1990-VIL-88-ITAT-ART

Equivalent Citation: TTJ 039, 126,

Income Tax Appellate Tribunal AMRITSAR

Date: 16.05.1990

KASHMIR STEEL ROLLING MILLS.

Vs

DEPUTY COMMISSIONER OF INCOME TAX.

BENCH

Member(s)  : S. GROVER., RAM RATTAN.

JUDGMENT

This is an appeal, by the assessee, arising out of order of the CIT(A). The assessment year involved is 1986-87. The following grounds have been taken in this appeal:

"1. That the order passed under s. 250(6) by the learned CIT(A) upholding action of the Id. Dy. Commr.(A) in rejecting claim of deduction under ss. 80 HH and 80-I on the income of Rs. 38,20,000 disclosed under the Amnesty Scheme under the head 'Business income' being from appellant's industrial undertaking M/s Kashmir Steel Rolling Mills.

2. That the ld. CIT(A) was not justified to uphold the action of the ld. Assessing Officer by observing that not withstanding the fact that the income had been disclosed stating that such disclosed income was from ' Industrial undertaking', the appellant was further under a legal obligation to link the disclosed income under the Amnesty Scheme with the industrial undertaking for the purpose of ss. 80HH and 80-I ignoring the spirit and scope of the Scheme as elucidated and clarified by the senior officers of the Board. In any case, rejection of the claim of deductions of Rs. 11,32,391 each under ss. 80HH and 80-I in the facts and circumstances of the case, was unwarranted and unjustified keeping in view the scope and spirit of the Amnesty Scheme implementation whereof was the duty of the departmental officials and that denial of deduction was arbitrary and unjustified.

2. Before considering the above grounds of appeal, it is worthwhile to state, in brief, the facts of the case. The assessee firm derives income from manufacturing re-rolled steel products. It maintained its account books which were closed and supported by balance sheet. Audited report and tax audit reports were submitted by the assessee. Over and above the profits reflected in the books of account as audited, the assessee disclosed an income of Rs. 38,20,000 under the Amnesty Scheme for the asst. yr. 1986-87. The assessee claimed deductions under ss. 80HH and 80-I on account as it was claimed that the assessee was an industrial undertaking. According to the Dy. CIT(A) hereinafter referred to as Assessing Officer, this income of Rs. 38,20,000 did not qualify for deductions under ss. 80HH and 80-I, as the same was not derived form the industrial undertaking. He asked the assessee to prove that the above income was derived from the industrial undertaking. He asked the assessee to prove that the above income was derived from the industrial undertaking. He also pointed out that the assessee should produce evidence for electricity charges, water bills, which were not debited in the accounts which could indicate that the assessee did make extra production which resulted in such extra income. It was stated before the Assessing Officer, for the assessee that no such expenditure out of books had been incurred. The Assessing Officer, therefore, came to the conclusion that the income disclosed under the Amnest Scheme was not derived from the industrial under taking, and, therefore, deductions under ss. 80HH and 80-I could not be allowed. The submission of the assessee before the Assessing Officer was that the Department was prohibited from making any enquiry regarding the source of income, The Assessing Officer has observed:

"....I do agree that under the Amnesty Scheme the Department is prohibited from enquiring into the source of income."

He further observed:

"...the attempt of the assessee appears to be to disclose the higher income by paying the tax only at 60 per cent of this amount (as 40 per cent of the total amount is claimed by way of deduction under ss. 80HH and 80-I.."

He also held that before the claim of deduction under ss. 80HH and 80-I, the assessee must fulfil all the conditions laid down thereunder. He, therefore, did not allow deduction under ss. 80HH and 80-I. The claim of the assessee was rejected.

3. The matter was carried in appeal before the CIT(A) who has upheld that order of Assessing Officer.

4. The assessee, aggrieved by the order of CIT(A), is in further appeal before the Tribunal. Sh. Mohan Lal learned counsel of the assessee, has reiterated the submissions as were made before the lower authorities. He maintained that no expenses were incurred outside the books of accounts. It was only the income which was not reflected in the account books. He further urged that under various circulars issued by the CBDT and clarifications given by the Chief CIT, Patiala, the Department was prohibited from making enquiries. He further pointed out that this fact has also been accepted by the Assessing Officer himself. He as referred to the circulars of the Board and clarifications of the Chief Commissioner and included the same in the paper book. We need not refer them here, since the same has already been accepted by the Assessing Officer and there is no dispute about that fact. In particular, Sh. Mohan Lal referred to a clarification given by the Chief CIT, Patiala, under whose jurisdiction the Assessing Officer operates. The clarification sought from the Chief Commissioner was whether in cases where the assessee firm or company declares stock under the Voluntary Disclosure Scheme and took it into profits for a particular year, whether the firm/company was entitled to benefits under ss. 80J, 80H, 80HH,80HHA, 80-I, etc. On the disclosed income. The answer was under:

"Yes, such assessee making declarations are entitled to get benefits under these exemption provisions provided under the law."

