Agarwal Pesticides & Chemicals ... vs Income-Tax Officer.
1990 Latest Caselaw 101 Del

ORDER

Per V. P. Elhence, Judicial Member - The assessed is in appeal against the order dated 29-3-1988 of the learned commissioner of Income-tax, Meerut for the assessment year 1985-86 and sec. 263 of the Income-tax Act 1961 by which he set aside the assessment made by the Income-tax Officer with directions that a fresh assessment be made.

2. The assessed is a registered firm which manufactures and sells pesticides. It consisted of 4 partners namely S/Shri Salek Chand Agarwal, Suresh Chand Agarwal, Vinod Kumar Agarwal and Anil Kumar Agarwal. The facts need to be given in some detail from the very beginning in a chronological order. It had filed its return on 30-8-1985 declaring an income of Rs. 1,65,360. The papers on the record as also the original records of the department shown to us show that there was a special survey carried out on 29-1-1986 by the Sales-tax department with whom the Income-tax Department associated under sec. 133A. The survey was carried out in the premises of all the concerns of the assessed group. During the course of survey, the Income-tax authorities found that in the current cash book for the financial year 1985-86, on the first date of the previous year i. e. on 1-4-1985, there were 21 cash deposits in different names aggregating to Rs. 1,15,08,000. In the cash book only the names of the depositors had been given without any further details. During the survey, the statement of the assesseds partner Shri Vinod Kumar Agarwal was recorded wherein he stated that he was not in a position to tell anything about the depositors. However, subsequent inquiries from the Union Bank of India, Muzaffarnagar showed that cash to the extent mentioned above was deposited on 1-4-1985 in the current account of the assessed firm. The Income-tax Officer, during the assessment proceedings for the assessment year in question, issued notice under secs. 143(2) & 142(1) to the assessed on 21-2-1986 fixing 27-2-1986. On 27-2-1986 the case was adjourned to 3-3-1986. On 3-3-1986 before the Income-tax Officer the assesseds partner Shri Salek Chand attended along with Accountant Shri R. K. Jain and the counsel Shri M. P. Singhal, Advocate and submitted the details as required. The books of account were produced which were partly considered by the Income-tax Officer with reference to the details filed. The Income-tax Officer noticed from a perusal of the journal for the assessment year in question that the assessed firm had received advances from 59 different parties/persons on different dated (specified in the order-sheet entry dated 3-3-1986 of the I. T. O.) aggregating to Rs. 1,14,25,000. The I. T. O. required the assessed to prove the identity of the depositors, genuineness of the deposits as also the full particulars and addresses of the depositors. Thereafter on 5-3-1986 the assessed moved a voluntary disclosure petition before the Commissioner of Income-tax, Meerut purporting to do so under the Governments Circulars and Clarification not published in February 1986 (containing Amnesty Scheme) mentioned in CBDT Instruction No. 1691 dated 12-2-1986 and Instruction No. 1692 dated 13-2-1986 and Circular No. 451 dated 17-2-1986. On this petition the following remarks were recorded by the Commissioner of Income-tax the same day :

"Discussed with I. A. C. and copy of petition given to him. He is directed to act in accordance with directions contained in Boards Circulars dated 15th November, 1985 on the subject and Instruction No. 1691 dated 12-2-1986. The petitioner may be advised accordingly.

Sd/-

CIT

Dated 5-3-1986"

The Income-tax Office (Judicial) also addressed the IAC, Muzaffarnagar on 5-3-1986 itself as follows :-

"F. No. 38-83/Vo. Discl/ITO-J/CIT-MRT/85-86/5-3-1986

To

The Inspecting Asstt. Commissioner of Income-tax,

Muzaffarnagar.

Sub : - Voluntary Disclosure as per Government Circulars and Clarification note published in Feb. 1986 issue of Taxman and clarified in public meeting in Muzaffarnagar and also Meerut with Chamber of Commerce, Meerut.

A copy of the petition of M/s Agarwal Pesticides & Chemical Industries, Muzaffarnagar addressed to the Commissioner of Income-tax, Meerut is enclosed herewith for necessary action at your end.

