Judgment:
1. This is an appeal by the assessee which is directed against the order of the CIT(Appeals), Nashik dated 23-6-1988 wherein he has confirmed the penalty imposed by the ITO under Section 271 (1)(a) of the Income-tax Act, 1961. According to the CIT (Appeals), there was no reasonable cause for the late filing of the return. The assessee has taken several grounds to urge that the CIT (Appeals) erred in his decision and, therefore, his order should be set aside and penalty should not have been levied in view of the immunity from penalty, interest etc. given by the amnesty scheme which came into existence on 26-6-1985.
2. The assessee is a registered firm dealing in soaps and detergent products. The assessment year 1983-84 is the first assessment year for which the accounting year ended on 30-9-1982. The return was filed on 27-9 1985 showing income of Rs. 1,48,386. The ITO completed the assessment on 10-9-1986 accepting the income returned subject to disallowance of Rs. 1,614 out of office and vehicle expenses on estimate basis.
3. Consequent on the assessment, the ITO initiated penalty proceedings because the return of income was due to be filed on 1-7-1983, but it was filed on 27-9-1985 after a delay of 26 months. The assessee pleaded in writing for dropping of penalty proceedings stating that the return was filed voluntarily and also co-operated with the department during the assessment proceedings. It was also explained that the return was filed under the voluntary disclosure scheme and interest was also levied under Section 139 which has been fully paid.
4. Rejecting the claims, the ITO levied penalty of Rs. 27,456 under Section 271(1)(a) of the Income-tax Act, 1961.
5. On appeal, the CIT (Appeals) confirmed the penalty levied by the ITO. According to him, the return was not specifically marked as having been filed under the amnesty scheme. He has also observed that immunity from initiation of penalty proceedings under Section 271(1)(a) and 271(1)(c) applied, if the return was filed voluntarily and in good faith between the period 15-11-1985 and 31-3-1986. But in this case the return was filed on 27-9-1985. Referring to Circular No. 432 dated 15-11 1985 directing the Officers to adopt very liberal and sympathetic approach to the case of new assessees who come forward themselves to show their true incomes in good faith and co-operated in any enquiry relating to assessment of their incomes, he pointed out that it would apply only to cases where returns were filed between 15-11-1985 and 31 -3 1986. Advance tax paid also falls short of the tax due, though marginally and, therefore, ratio of the Supreme Court in the case of Ganesh Doss Sreeram v. ITO [1988] 169 ITR 221 was not strictly applicable. He has also observed that there was no reasonable cause for the delay of 26 months. Therefore, he has confirmed the penalty levied by the ITO.6. At the time of hearing, Shri G.N. Gadgil, learned counsel for the assessee was heard at great length. Though he admitted delay in the matter of filing return of income for this year, nonetheless, he stressed the point that the assessee had filed voluntarily return of income showing huge income of Rs. 1,48,386 without the service of notice under Section 139(2) and 142(1), As stated earlier, the income returned was accepted in toto by making a nominal estimated addition of Rs. 1614. According, to him, the case of the assessee is thus covered by the amnesty scheme. In this connection, he has referred to Circular No. 432 dated 15-11-1985 issued by the CBDT wherein, in para 2 thereof it has been stated that "the department's approach will be very liberal and sympathetic in the cases of new assessees who come forward themselves to show their true incomes in good faith and co-operate in any enquiry relating to the assessment of their incomes." He has also filed a copy of the revisional order of the CIT, Pune, under Section 264 waiving interest under Section 139(8) levied for the assessment year 1983-84 by relying on the judgment of the Supreme Court in the case of Ganesh Dass Sreeram (supra). Relying on this revisional order, the learned counsel for the assessee submitted that same consideration which prevailed on the CIT in the revisional proceedings should also prevail for the levy of penalty under Section 271(1)(a) of the Income-tax Act, 1961, as both are concerned with delay in filing return of income. He has also raised a contention stating that when the amnesty scheme gave immunity from penalties leviable under Section 271(1) and 273 in respect of the assessment year 1985-86, if returns were filed voluntarily and in good faith making full and true disclosure of his income, there was no reason why such return filed relating to assessment year 1983-84 during the period of amnesty scheme such scheme should not be applied to the case of the assessee also. In the circumstances, he vehemently urged that the authorities were not Justified in levying penalty under Section 271(1)(a) of the Income-tax Act, 1961.
7. Smt. G.V. Samant, learned departmental representative, vehemently supported the orders of the authorities for the reasons given by them.
According to her, various Circulars issued by the CBDT in connection with the amnesty scheme would apply for the assessment year 1986-87 only.
