Assistant Commissioner of Vs. Dalamal and Sons Investment Co. - Court Judgment

Excerpt:
1. this appeal by the department pertains to assessment year 1984-85.the department has taken the following 2 grounds in this appeal : 1. on the facts and in the circumstances of the case, the learned cit (appeals) erred in law in entertaining the assessee's appeal against initiation of penalty proceedings. 2. on the facts and in the circumstances of the case, the learned cit (appeals) erred in law in setting aside the assessment order passed by the income-tax officer when the assessee had no grievance against the assessment order inasmuch as he had no objection to the amount of income assessed on the amount of tax determined.2. assessee is an unregistered firm. the original assessment was completed on 31-3-86 fixing the income at rs. 13,78,749. in this assessment assessee claimed as a 'donation' rs. 10,00,000 made to christian medical college & hospital, vellore and the relief was allowed under section 35cca on the basis of two receipts bearing no.124 and 125 dated 28-3-84 which has been evidenced vide pages 16 and 17 of the paper book by the assessee. the d.d. has been evidenced at pages 14 and 15.3. subsequently assessee filed a revised income return purported to be under amnesty scheme which included donation to christian medical college and hospital trust which was earlier claimed and allowed under section 35cca. the same has been evidenced at page 6 of the paper book.4. in the meanwhile it came to the knowledge of the department that the assessee's claim of rs. 10,00,000 was not genuine, patently fraudulent and it was discovered that the so-called donation was encased through a spurious bank account in bombay. according to the department, it received letter bearing no. gs: 60:2:86, dated 4-7-1986 from shri d.s.aruldas, general superintendent, christian medical college and hospital, vellore on the basis of the enquiry made by the department.this letter made clear the following facts: (i) that the accounts of the christian medical college and hospital are opened in the name of "christian medical college vellore association" only; (iii) that they have no connection whatsoever with the account opened in the name of christian medical college & hospital in the co-operative bank at bombay; and (iv) that all the donations to their institution are through their bank account at vellore and madras only.5. the department also came into knowledge of the fraudulent account in the mercantile co-operative bank ltd., tambakata, bombay, account no.1488. this, according to the department was clear from the date of filing revised return by the assessee purportedly under the amnesty scheme. as the return of income was filed after the completion of the assessment for the relevant assessment year a notice was issued and reply was received vide which the assessee requested that the return of income filed by it under the amnesty scheme be treated as filed in compliance with the notice under section 148.6. notice under sections 143(2) and 142(1) was issued. in response to the above notice it was submitted before the assessing officer that the return of income was filed under amnesty scheme. the ao made it clear that in view of the replies given in the circulars since the department was already in the knowledge of the bogus nature of the claim of the donation, allegedly made to christian medical college & hospital, and the fact that such donation was encased through a spurious bank account opened in the aforementioned name, in the mercantile co-operative bank ltd., tambakata, bombay, the return of income filed cannot be treated as coming under the purview of the amnesty scheme.7. vide letter dated 24-11 -87 it was pointed out to the assessee that facts with regard to the claim under section 35cca are not supported by evidences/facts such as the circumstances that assessee parted with a huge amount, the person who approached the assessee, the name of the party who approached and their bona fides, the evidence that produced by such person to indicate that they are authorised agents of christian medical college and hospital, vellore. further the assessee was also told, to answer whether the assessee made any enquiry with christian medical college, vellore to satisfy the bona fides of the person who approached the assessee, whether christian medical college, vellore has acknowledged any payment, whether the assessee had communicated to the authorities any time the source of information that the money paid in favour of the trust did not reach the trust. assessee was required to furnish details on or before 3-12-87. assessee has not replied to these queries at all. a letter was filed by the assessee on 21 -12-87 with enclosure letter dated 18-12-87. however this, according to the department did not answer to the specific queries made. accordingly another letter dated 14-1-88 was also issued. to this letter assessee through the chartered accountant submitted that assessee has nothing further to submit other than what was already submitted by their letter dated 18-12-87.8. assessee along with his letter dated 18-12-87 produced zerox copies of two receipts dated 28-3-84 and 29-3-84 which was issued by christian medical college & hospital, vellore. this, as per the letter of general supdt, christain medical college & hospital, vellore is bogus one, because all the accounts are operated only in the name of christian medical college vellore association. on the basis of the fact that the assessee has not replied to the queries by the department the ito came to the conclusion that the revised return filed by the assessee under amnesty scheme shows the guilty conscience