2. The C. I. T. Meerut has observed as under :-

"I. A. C. has been directed to act in accordance with Board circular dated 15th November 85 on the subject and subsequent instruction thereon. He will particularly keep in mind the Boards instruction number 1691 dated 12th Feb. 1986 by which the petitioners case is covered. The assessed may be advised accordingly."

Yours faithfully,

Sd/-

Enc :- As above

(K. K. Agarwal)

Income-tax Officer (J)

O/O C.I.T. Meerut."

He submitted that these articles being gifts on a The Boards Circular dated 15th November, 1985 referred to by the Commissioner of income-tax in his Minutes dated 5-3-1986 was Circular No. 432 containing clarification from the Board regarding the effect in the earlier years of the declaration of substantial income by the assessed in the initial assessment year. On 5-3-1986 itself the IAC (Asst.) made a communication to the assessing Income tax Officer as follow :

"F. No. 1/Vo. Discl/IAC-MZR/85-86/

Confidential Office of the Inspecting Asstt. Commissioner of Income tax, Muzaffarnagar.

Date : 5-3-1986.

To

Shri H. C. Jain, Income Tax Officer, Muzaffarnagar.

Sub :- Voluntary Disclosure by M/s. Agarwal Pesticides & Chemical Industries, Muzaffarnagar.

M/s Agarwal Pesticides & Chemical Industries, Muzaffarnagar has filed a voluntary disclosure petition dated 5-3-1986 before the Hon'ble C. I. T, Meerut stating inter alia that assessed has offered a sum of Rs. 1,15,08,000 as current years income from "Other Sources" and they have decided to revise the estimate of Income Tax for the Asst. Year 1986-87 and pay tax accordingly by 31-3-1986. A copy of the said petition has been forwarded by the C. I. T. to me. assessed would be filing the estimate of Advance Tax before you shortly. The assesseds voluntary disclosure is covered by the Board Instruction No. 1691 dated 12-2-1986.

2. You are directed to complete the assessments of earlier years keeping in view the Instruction No. 1691 dated 12-2-1986 and circular dated 15-11-1985. In case you find any difficulty, you are free to seek my direction.

Sd/-

(E. Saroj)

Inspecting Asstt. Commissioner

of Income Tax, M. Nagar."

He submitted that these articles being gifts on a Thereafter vide order-sheet entry dated 7-3-1986 the assessing Income-tax Officer asked the assessed inter alia explanation regarding the cash credits. The assessed vide its reply dated 10-3-1986 wrote to the income-tax Officer that the cash credits appearing in the assessment year 1985-86 were fully covered by the petition dated 5-3-1986 filed before the CIT and hence it may be treated as covered by the declared income. The photo copies of the Bank accounts and copies of the loan accounts were also enclosed by the assessed as required by the I. T. O. Thereafter the I.T.O sought the directions of the IAC under sec. 144A vide letter dated 17-3-1986 giving reference to the IACs letter dated 5-3-1986 referred to above as also Circular No. 423 dated 26-6-1985. Circular dated 15-11-1983 (Nos. 432, 439, 440 & 441), Instruction No. 1691 dated 12-2-1986 and Circular No. 451 dated 17-2-1986. The IAC thereupon gave his directions dated 18-3-1986 saying that the squared-up accounts of Rs. 1,14,80,000 were covered by the amount of Rs. 1,15,08,000 disclosed by the assessed as current years income and that its case fell within the parameters of Instruction No. 1691 dated 12-2-1986. He noticed that the assessment proceedings up to the assessment year 1983-84 stood already finalised and that assessments were pending only for the assessment years 1984-85 and 1985-86. He also observed that no concealment had been detected in the case of the assessed and therefore, Circular No. 423 dated 26-6-1985 did not apply. Next, he observed that the deposits in the squared-up accounts in the earlier years did not exceed the amount offered in the estimates of the current income and therefore, Instruction No. 1691 dated 12-2-1986 was to be followed. He also observed that revised estimate of advance tax for A. Y. 1986-87 could be filed by the assessed up to 31-3-1986. Thereafter assessment was framed by the Income-tax Officer under sec. 143(3) accordingly and the amount was treated as covered by the assesseds declared income at Rs. 1,15,08,000 disclosed as the current years income. The assessed thereafter filed the revised estimate of the advance tax for the A. Y. 1986-87 on 31-3-1986 in Form No. 29 showing loss of Rs. 64.25 lakhs.