Sh. Mohan Lal, referring to this clarification by the Chief Commissioner, pointed out that the declaration of stock would not necessarily mean that it represented the business income. The investment in such stock could be as income from undisclosed sources and not as income derived from the industrial undertaking. The other view could be that these were the suppressed stock of the industrial undertaking which were not disclosed in the return but were debited to the manufacturing account. If the Department was to make an enquiry on the nature of the income, then obviously the Chief CIT would not have answered the questions in favour of the assessee. The submissions made by him was that since the Department was prohibited from making any enquiry, the declaration was to be accepted on its face value and it was in this background that the Chief CIT answered the question. Another point raised by him was that, if the assessee had disclosed stock, then probably the Department would have accepted this income for the purpose of deductions under ss. 80HH, and 80-I without any hitch because of the classificatory explanation given by the Chief Commissioner. This stock was ultimately to be converted into money and that whether would be the income of the assessee. He, therefore, urged that whether as declaration of stock or as income, it would pertain to the industrial under taking. He further pointed out that the only source of income of the assessee firm was from the industrial undertaking and the Assessing Officer had not pointed out assessee was also deriving income from other sources. He, therefore, urged that because of this circumstantial evidence and because of declaration by the assessee which were immune from any enquiry, the income disclosed under the Amnesty Scheme has to be accepted as derived from the industrial undertaking, and, therefore, entitled to deductions under ss. 80HH and 80-I. He also referred to a circular contained in D.O. No. 281/50-86-IT(Inv. III),dt. 17th June, 1986 from Sh. S.K. Roy, Member (Investigation), CBDT. In particular, he referred to para 3 of the said circular, stating that the matter was considered in a meeting of the Board, which was strongly of the view that if such voluntary returns were made the basis of roving enquires to find out the date of acquisition of the wealth and substantive assessments are made for years other than the year in which the income has been disclosed without the ITO having any material on record, it would be absolutely contrary to the spirit of the amnesty that has the blessings of the F.M. He, therefore, strongly urged that the instructions of the CBDT are binding on all the IT authorities charged with the execution of the tax laws. He, therefore, reiterated his submission that that Department was precluded from making any enquiry about the source and the nature of the income and the declaration was to be accepted omits face value and necessary deductions under ss. 80HH and 80-I allowed accordingly. He further urged that the observations of the Assessing Officer that the assessee had resorted to this procedure with a view to paying lesser at while introducing more money, is uncalled for. If the law gives the benefit, that should not be adversely viewed by the Assessing Officer and, on the contrary, he should have allowed the same according to law.

5. Shri R.C. Bhulal, learned Departmental Representative, on the other hand, supported the orders of the authorities below. He further stated that immunity from enquiry was as to the source of income disclosed. For the purpose of claiming deduction under ss. 80HH and 80-I, there was no such immunity and the assessee has to establish its claim. He also highlighted the fact that, if stock was disclosed, then alone the assessee was entitled to deduction under ss. 80HH and 80-I, in view of the clarification given by the Chief Commissioner.

6. We have given our very careful consideration to the rival submissions. It is a common ground between the parties that the Department is precluded from making any enquiry about the source and nature of income voluntarily disclosed under the Amnesty Scheme. It is a different matter, if the Department could prove, on the basis of material available with it, that the income disclosed by the assessee is not derived from the industrial undertaking but from some different source. No such material has been brought on record the Revenue. We are in agreement with the learned counsel for the assessee that even the stock declared could not be straightway accepted as the concealed stock of the industrial undertaking. Such stock could be purchased from the funds available from other sources but disclosed under the Amnesty Scheme as stock of the industrial undertaking. The Chief Commissioner, while answering the questions on the stock disclosed., has categorically stated that this will qualify for deductions under ss. 80J,80HH,80-I, etc. When he answered this question, he had in his mind the spirit of the Amnesty Scheme, i.e., declaration by the assessee to be accepted as such without making an y enquiry. Even the CBDT has emphasised the same view. These instructions of the CBDT and that of the Chief Commissioner are binding on all the authorities charged with the execution of the tax laws. The assessee in our opinion, is not bound to disclose the source of such income and declaration is to be accepted about the nature of the income on its face value unless contrary is proved by the Revenue by bringing positive evidence on record. The Department has also not brought on record any material to show that the assessee-firm was having income from other sources also. This being the only source of income of the assessee-firm, there is strong circumstantial evidence in favour of the assessee to come to the conclusion that the income voluntarily disclosed is derived from the industrial undertaking. We also noticed that the Assessing Officer has not pointed out any specific conditions in ss. 80HH and 80-I which have not been complied with while claiming deductions under these sections other than the voluntary disclosed income. We are also in agreement with Sh. Mohan LaL that stock disclosed under the Amnesty Scheme which may have been out of income from other sources, when sold, will get converted into money and ultimately its income which is to arise out of stock on sale will qualify for deduction under ss. 80HH and 80-I. It is, therefore, immaterial whether the stock or the income is disclosed. The end-result of both the disclosures will remain the same.

7. Taking into account totality of the circumstances, e.g., the declaration made by the assessee which has to be accepted on its face value in view of the circular of the CBDT contained in D.O.No. 281/50-86-IT (Inv.III), dt. 17th June,1986 and the clarification issued by the Chief Commissioner and circumstantial evidence disclosed above, we have no hesitation in holding that the income voluntarily disclosed under the Amnesty Scheme can be said to have been derived from the industrial undertaking, in the absence of any evidence to the contrary brought on record by the Revenue. We are, therefore, unable to sustain the orders of the lower authorities on this account. Their a orders are reversed. The Assessing Officer is directed to allow the deduction accordingly.

8. In the result, the appeal is allowed.

 

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