of the assessee. the ao further noted that so as to get the benefit of amnesty scheme the assessee has to satisfy the authorities by disclosing all facts fully and truly. in the instant case the assessee did not answer to specific queries. the 1d. ao further came to the conclusion that by not answering the queries but producing fraudulent letters, receipts etc.assessee is taking strain to take advantage. only at later stage, after the department came into specific possession of assessee's fraud/concealment assessee claimed that assessee is a victim of a fraud and that it was not aware that the parties who claimed to represent the christian medical college & hospital were acting fraudulently and that assessee has been cheated. further he came to the conclusion that no prudent person, much less a shrewd assessee having legal advisers of considerable merit, would hand over such a large sum of rs. 10,00,000 as 'donation' to unknown and unidentified person, without verifying the genuineness of the recipient. assessee has all means at its command to contact christian medical college at vellore, an institution known for its services in the field of medical science. the 1d. ao further rejected the claim of the assessee that the sum of rs. 10 lakhs was handed over to unknown and unidentified person, without enquiry. the circumstances, facts and evidences indicate the assessee's lack of bona fides in his return of income filed on 9-10-84 which is purportedly under the amnesty scheme. further on the above facts the ao came to the conclusion that nothing has been established to come to a conclusion that the assessee has lost substantial or whole portion of rs. 10,00,000 donated by the assessee for which assessee claimed exemption from penal consequences under amnesty scheme. the disclosure now made under amnesty scheme is nothing but a cover to escape the consequences.this was done so only after the department detected the fraud, and the modus operandi, by which the cheques were made out in the name of christian medical college & hospital, vellore but not paid at vellore in tamil nadu, but on the spurious bank account operated in bombay.thus in the light of the above facts the ito held that the assessee has, on the basis of bogus receipts and letters fraudulently claimed in his return of income filed on 9-10-84, and obtained relief under section 35cca on alleged donation of rs. 10 lakhs to the christian medical college & hospital, vellore. it was under these circumstances and on the above facts that the ao initiated penalty proceedings for default under section 271(1)(c). aggrieved by the above order the assessee appealed before the first appellate authority.9. the only ground agitated before the cit (a) by the assessee as per the appellate order was that 'the 1d. ito was not justified in initiating the penalty proceedings'. on a query, as to why the initiation of penalty proceedings by itself should be treated as a grievance appeasable, the assessee replied that the real grievance of the assessee, in the facts and circumstances of the case, is that the ito did not follow the instruction, which forbid him from initiation of penally proceedings when the return is filed under amnesty scheme, in view of circular no. 451 of 17-2-86. the said circular has been reproduced in the order of the 1d. cit(a). it is addressed to bombay chartered accountants' society, church gate, bombay written by chief public relations officer, it department, bombay in the form of a clarification issued by chief public relations officer, income-tax department, bombay, which runs into 2 parts, one dealing with section 35cca, and another regarding investment companies where the assessee wants to come under amnesty scheme and declare the bogus investments.the relevant portion runs as under : it has been decided by the central board of direct taxes that in all cases where some donations have been made under section 35cca of income-tax act, 1961 to a bogus organisation, the assessee giving such donations can come under amnesty scheme. the assessee has to declare the donation paid by him to the bogus organisation and pay tax thereon. he can credit the amount of cash received by him from the donee organisation in the books of account. they can also capitalise this amount.10. considering the facts and clarifications of cpro, the 1d. cit(a) set aside the order of the ao and directed that the order should be done afresh, with an observation that while doing so the ito may determine as to how the case is covered or not covered by the amnesty scheme after taking due note of the relevant public circulars issued from time to time in particular the circular issued on 27-3-87. (this circular in the form of question and answer is evidenced vide pages 29 to 34 of the paper book filed by the assessee). it is against this order the department is in appeal before the tribunal.11. learned departmental representative, on behalf of the department, submitted that the order of the cit(a) is patently wrong. firstly assessee has no real grievances as only a penalty proceedings is initiated, and secondly even the assessee is not aggrieved against the assessment order because no ground of appeal to that effect was taken by assessee. only ground agitated by the assessee before the 1d. cit(a) was against initiation of penalty proceedings, and as such the setting aside of the whole order by the cit(a) is without merit and patently wrong.12. the 1d. d.r. also submitted that the finding of the cit(a) is without any merit. the circular relied upon by the assessee i.e., circular no. 451, dated 17-2-86 does not further assessee's case. the 1d. d.r. submitted that the department has gone beyond