3. It appears that the succeeding Commissioner (who ultimately passed the impugned order under sec. 263) wrote to the Board on 17-9-1987 for clarification whether in the circumstances of the case, the disclosure made by the assessed could be taken to cover its untaxed income for the preceding A. Y. 1985-86 introduced in the books in the from of cash credits and if not, he would have to take proceedings under sec. 263 for the assessment year 1985-86. The Board issued Instruction No. 1775 dated 23-10-1987 (F. No. 11015/2/87-Ad. VII) and sent the matter to the CCIT, Lucknow, The CCIT, Lucknow vide his letter dated 12-1-1988 wrote to the CIT, Meerut as follows :

"2. The Chief Commissioner (Administration) has observed as under :-

The assessed cannot cover past years undisclosed income by filing only one return of the current year and mentioning that any undisclosed income found in the earlier years may be treated as explained by the Amnesty return. The circular required that each years undisclosed income should be disclosed by filing a return for the relevant year to claim amnesty. In this case the assessed had disclosed the peak credits for asst. year 1986-87 only. He has not disclosed non-genuine squared up accounts of earlier year which were introduced in the books of accounts and utilised for meeting the purchases made for or other expenditure incurred. If the assessed wanted to be taxed on peak credits of all the years introduced in the books, he should have prepared a statement surrendering the credits acceptable by him as bogus on the accretion basis or if there was evidence or material to support that it was earned in different years, then, on that basis.

It would therefore be advisable for the C.I.T. to cancel the asst. for 85-86 as the instructions issued by the I. A.C to I. T. O. were erroneous in law that they could be treated as covered by the subsequent disclosure though the amount had been treated as covered by the subsequent disclosure though the amount had been introduced in the books and utilised for business purposes. This could not represent income earned in a later year. The credits should be dealt with independent of the disclosure made in the amnesty return for 86-87.

In instruction No. 451 Q/A 34 it was made clear that assessed could not get immunity for past years income even if the disclosure is made for a later year. In instruction No. 1691 also it was made clear that the liberal approach will apply only where the concealment in year is not in the from of tangible assets. In this case cash has been brought in the books and utilised which shows existence of concealed income in A. Y. 85-86.

If later on the assessed comes forward for settlement by offering the peak credit to be taxed in the relevant year the C. I. T. may take the disclosure made in amnesty return into consideration for deciding waiver/reduction of penalty with the approval of Board."

It is, thereafter that the learned CIT issued notice dated 12-2-1988 to the assessed under sec. 263. In that notice he said that the I. T. O. had accepted the assesseds explanation on a complete misconception of law as well as misunderstanding of the Boards Instruction No. 1691 dated 12-2-1986 there being nothing in the Boards instruction which could justify the ITOs action in treating the unexplained deposits in the Asst. Year 1985-96 as covered by the unexplained deposits in different names in A. Y. 1986-87. It was pointed out in the notice that the I. T. O. had failed to see that in the financial year 1984-85 unaccounted cash had been introduced by the assessed and was utilised in the business and therefore, such untaxed amounts were introduced in the books for the A. Y. 1985-86 in the form of tangible assets. It was said that the I. T. O. was not justified in ignoring the existence of unaccounted funds in the Asst. Year 1985-86 because the subsequent years deposits could not cover the deposits in the preceding year. It was also said in the said notice that if the assessed wanted to surrender the unexplained deposits it could surrender peak credits introduced in each year. It was said that cash had been brought in the books and utilised which showed the existence of concealed income in the A. Y. 1985-86. Therefore, he proposed to set aside the assessment order on the ground that it was erroneous in so far as it was prejudicial to the interest of the revenue. The assessed filed its reply dated 16-3-1988. After considering the same, the learned Commissioner was of the view that the assessment order was erroneous in so far as it was prejudicial to the interests of the revenue. He accordingly passed the order impugned before us. In the said order, he held as follows :-

(i) There was no settlement by the Commissioner nor under the Amnesty Scheme there was any scope for the same.

(ii) If the assessed chosen to file a letter before the earlier CIT before filing an estimate for advance tax for the A. Y. 1986-87, it was not part of any procedure under the Amnesty Scheme and if some discussion took place with the Commissioner and any guidance etc., was issued by him to the subordinate officers, they did not form any guidance etc., was issued by him to the subordinate officers, they did not form part of any assessment record, as they were internal or confidential proceedings.