8. We have duly considered the submissions of the parties, the paper compilation filed and the facts of the case. The CBDT circular No. 453 dated 4-4-1986 enumerated the various circulars, namely, circular Nos.
423, 432, 439, 440, 441 and 451 and as they invoked very good response to the offer of amnesty and numerous representations were made by the public in this regard the Board has extended the benefit of the amnesty circulars till 30-9-1986 to cases where the assessee wants to disclose income or wealth relating to assessment year 1986-87 or earlier years.
However the Board has specified that for the assessment year 1986-87 strict compliance would be enforced to deserve the immunity and in case return was not filed within the specified time under Section 139(1)'of the Income-tax Act/ or Section 14(1) of the Wealth-tax Act, the immunity will not extend to penal consequences of the late filing of return. Therefore, such strict compliance expected for the assessment year 1986-87 is not specified for the returns relating to earlier years. This is a reasonable inference that could be drawn from the aforesaid circular of the CBDT, though the benefit has been extended till 30-9-1986 in respect of income and wealth-tax assessments for assessment year 1986-87 and earlier years. The order issued by the Member (Investigation), CBDT, New Delhi in F.No.281/8/86 IT(In v. III) dated 14-2-1986, a copy of which has been filed in the paper compilation, directed the Assessing Authorities not to initiate any proceeding for imposition of penalty or impose penalty for defaults under Section 271(1) or 273 in respect of any assessment year upto and including the assessment year 1985-86, if they are satisfied that prior to the detection of concealment of income, the assessee voluntarily and in good faith made full and true disclosure of income between the period 15-11-1985 and 31-3-1986 and paid the tax on the income disclosed and co-operated in any enquiry relating to assessment of his income. In view of these binding circulars and orders, there is no doubt that the case of the assessee also falls within the amnesty scheme because it related to the assessment year 1983-84 and the assessee has fulfilled all the conditions specified in the order dated 14-2-1986. The only question that remains to be satisfied is whether the immunity on the disclosure made by the assessee in the return filed on 27-9-1985 is applicable or not. Had the assessee filed return between 15-11-1985 and 31-3-1986 obviously, the assessee would have been eligible for immunity as per the order dated 14-2-1986. The assessee having filed the return earlier on 27-9-1985 cannot be denied the benefit of immunity when in substance the conditions specified in the order dated 14-2-1986 have been fulfilled by the assessee. Further it is pertinent to observe that interest under Section 139(8) levied by the ITO for late filing of return for the assessment year 1983-84 has been waived by the CIT by his revisional order under Section 264 of the Income-tax Act, 1961 dated 6-9-1988. Charging of interest under Section 139(8) and levy of penalty under Section 271(1)(a) relate to the same default, namely, late filing of the return of income. Thus they are the obverse and converse of the same coin. For sufficient cause shown and in terms of Rule 117, interest charged could be waived. For reasonable cause penalty levied under Section 271(1)(a) could be cancelled. In this case, interest charged under Section 139(8) has been waived. We shall not go into the merits of the revisional order of the CIT passed under Section 264 dated 6-9-1988 for the simple reason that the imugned order is not in appeal before us. But that order would be relevant for the limited purpose that the assessee has substantially complied with the requirements of eligibility for immunity granted under the amnesty scheme as specified in the order of the Board dated 14-2-1986. The first circular under the amnesty scheme was issued in the month of June 1985. The assessee has chosen to file return for this year in the month of September 1985, i.e., 27-9-1985. The return for the assessment year 1984-85 was filed on 30-9-1985. For this year, the CIT in his revisional order under Section 264 dated 6-9-1988 held that the assessee is covered by the Board's circular issued under the amnesty scheme and the assessee has paid almost the entire tax on the income declared. He held that returns were filed voluntarily and the assessee has been co-operating not only in payment of tax but also interest. It was also stated that he was satisfied that the assessee's petition deserved sympathetic consideration and therefore, petition for both the assessment years were allowed, vide para 8 of the revisional order dated 6-9-1988. In view of these categorical findings given by the CIT, there is no force in the contentions urged by the learned departmental representative.
9. In view of these facts and circumstances, we have no hesitation to come to the conclusion that the assessee is also entitled to the benefit of immunity of the amnesty scheme because the assessment was completed on 10-9-1986 which falls within the extended time limit till 30-9-1986. Consequently, the order of the CIT (Appeals) confirming the penalty is set aside and the penalty levied is hereby cancelled. The ITO is also directed to refund the penalty, if it has been paid by the assessee already.