forming a prima-facie belief that the assessee has concealed income, but it has conclusively detected the concealment with evidence. assessee filed the revised return for the a.y. 1984-85 and paid the taxes thereon to the reserve bank of india on 30-9-86; whereas the department came into possession the letter from shri d.s. aruldas, general supdt., christian medical college and hospital, vellore on 4-7-86. when department came into possession of this specific reply the department detected the concealment. if the assessee filed the returns before receipt of this letter from the general supdt., it would have been possible for the assessee to put up a case that the department has only formed a "prima facie belief that the assessee has concealed income. further the 1d.d.r. pointed out that the assessee has not cared to answer the queries made by the department. so assessee has not made disclosure 'voluntarily' and in 'good faith'. this is so, because if the assessee filed revised return in good faith the assessee should be co-operative and would have answered the queries specifically put forth by the department. the assessee in spite of answering the queries, kept silent on these important facts. thus by no dint of imagination it could be said that the assessee filed the returns voluntarily and in good faith.there is no full and true disclosure of income by the assessee. thus he contended that the order of the first appellate authority is bad in law and also on facts. in spite of giving a specific finding to the point agitated by the assessee, the 1d. first appellate authority set aside the order in toot and directed to re-do it. apart from this, as made it clear in the preceding para, the 1d. d.r. submitted that the order of the 1d. cit(a) also cannot stand legal scrutiny. it has not complied with the circular, that extended to the assessee immunity from penalty proceedings under amnesty scheme. the 1d. d.r. further brought our attention to the board's circular no. 451, dated 17-2-86, question no.19 which is reproduced below : q. no. 19: kindly clarify the expression "before detection by the department"? answer: if the income-tax officer has already found material to show that there has been concealment, that would mean the department has detected the concealment. if the income-tax officer only had prima facie belief, that would not mean concealment has been detected.the 1d. d.r. contended that appeal by the assessee cannot be maintained by the cit(a) because whether a return filed under amnesty scheme or not is an administrative matter and as such the cit(a) cannot decide the issue on merit. the 1d. d.r. brought our attention to the third member decision in the case of b. tex corpn. v. ito[1993] 202 itr(at) 17 (bom.). thus he concluded that the order of cit(a) is bad in law as well as on facts.13. opposing the contentions of the 1d. d.r. the 1d. a.r. submitted that the circular issued on 27-3-87 makes it abundantly clear that where some donations have been made under section 35cca of it act, 1961 to bogus organisation, the assessee giving such donations can come under amnesty scheme. the only condition attached to this is that the assessee has to declare the donation paid by him to the bogus organisation and paid tax thereon. in the instant case of the assessee, as soon as the assessee realised that it has made donation to a bogus organisation came forward and declared the donations before the department.14. the 1d. a.r. at the time of hearing also produced a copy of the order of the tribunal in the case of industrial machine shops v. lac [it appeal no. 6836 (bom.) of 1989] for a.y 1977-78 and other connected cases. the 1d. a.r. submitted that vide para 13 of his order the tribunal set aside the orders of the first appellate authority and directed him to entertain assessee's appeal on amnesty scheme and to examine his claim with reference to the conditions laid down by the board circular and orders issued under section 119 of the act from time to time and to dispose of all the appeals afresh after affording adequate opportunity of being heard to the parties concerned.15. we have heard the rival submissions and gone through the order of the revenue authorities and the case laws cited by the contending parties. on a careful consideration we are of the view, in this case the department is to succeed on point of law and on facts. the assessee filed revised returns on 30-9-86. before that date, the department came into possession of letter dated 4-7-86 from d.s. aruldas, general supdt, christian medical college & hospital, vellore. this letter evidently was written as a reply to queries made by the department. a perusal of ito's order, para 1 will make it abundantly clear that the department was aware that the assessee has made donation to some parties other than the genuine party. para 4 of the assessment order also makes it clear that the assessee avoided disclosing the identity of the persons who approached the assessee. it is very difficult to believe that a firm of assessee's stature will give away rs. 10 lakhs simply to some persons, with whom the assessee has no contact or knowledge. if the assessee's version that the assessee has donated the money to some bogus organisations and later on finding out the truth assessee filed revised returns, there is no reason why the assessee should not answer the queries made by the department. question no. 19 of circular no. 451, dated 17-2-86 makes it abundantly clear that in order to get the benefit of the amnesty scheme the assessee should disclose his concealed income before the department detects the concealment. the crucial question thus is, what amounts to detection? the second