(iii) The Commissioner could not have issued any instructions but could have only explained Boards instructions to the assessing officer for his guidance, with the result it was for the I. T. O. to take ultimate decision on his own.

(iv) By declaring cash deposits in the subsequent assessment year 1986-87 as its income in the estimate of advance tax, the deposits in the proceeding year could not be treated to be fully explained.

(v) Had a proper assessment been made, the assessed firm would have to pay much larger amount of tax on account of the higher rate of tax and the partners had got undue advantage by not paying wealth-tax on the basis of such amount which remained untaxed in the A. Y. 1985-86.

4. That is how the assessed has come up in appeal before us. On behalf of the assessed Shri C. S. Aggrawal, the learned counsel reiterated the submissions made before the learned Commissioner. He submitted that no valid jurisdiction could be assumed by the Commissioner under sec. 263 and no interference could be made with the assessment order framed by the Income-tax Officer under sec. 143(3) under the binding instructions of the IAC under sect 144A. He submitted that the assessment had been completed by the I. T. O. on and under the direction of his superior authority, the then CIT, Meerut as a result of settlement reached by the assessed with him to the effect that the case credits found in the books of the assessed in the earlier year (including the A. Y. 1985-86) would be accepted as covered by the additional income disclosed for taxation in the assessment year 1986-87 by offering it in its estimate for advance tax for the A. Y. 1986-87. He also submitted that the learned Commissioner was estopped from repudiating the settlement/assurance made by his predecessor. He pointed out that what the I. T. O. was to do, was to implement the directions of his superior authority. It was said that the earlier Commissioner had full legal authority and competence to issue directions under sec. 119(3) to bind the I. T. O. to frame the assessment in accordance with such directions even if they relaxed the rigours of law in favor of the assessed and to its benefit. Reliance was placed by him in this connection on the order dated 1st March, 1988 of Delhi Bench B in ITA No. 1912/Del/1986 for A. Y. 1980-81 in the case of M/s. Amar General Industries, New Delhi wherein reliance had been placed on the decision of the Hon'ble Calcutta High Court in the case of Russel Properties (P.) Ltd. v. A. Chowdhury, Addl. CIT [1977] 109 ITR 229 and the decision of Delhi Bench C in Vijay Kumar v. ITO [1986] 15 ITD 58. He referred to the decision of Bombay High Court in the case of Jivatlal Purtapshi v. CIT [1967] 65 ITR 261 to emphasise the point that there was no right of appeal in the department if it had agreed to the deletion of the addition of an amount. For the same proposition, he referred to the decision of the Hon'ble Allahabad High Court in the case of Sterling Machine Tools v. CIT [1980] 123 ITR 181. Shri Aggarwal submitted that the question relating to the cash credits pertaining to the assessment year in question had been duly considered by the preceding Commissioner as having been built-up out of the past accumulated untaxed income of the assessed of several years and that the assessing Income-tax Officer was to be deemed to have accepted the assesseds explanation about the source of such cash credits similarly in exercise of his own independent judgment uninfluenced by any directions of his superior, even if it was assumed that no such directions were or could be lawfully issued to the Income-tax Officer. He, therefore, submitted that the order of the learned Commissioner under sec. 263 deserved to be set aside. On the other hand, Shri B. B. Ahuja, the learned counsel for the department, referring to the decision of the Supreme Court in the case of Sirpur Paper Mills Ltd. v. CWT [1970] 77 ITR 6, pointed out that the power of the Commissioner under sec. 263 was quasi-judicial and not administrative and that the Board directions could only control the exercise of the power of the officers of the department in matters administrative but not quasi-judicial. For the latter proposition he referred to another decision of the Supreme Court in the case of J. K. Synthetics Ltd. v. CBDT [1972] 83 ITR 335. He referred to the decision of the Calcutta High Court in the case of Jeewanlal (1929) Ltd. v. CIT [1977] 106 ITR 33 for the proposition that while passing an order in consequence of the direction of the Appellate Asstt. Commissioner, if the I. T. O. acts erroneously or contrary to the provisions of law, it could not be said that the same forms part of the order of the A. A. C. He submitted that on facts the decision of the Calcutta High Court in the case of Russel Properties (P.) Ltd. (supra) could not be availed of by the assessed. He referred to the another decision of the Calcutta High Court in the case of ITO v. Easter Scales (P.) Ltd. [1978] 115 ITR 323 for the proposition that there could be no interference by a superior authority in the judicial or quasi-judicial functions of an inferior authority and therefore, if rectification was made under sec. 154 by the I. T. O. at the behest of superior officer, it was bad. He also referred to the decision of the Rajasthan High Court in the case of Rajputana Mining Agencies v. ITO [1979] 118 ITR 585 for the proposition that the I. T. O. should not act under instructions or directions of higher authorities and had to apply his own mind independently to the facts of the case.