question is where the limits of prima facie belief ends and the detection starts? to our mind it appears that if the department "suspects" something and initiates an inquiry, the initiation of enquiry is based on "prima facie belief'. if the assessee files returns disclosing the concealed income at this stage, the assessee can escape the consequences or proceedings. but if the department has gone a step further and has obtained a "satisfactory evidence" that the assessee has concealed income, then the assessee has to face the consequences because the assessee has not disclosed the concealment of income before "detection". the case relied upon by the assessee has no bearing on assessee's case.the tribunal while allowing the appeal by the assessee observed in this case as under: there are numerous instances where the benefit of the circulars issued by the board have been granted in appellate proceedings even in cases where they have been clearly found to be contrary to the law. reference in this connection may be said to the decisions of the supreme court in the case of jhaveri (56 itr 190 (sc) (82 itr 913 (sc) and k.p. varghese (131 itr 537 (sc). a circular issued under section. 119 of the income-tax act is binding on the income-tax authorities and if the effect to that is not given, the matter can be agitated and due relief sought in appeal. the only restriction in our opinion, could be that the appeal should be otherwise maintainable. the appeals in this case were filed against orders under section. 271(1)(c) of the act and that were made appeasable under clause. (b) of sub-section (2) of section 246. independent to such an appeasable order, the relief would, however be not available to the assessee in appellate proceedings, that is by itself the issue of amnesty scheme cannot be agitated on involved in appeal. we, therefore, hold that the relief under the amnesty scheme can be claimed and agitated in appeal in the circumstances of the case. we are fortified in the view of the matter by the decision of the madhya pradesh high court in the case of jalkishan gopikishan and sons and ors. vs. xt (a) wherein the order of the cit (a) refusing to consider the case of the assessee under the voluntary disclosure scheme was quashed by holding that the cit (a) was not right in not considering the merits of the case of the assessee under the voluntary disclosure scheme. in this reported case also, it was held that the various circulars issued by the central board of direct taxes in exercise of its powers under section 119 of the act have the force of law and are binding on the subordinate authorities. the court further observed that guidelines are issued from time to time to deal with the case of such assessee who claim immunity and consideration of their cases leniently and sympathetically and the authorities are bound to deal with the cases, according to the instructions issued from time to time. in the circumstances, the outright rejection of the assessee's claim by the cit (a) on the ground that the matter cannot be agitated in appeal is not justified.16. the reliance of the 1d. a.r, for the assessee on question nos. 5, 6 and 7 also cannot help the assessee.question no. 5 is with regard to the time limit of waiver of penalty, interest etc. question no. 6 is with regard to immunity in cases, where the cash credits have been accepted as genuine by the ito. question no.7 is with regard to investigation in case of persons other than the assessee, if indicated concealment of income by the assessee, and if the assessee makes a true and full disclosure of his income, in such cases whether the assessee is entitled to immunity under the circular or not. in the instant case of the assessee, the assessee filed the revised return after the department getting the reply from general supdt., christian medical college & hospital, vellore. question no. 7 is applicable only in the case of an investigation other than the assessee.17. apart from this, it is clear from the order of the cit (a) that only ground taken by the assessee was directed against the initiation of the penalty proceedings. to set aside the assessment order the 1d.cit (a) simply relied on a circular in the nature of clarification issued by chief public relation officer. if he had considered all the aspects i.e., the circular no. 451, dated 17-2-86 along with the question and answer explaining the scope, before setting aside the assessment order he would not have come to the conclusion he arrived at. the amnesty scheme is applicable, but there are certain conditions attached to it by the circular itself. one of the most vital condition is that the disclosure should be made before the detection of the concealment by the department and if not so done, the department is riot bound to treat it as a return filed under amnesty scheme. in addition to this it is nowhere stated that the department cannot ask about the identity of the persons or the circumstances how and when such donations were made.18. in the instant case of the assessee, as we have seen in the preceding para the department has come into possession of unquestionable and irrefutable evidence regarding the concealment of income before the assessee files the returns, purportedly under amnesty scheme. as such it cannot be said that this disclosure was 'voluntary' and 'in good faith'.19. considering the entire fact and circumstances and considering the circulars and question answer by c.b.d.t. and the case relied upon by the department in b. tex corpn. 's case (supra) we are unable to agree with the findings of the 1d. cit (a).20. in the result, we set aside the order of the cit (a). appeal by the department is allowed.

Judgment:
1. This appeal by the department pertains to assessment year 1984-85.

The department has taken the following 2 grounds in this appeal : 1. On the facts and in the circumstances of the case, the learned CIT (Appeals) erred in law in entertaining the assessee's appeal against initiation of penalty proceedings.

2. On the facts and in the circumstances of the case, the learned CIT (Appeals) erred in law in setting aside the assessment order passed by the Income-tax Officer when the assessee had no grievance against the assessment order inasmuch as he had no objection to the amount of income assessed on the amount of tax determined.

2. Assessee is an unregistered firm. The original assessment was completed on 31-3-86 fixing the income at Rs. 13,78,749. In this assessment assessee claimed as a 'donation' Rs. 10,00,000 made to Christian Medical College & Hospital, Vellore and the relief was allowed under Section 35CCA on the basis of two receipts bearing No.124 and 125 dated 28-3-84 which has been evidenced vide pages 16 and 17 of the paper book by the assessee. The D.D. has been evidenced at pages 14 and 15.

3. Subsequently assessee filed a revised income return purported to be under Amnesty Scheme which included donation to Christian Medical College and Hospital Trust which was earlier claimed and allowed Under Section 35CCA. The same has been evidenced at page 6 of the paper book.

4. In the meanwhile it came to the knowledge of the department that the assessee's claim of Rs. 10,00,000 was not genuine, patently fraudulent and it was discovered that the so-called donation was encased through a spurious bank account in Bombay. According to the department, it received letter bearing No. GS: 60:2:86, dated 4-7-1986 from Shri D.S.Aruldas, General Superintendent, Christian Medical College and Hospital, Vellore on the basis of the enquiry made by the department.

This letter made clear the following facts: (i) that the accounts of the Christian Medical College and Hospital are opened in the name of "Christian Medical College Vellore Association" only; (iii) that they have no connection whatsoever with the account opened in the name of Christian Medical College & Hospital in the Co-operative Bank at Bombay; and (IV) that all the donations to their institution are through their bank account at Vellore and Madras only.

5. The department also came into knowledge of the fraudulent account in the Mercantile Co-operative Bank Ltd., Tambakata, Bombay, account No.1488. This, according to the department was clear from the date of filing revised return by the assessee purportedly under the Amnesty Scheme. As the return of income was filed after the completion of the assessment for the relevant assessment year a notice was issued and reply was received vide which the assessee requested that the return of income filed by it under the Amnesty Scheme be treated as filed in compliance with the notice under Section 148.

6. Notice under Sections 143(2) and 142(1) was issued. In response to the above notice it was submitted before the Assessing Officer that the return of income was filed under Amnesty Scheme. The AO made it clear that in view of the replies given in the Circulars since the Department was already in the knowledge of the bogus nature of the claim of the donation, allegedly made to Christian Medical College & Hospital, and the fact that such donation was encased through a spurious bank account opened in the aforementioned name, in the Mercantile Co-operative Bank Ltd., Tambakata, Bombay, the return of income filed cannot be treated as coming under the purview of the Amnesty Scheme.

7. Vide letter dated 24-11 -87 it was pointed out to the assessee that facts with regard to the claim under Section 35CCA are not supported by evidences/facts such as the circumstances that assessee parted with a huge amount, the person who approached the assessee, the name of the party who approached and their bona fides, the evidence that produced by such person to indicate that they are authorised agents of Christian Medical College and Hospital, Vellore. Further the assessee was also told, to answer whether the assessee made any enquiry with Christian Medical College, Vellore to satisfy the bona fides of the person who approached the assessee, whether Christian Medical College, Vellore has acknowledged any payment, whether the assessee had communicated to the authorities any time the source of information that the money paid in favour of the trust did not reach the trust. Assessee was required to furnish details on or before 3-12-87. Assessee has not replied to these queries at all. A letter was filed by the assessee on 21 -12-87 with enclosure letter dated 18-12-87. However this, according to the department did not answer to the specific queries made. Accordingly another letter dated 14-1-88 was also issued. To this letter assessee through the Chartered Accountant submitted that assessee has nothing further to submit other than what was already submitted by their letter dated 18-12-87.

8. Assessee along with his letter dated 18-12-87 produced zerox copies of two receipts dated 28-3-84 and 29-3-84 which was issued by Christian Medical College & Hospital, Vellore. This, as per the letter of General Supdt, Christain Medical College & Hospital, Vellore is bogus one, because all the accounts are operated only in the name of Christian Medical College Vellore Association. On the basis of the fact that the assessee has not replied to the queries by the department the ITO came to the conclusion that the revised return filed by the assessee under Amnesty Scheme shows the guilty conscience of the assessee. The AO further noted that so as to get the benefit of Amnesty Scheme the assessee has to satisfy the authorities by disclosing all facts fully and truly. In the instant case the assessee did not answer to specific queries. The 1d. AO further came to the conclusion that by not answering the queries but producing fraudulent letters, receipts etc.