He submitted that the decision of the Allahabad High Court in the case of Sterling Machine Tools (supra) was not relevant to the facts of this case. Next, he referred to the decision of Andhra Pradesh High Court in the case of torson Products Ltd. v. CIT [1988] 173 ITR 611/38 Taxman 72 for the proposition that if certain directions were given by the IAC under sec. 144B, they did not have the effect of impressing the order ostensibly made by the I.T.O as an order made by the IAC. He pointed out that this decision was prior to the Direct Tax Laws (Amendment) Act, 1987 which declared that an order passed by the assessing officer included an order of assessment made on the basis of the direction issued by the Dy. Commissioner under sec. 144A or sec. 144B. He also referred to the Finance Act, 1988 which made a change again with effect from 1-6-1988. To the same effect was cited by him another decision namely of Madhya Pradesh High Court in the case of CIT v. Vithal Textiles [1989] 175 ITR 629 wherein it was held that the Commissioner had jurisdiction to revise an order passed by the Income-tax Officer in accordance with the directions given by the IAC under sec. 144B. Placing strong reliance on the orders of the learned Commissioner Shri Ahuja submitted that there was no assurance or settlement with the assessed and that no instruction by the Board or advice by the Commissioner could be binding on the assessing officer in regard to a specific assessment in terms of sec. 119. He submitted that the assessment order had been rightly set aside by the learned Commissioner whose order was entitled to upheld.

5. We have given our careful consideration to the facts of this case, the contentions raised on both the sides as also the decisions referred to above. The first question is whether there was any agreement, settlement or understanding reached with the assessed by the department or by any of its officers competent to bind the department. On facts as narrated in detail above, we are unable to discover any such thing on the basis of the assesseds petition dated 5-3-1986 or of the actions or directions of the IAC, the Commissioner or the Board. The decision in the cases of Jivatlal Purtapshi (supra) and Sterling Machine Tools (supra) therefore, do not assist the assessed. The decisions of the Tribunal in the cases of Vijay Kumar (supra) and Amar General Industries (supra) proceeded on their own facts and are therefore, not being discussed here. Another allied question is whether the conduct or the express or any implied understanding given by the officers of the department to the assessed were such as to give rise to a situation in which the assessed could invoke the well known doctrine of promissory estoppel. Again our answer to this question is an emphatic "no".

6. The second question is as to from the point of view of sec. 263, what is the position of an assessment order framed on the basis of the directions of the IAC under sec. 144A. Sec. 144A provides that though such directions are for the guidance of the assessing officer in order to enable him to complete the assessment yet they shall be binding on the assessing officer. The Explanation to sec. 263 as inserted by the Taxation Laws (Amendment) Act, 1984 with effect from 1-10-1984 and amended by the Direct Tax Laws (Amendment) Act 1987 with effect from 1-4-1988 and Finance Act, 1988 with effect from 1-6-1988 was to the effect that an order passed by an assessing officer shall include an order made on the basis of the directions issued under sec. 144A. The position resulting from these two sets of provisions therefore is, that the Commissioner would have the jurisdiction and power under sec. 262 to recall for and examine the assessment order even though made by the assessing officer was bound to follow the directions issued by the IAC under sec. 144A would therefore, not detract from the jurisdiction and power of the Commissioner under sec. 263. We hold accordingly.