assessee is taking strain to take advantage. Only at later stage, after the department came into specific possession of assessee's fraud/concealment assessee claimed that assessee is a victim of a fraud and that it was not aware that the parties who claimed to represent the Christian Medical College & Hospital were acting fraudulently and that assessee has been cheated. Further he came to the conclusion that no prudent person, much less a shrewd assessee having legal advisers of considerable merit, would hand over such a large sum of Rs. 10,00,000 as 'donation' to unknown and unidentified person, without verifying the genuineness of the recipient. Assessee has all means at its command to contact Christian Medical College at Vellore, an institution known for its services in the field of medical science. The 1d. AO further rejected the claim of the assessee that the sum of Rs. 10 lakhs was handed over to unknown and unidentified person, without enquiry. The circumstances, facts and evidences indicate the assessee's lack of bona fides in his return of income filed on 9-10-84 which is purportedly under the Amnesty Scheme. Further on the above facts the AO came to the conclusion that nothing has been established to come to a conclusion that the assessee has lost substantial or whole portion of Rs. 10,00,000 donated by the assessee for which assessee claimed exemption from penal consequences under Amnesty Scheme. The disclosure now made under Amnesty Scheme is nothing but a cover to escape the consequences.

This was done so only after the department detected the fraud, and the modus operandi, by which the cheques were made out in the name of Christian Medical College & Hospital, Vellore but not paid at Vellore in Tamil Nadu, but on the spurious bank account operated in Bombay.

Thus in the light of the above facts the ITO held that the assessee has, on the basis of bogus receipts and letters fraudulently claimed in his return of income filed on 9-10-84, and obtained relief under Section 35CCA on alleged donation of Rs. 10 lakhs to the Christian Medical College & Hospital, Vellore. It was under these circumstances and on the above facts that the AO initiated penalty proceedings for default under Section 271(1)(c). Aggrieved by the above order the assessee appealed before the first appellate authority.

9. The only ground agitated before the CIT (A) by the assessee as per the appellate order was that 'the 1d. ITO was not justified in initiating the penalty proceedings'. On a query, as to why the initiation of penalty proceedings by itself should be treated as a grievance appeasable, the assessee replied that the real grievance of the assessee, in the facts and circumstances of the case, is that the ITO did not follow the instruction, which forbid him from initiation of penally proceedings when the return is filed under Amnesty Scheme, in view of Circular No. 451 of 17-2-86. The said circular has been reproduced in the order of the 1d. CIT(A). It is addressed to Bombay Chartered Accountants' Society, Church gate, Bombay written by Chief Public Relations Officer, IT Department, Bombay in the form of a clarification issued by Chief Public Relations Officer, Income-tax Department, Bombay, which runs into 2 parts, one dealing with Section 35CCA, and another regarding investment companies where the assessee wants to come under Amnesty Scheme and declare the bogus investments.

The relevant portion runs as under : It has been decided by the Central Board of Direct Taxes that in all cases where some donations have been made under Section 35CCA of Income-tax Act, 1961 to a bogus organisation, the assessee giving such donations can come under Amnesty Scheme. The assessee has to declare the donation paid by him to the bogus organisation and pay tax thereon. He can credit the amount of cash received by him from the donee organisation in the books of account. They can also capitalise this amount.

10. Considering the facts and clarifications of CPRO, the 1d. CIT(A) set aside the order of the AO and directed that the order should be done afresh, with an observation that while doing so the ITO may determine as to how the case is covered or not covered by the Amnesty Scheme after taking due note of the relevant public circulars issued from time to time in particular the circular issued on 27-3-87. (This circular in the form of question and answer is evidenced vide pages 29 to 34 of the paper book filed by the assessee). It is against this order the department is in appeal before the Tribunal.

11. Learned departmental representative, on behalf of the department, submitted that the order of the CIT(A) is patently wrong. Firstly assessee has no real grievances as only a penalty proceedings is initiated, and secondly even the assessee is not aggrieved against the assessment order because no ground of appeal to that effect was taken by assessee. Only ground agitated by the assessee before the 1d. CIT(A) was against initiation of penalty proceedings, and as such the setting aside of the whole order by the CIT(A) is without merit and patently wrong.

12. The 1d. D.R. also submitted that the finding of the CIT(A) is without any merit. The circular relied upon by the assessee i.e., Circular No. 451, dated 17-2-86 does not further assessee's case. The 1d. D.R. submitted that the department has gone beyond forming a prima-facie belief that the assessee has concealed income, but it has conclusively detected the concealment with evidence. Assessee filed the revised return for the A.Y. 1984-85 and paid the taxes thereon to the Reserve Bank of India on 30-9-86; whereas the department came into possession the letter from Shri D.S. Aruldas, General Supdt., Christian Medical College and Hospital, Vellore on 4-7-86. When department came into possession of this specific reply the department detected the concealment. If the assessee filed the returns before receipt of this letter from the General Supdt., it would have been possible for the assessee to put up a case that the department has only formed a "prima facie belief that the assessee has concealed income. Further the 1d.

D.R. pointed out that the assessee has not cared to answer the queries made by the department. So assessee has not made disclosure 'voluntarily' and in 'good faith'. This is so, because if the assessee filed revised return in good faith the assessee should be co-operative and would have answered the queries specifically put forth by the department. The assessee in spite of answering the queries, kept silent on these important facts. Thus by no dint of imagination it could be said that the assessee filed the returns voluntarily and in good faith.

There is no full and true disclosure of income by the assessee. Thus he contended that the order of the first appellate authority is bad in law and also on facts. In spite of giving a specific finding to the point agitated by the assessee, the 1d. first appellate authority set aside the order in toot and directed to re-do it. Apart from this, as made it clear in the preceding para, the 1d. D.R. submitted that the order of the 1d. CIT(A) also cannot stand legal scrutiny. It has not complied with the circular, that extended to the assessee immunity from penalty proceedings under Amnesty Scheme. The 1d. D.R. further brought our attention to the Board's Circular No. 451, dated 17-2-86, question No.19 which is reproduced below : Q. No. 19: Kindly clarify the expression "before detection by the department"? Answer: If the Income-tax Officer has already found material to show that there has been concealment, that would mean the department has detected the concealment. If the Income-tax Officer only had prima facie belief, that would not mean concealment has been detected.

The 1d. D.R. contended that appeal by the assessee cannot be maintained by the CIT(A) because whether a return filed under Amnesty Scheme or not is an administrative matter and as such the CIT(A) cannot decide the issue on merit. The 1d. D.R. brought our attention to the Third Member decision in the case of B. Tex Corpn. v. ITO[1993] 202 ITR(AT) 17 (Bom.). Thus he concluded that the order of CIT(A) is bad in law as well as on facts.

13. Opposing the contentions of the 1d. D.R. the 1d. A.R. submitted that the circular issued on 27-3-87 makes it abundantly clear that where some donations have been made under Section 35CCA of IT Act, 1961 to bogus organisation, the assessee giving such donations can come under Amnesty Scheme. The only condition attached to this is that the assessee has to declare the donation paid by him to the bogus organisation and paid tax thereon. In the instant case of the assessee, as soon as the assessee realised that it has made donation to a bogus organisation came forward and declared the donations before the department.

14. The 1d. A.R. at the time of hearing also produced a copy of the order of the Tribunal in the case of Industrial Machine Shops v. LAC [IT Appeal No. 6836 (Bom.) of 1989] for A.Y 1977-78 and other connected cases. The 1d. A.R. submitted that vide para 13 of his order the Tribunal set aside the orders of the first Appellate Authority and directed him to entertain assessee's appeal on Amnesty Scheme and to examine his claim with reference to the conditions laid down by the Board circular and orders issued under Section 119 of the Act from time to time and to dispose of all the appeals afresh after affording adequate opportunity of being heard to the parties concerned.

15. We have heard the rival submissions and gone through the order of the revenue authorities and the case laws cited by the contending parties. On a careful consideration we are of the view, in this case the department is to succeed on point of law and on facts. The assessee filed revised returns on 30-9-86. Before that date, the department came into possession of letter dated 4-7-86 from D.S. Aruldas, General Supdt, Christian Medical College & Hospital, Vellore. This letter evidently was written as a reply to queries made by the department. A perusal of ITO's order, para 1 will make it abundantly clear that the department was aware that the assessee has made donation to some parties other than the genuine party. Para 4 of the assessment order also makes it clear that the assessee avoided disclosing the identity of the persons who approached the assessee. It is very difficult to believe that a firm of assessee's stature will give away Rs. 10 lakhs simply to some persons, with whom the assessee has no contact or knowledge. If the assessee's version that the assessee has donated the money to some bogus organisations and later on finding out the truth assessee filed revised returns, there is no reason why the assessee should not answer the queries made by the department. Question No. 19 of Circular No. 451, dated 17-2-86 makes it abundantly clear that in order to get the benefit of the Amnesty Scheme the assessee should disclose his concealed income before the department detects the concealment. The crucial question thus is, what amounts to detection? The second question is where the limits of prima facie belief ends and the detection starts? To our mind it appears that if the department "suspects" something and initiates an inquiry, the initiation of enquiry is based on "prima facie belief'. If the assessee files returns disclosing the concealed income at this stage, the assessee can escape the consequences or proceedings. But if the department has gone a step further and has obtained a "satisfactory evidence" that the assessee has concealed income, then the assessee has to face the consequences because the assessee has not disclosed the concealment of income before "detection". The case relied upon by the assessee has no bearing on assessee's case.