7. The third question is whether, and if so, how far that exercise of the jurisdiction or the power of a Commissioner under sec. 263 is affected by his or by his predecessor in office expressing a view sitting in another capacity, on a point which is directly relevant to the exercise of the jurisdiction or the power of the Commissioner under sec. 263. In absolute terms what was sought to be argued on behalf of the department by Shri B. B. Ahuja is right namely, that the power of revision conferred on the Commissioner is not administrative but quasi-judicial and that in the exercise thereof, the orders, instructions and directions of the Board cannot influence him. Section 119 in terms itself provides that the orders, instructions and directions which the Board can issue from time to time are for the proper administration of the Income-tax Act and it is such directions only which the Income-tax authorities shall observe and follow and that no such orders, directions or instructions shall be issued -

(a) so as to require any Income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner, or (b) so as to interfere with the discretion of the Dy. Commissioner (A) or the Commissioner (A) in the exercise of his appellate functions. However without prejudice to the generality of the foregoing power, the Boar may, for the purpose of the proper and efficient management of the work of assessment and collection of revenue or for avoiding genuine hardship in any case or class of case, issue from time to time general or special orders. The Board however cannot give directions regarding the exercise of any judicial power by its subordinate authorities. In the case of Russell Properties (P.) Ltd. (supra) the observations made by the Calcutta High Court to the effect that where there is a decision of a higher appellate authority, the subordinate authority is bound to follow such decision, was made in the context that an order passed by the ITO following the decision of the Appellate Tribunal could not be held to be erroneous and that such an order could not be revised. We have therefore to examine each case in its proper factual context. No doubt as held in the case of Eastern Scales (P.) Ltd. (supra) and Rajputana Mining Agencies (supra) the ITO exercising powers of rectification under section 154 can rectify only if an error is apparent on the face of the record and not merely at the behest of the superior officer as it shows non-application of the requirements of section 154. However the fact remains that for examining the correctness of the exercise of the jurisdiction or power by a Commissioner under section 263 the fact that he or his predecessor in office held a certain view or took a certain stand, would be relevant thought not conclusive. We would have occasion to dilate on this point further in what follows.

8. This brings us to the consideration of the most essential aspect namely as to what the petition dated 5-3-1986 of the assessed was, what the Amnesty Scheme was, what were the other instructions preceding and subsequent to it and how the assessment proceedings took note of the same. If hardly needs to be emphasised the Circulars issued by the Board are binding on the Income-tax authorities particularly when they are of a benevolent nature and instead of imposing a burden on the tax-payer, they mitigate the rigour of law. It is not the case of the department that the Circulars which we would be presently making reference to, were not within the four corners of the provisions of section 119 or that they were contrary to law. They had been issued with particular reference to the Finance Act 1985 with the objective of securing voluntary tax compliance and to treat repentant sinners on the same footing as honest taxpayers. Circular No. 423 dated 26-6-1985 mentions that the Finance Act, 1985 had, with the objective of securing better tax compliance rationalised the provisions of personal Income-tax. Para 3 of that Circular mentions that clarification had been sought on the question whether a taxpayer who was found to have concealed his income for any earlier year, could claim that such income should not be assessed in that year on the ground that he had included such income in the estimate of advance tax furnished by him for the financial year 1985-86. It was clarified that such a claim was clearly untenable and that income which related to a particular assessment year could be assessed only in that year. It was also mentioned there that the advisable course for the taxpayer in such a case was to voluntarily and in good faith make a full and true disclosure of his concealed income, prior to its detection by the Income-tax Officer and then to make an application to the Commissioner for the reduction or waiver of penalty or interest under section 273A. Circular No. 432 dated 20-9-1985 provided that instructions were being issued to all officers of the department that they should adopt a liberal and sympathetic approach where the assessed had come forward suo motu and co-operated with the department and that the assesseds would do well to avail themselves of this opportunity and file returns of income without any fear. Circular Nos. 432, 439, 440 and 441 dated 15-11-1985 related to declaration of higher incomes or wealth. The Boards Instruction No. 1691 dated 12-2-1986 emphasises the following points :-

(1) The penal provisions of law will hereafter be strictly applied in case where any person having taxable income, does not voluntarily come forward to declare the same and pay tax thereon by 31-3-1986.

(2) Considering the fact that the entire thrust of the new fiscal policy is to give taxpayers hitherto recalcitrant an opportunity to reform themselves and come forward and declare their true income, officers will have to be liberal and sympathetic in their approach to such taxpayers.