The Tribunal while allowing the appeal by the assessee observed in this case as under: There are numerous instances where the benefit of the circulars issued by the Board have been granted in appellate proceedings even in cases where they have been clearly found to be contrary to the law. Reference in this connection may be said to the decisions of the Supreme Court in the case of Jhaveri (56 ITR 190 (SC) (82 ITR 913 (SC) and K.P. Varghese (131 ITR 537 (SC). A circular issued under Section. 119 of the Income-tax Act is binding on the income-tax authorities and if the effect to that is not given, the matter can be agitated and due relief sought in appeal. The only restriction in our opinion, could be that the appeal should be otherwise maintainable. The appeals in this case were filed against orders under Section. 271(1)(c) of the Act and that were made appeasable under Clause. (b) of Sub-section (2) of Section 246.

Independent to such an appeasable order, the relief would, however be not available to the assessee in appellate proceedings, that is by itself the issue of Amnesty Scheme cannot be agitated on involved in appeal. We, therefore, hold that the relief under the Amnesty Scheme can be claimed and agitated in appeal in the circumstances of the case. We are fortified in the view of the matter by the decision of the Madhya Pradesh High Court in the case of Jalkishan Gopikishan and Sons and Ors. vs. XT (A) wherein the order of the CIT (A) refusing to consider the case of the assessee under the Voluntary Disclosure Scheme was quashed by holding that the CIT (A) was not right in not considering the merits of the case of the assessee under the Voluntary Disclosure Scheme. In this reported case also, it was held that the various circulars issued by the Central Board of Direct Taxes in exercise of its powers under Section 119 of the Act have the force of law and are binding on the subordinate authorities. The Court further observed that guidelines are issued from time to time to deal with the case of such assessee who claim immunity and consideration of their cases leniently and sympathetically and the authorities are bound to deal with the cases, according to the instructions issued from time to time. In the circumstances, the outright rejection of the assessee's claim by the CIT (A) on the ground that the matter cannot be agitated in appeal is not justified.

16. The reliance of the 1d. A.R, for the assessee on question Nos. 5, 6 and 7 also cannot help the assessee.

Question No. 5 is with regard to the time limit of waiver of penalty, interest etc. Question No. 6 is with regard to immunity in cases, where the cash credits have been accepted as genuine by the ITO. Question No.7 is with regard to investigation in case of persons other than the assessee, if indicated concealment of income by the assessee, and if the assessee makes a true and full disclosure of his income, in such cases whether the assessee is entitled to immunity under the circular or not. In the instant case of the assessee, the assessee filed the revised return after the department getting the reply from General Supdt., Christian Medical College & Hospital, Vellore. Question No. 7 is applicable only in the case of an investigation other than the assessee.

17. Apart from this, it is clear from the order of the CIT (A) that only ground taken by the assessee was directed against the initiation of the penalty proceedings. To set aside the assessment order the 1d.

CIT (A) simply relied on a circular in the nature of clarification issued by Chief Public Relation Officer. If he had considered all the aspects i.e., the Circular No. 451, dated 17-2-86 along with the question and answer explaining the scope, before setting aside the assessment order he would not have come to the conclusion he arrived at. The Amnesty Scheme is applicable, but there are certain conditions attached to it by the circular itself. One of the most vital condition is that the disclosure should be made before the detection of the concealment by the department and if not so done, the department is riot bound to treat it as a return filed under Amnesty Scheme. In addition to this it is nowhere stated that the department cannot ask about the identity of the persons or the circumstances how and when such donations were made.

18. In the instant case of the assessee, as we have seen in the preceding para the department has come into possession of unquestionable and irrefutable evidence regarding the concealment of income before the assessee files the returns, purportedly under Amnesty Scheme. As such it cannot be said that this disclosure was 'voluntary' and 'in good faith'.

19. Considering the entire fact and circumstances and considering the circulars and question answer by C.B.D.T. and the case relied upon by the department in B. Tex Corpn. 's case (supra) we are unable to agree with the findings of the 1d. CIT (A).

20. In the result, we set aside the order of the CIT (A). Appeal by the department is allowed.