(3) The basic principle now being followed is that repentant sinners will be treated on the same footing as honest taxpayers, while those who continue to evade tax will be punished severely.

(4) It may happen under these circumstances that a person files an estimate of income for advance tax purposes showing a very high figure in the current year. It should be obvious that such a higher estimate of income would not represent his income of the current year alone but possibly also the accumulated untaxed income of several earlier years. It may be difficult for him even to relate the income to different years ..... The assessed may very well plead that even if some income had escaped assessment in some particular earlier years, he has made a clean breast of it in the current year by including it in his estimate for advance tax and paying tax on the same.

(5) In such cases (i. e. cases mentioned at Sl. No. 4 above) Income-tax Officer are advised to have a broad and liberal approach and take a sympathetic view in respect of the case for the earlier year, so long as the material in their possession does not show the evasion of past incomes which could not be accounted for by the assesseds estimates for the current year. Obviously such an approach can apply only to cases where the concealment in the earlier years is not in the form of tangible assets.

In the Instruction No. 1692 dated 13-2-1986 it was said inter alia that in the spirit of the assurance given by the Finance Minister and Circular No. 432 dated 20-9-1985 and Circular Nos. 439, 440 and 441, dated 15-11-1985 issued by the Chairman, it may be necessary for the Commissioner to give advice to ITOs in terms of para 3 of the Instruction No. 1433, dated 26-11-1981. It also clarified that pending amendment of the law to give Commissioner the power to issue directions to the ITOs to complete a particular assessment or pass any other statutory order in the manner laid down by him, the existing practice of the Commissioner giving advice to the subordinate officers in the disposal of complicated matters, thus giving them the benefit of their experience, may continue and that this advice should be kept in view by the authority concerned in coming to a decision on the merits of the case in the light of his own judgment. This part of the Instruction No. 1692 is particularly relevant for examining not only the background but also the scope and extent to which the Board expected its Commissioner to give advice to the subordinate officers in the disposal of complicated matters which no doubt had to be decided by those subordinate officer on the merits of the case in the light of their own judgment. It is in the backdrop of these instructions that the petition dated 5-3-1986 made by the assessed has to be examined. Reference was also made to Circular No. 451 dated 17-2-1986. It purports to clarify the press note and circulars issued by the Ministry of Finance regarding declaration of higher income or wealth. In answer to question No. 10 it was said that the intention of the Circular No. 451 was that the correct net wealth for the A. Y. 1985-86 and earlier years should be disclosed and the immunity availed of. However, in answer to question No. 34 it was said that the immunity would not cover all investments or incomes of the past year also, if it was included in the declaration of income for the current year. By means of the petition dated 5-3-1986 the assessed purported to make a voluntary disclosure saying that the credit of Rs. 1,15,08,000 on 1-4-1985 in its account books in different names (details disclosed in Annexure A) represented unexplained cash credits which were offered as the current years income and the estimate of advance tax for the A. Y. 1986-87 was to be revised accordingly by 31-3-1986. It was also mentioned that similar squared-up accounts to the extent as offered in the A. Y. 1986-87 be treated as fully explained in the earlier years whose deposits may happen to appear in various names. It was said that estimates of advance tax for the A. Y. 1986-87 were also being revised in the case of the four partners. In the petition the assessed had also added that the aforesaid amount has been/will be utilised by the partners as per details given in Annexure B. It was, therefore, prayed that the revised estimates be accepted. After this petition the Commissioner discussed the matter with the IAC to whom a copy of the petition was given and he was directed to act in accordance with the Boards circular dated 15-11-1985 and Instruction No. 1691 dated 12-2-1986. Apart from this the instructions of the Commissioner were communicated though the ITO to the IAC by means of letter dated 5-3-1986 (supra) saying that he should particularly keep in mind the Boards Instruction No. 1691 dated 12-2-1986 by which the assesseds case was covered. On the same day the IAC wrote to the Income-tax Officer (supra) to complete the assessment of earlier years keeping in view the said instructions and to feel free to seek the IACs directions in case he found any difficulty. Then came the order-sheet entry dated 7-3-1986 recorded by the ITO to which we have already made reference while narrating the facts and the assesseds reply dated 10-3-1986 that the cash credits appearing for the A. Y. 1985-86 were fully covered by the disclosure petition dated 5-3-1986 filed before the Commissioner and hence it may be treated as covered by the declared income. The Income-tax Officer nevertheless sought the IACs direction under section 144A on 17-3-1986 whether the assesseds submission was tenable in law so that squared-up account of Rs. 1,14,80,000 may be treated as covered by the declaration for current year. It was pointed out by him that two Circulars mentioned in the IACs letter dated 5-3-1986 dealt with the reopening of the cases of the earlier years only whereas in the instant case the assessment proceedings were pending and that the assessed had not filed any revised estimate of advance tax as required in the Circular (this later observation was obviously not appropriate as the revised estimate of advance tax was due to be filed only by 31-3-1986 when it was actually filed). The IAC said that the square-up accounts of Rs. 1,14,80,000 were covered by the amount of Rs. 1,15,08,000 disclosed by the assessed as current years income. In our view this was the correct position. The IAC further mentioned in his directions dated 18-3-1986 that the assessment proceedings up to the A. Y. 1983-84 stood finalised and only the assessment for the Asstt. Years 1984-85 and 1985-86 were pending and therefore, the case was covered by Instruction No. 1691 dated 12-2-1986. The Inspecting Asstt. Commissioner also in our view, correctly stated that para 3 of the Circular No. 423 dated 26-6-1985 referred to a situation where the taxpayer was found to have concealed his income for any earlier years but that in assesseds case no such concealment had been detected. He further mentioned that the deposits in the squared-up accounts in the earlier years did not exceed the amounts offered in the estimate of the current income. This is not a case where the Commissioner thought that due enquiries as provoked by the facts of the case were not made by the Income-tax Officer. It was only a question whether a proper view had been taken in the assessment on the basis of the disclosure petition dated 5-3-1986 in the light of the Amnesty Scheme and other Circulars referred to above. Thus the income which had been earned by the assessed outside the books for a number of earlier years, had remained undisclosed and untaxed and the assessed was unable to offer to the Commissioner or the assessing authority the precise details of such income earned with clear co-relation with the years in which such incomes were earned. Due to the same the assessed had offered the amount of Rs. 1,15,08,000 to cover-up all the undisclosed and untaxed income of the past, for being taxed in the A. Y. 1986-87 under the Amnesty Scheme. The Income-tax Officer making the assessment had raised the question of proof of genuineness of the cash credits for the assessment year in question and completed the assessment in the light of the voluntary disclosure made by the assessed. The learned Commissioner, in our view, had correctly appreciated the facts and circumstances arising from the disclosure petition of the Amnesty Scheme in the circulars when in issued the instruction to the IAC which were handed down to the ITO initially administratively and later under section 144A. The successor Commissioner was not justified in considering such a view itself to be erroneous and in purporting ton review the stand while discharging the functions as a revisionary authority under section 263. In this context it would be pertinent to notice that even for discharging his quasi-judicial function under section 263 the learned Commissioner was himself seeking instructions from the Board. This is very thing which qua the assessing officer, was being taken exception to on behalf of the department during the arguments before us. The standard had to remain the same. Even otherwise, the learned Commissioner was not right in observing that the Income-tax Officer accepted the explanation of the assessed on a complete misconception of law as well as of the Boards Instruction No. 1691 dated 12-2-1986. The assessed had made a clean breast of it in A. Y. 1986-87 by including past untaxed income in his estimate of advance tax and had paid tax on the same. The assessing officer was justified in adopting a broad and liberal approach or a sympathetic view in the context and back ground of the Boards Instructions. It cannot be said that untaxed incomes were introduced in the books for the assessment year 1985-86 in the form of tangible assets. Even though the discussion which took place between the assessed, the Commissioner and the Inspecting asstt. Commissioner was not part of the assessment record, it was quite relevant for the purposes of assessment for the assessment year in question. We have already observed that it did not have the character of any agreement, settlement or understanding. Thus even if the instructions of the Commissioner and of the Inspecting Asstt. Commissioner were to be ignored, the assessment as made in the context of the disclosure petition dated 5-3-1986 and the Boards Instructions could not be said to be erroneous or prejudicial to the interests of the revenue. The order of the learned Commissioner has therefore to be cancelled.

9. In the result, the appeal filed by the assessed is allowed.