1990 PLP (Trib (PTD)

On 12‑3‑1974 ??????????? Cash ?? Rs. 1,000 On 30‑5‑1975 Cash Rs. 3,100 The balance of Rs. 17,000 was loan from Habib Bank Limited. The loan certificate from H.B.F.C. was also filed and placed on record. The return filed by the appellant was not processed under the Self‑Assessment Scheme and notice under section 61 was issued to the appellant. The appellant objected to the exclusion of his return from the Self‑Assessment Scheme. The I.T.O. replied to the appellant that his case has been rightly selected for detailed scrutiny because he filed the return of his income for the first time in the assessment year 1981‑82 declaring income in accordance with the C.B.R. Circular No. 11 of 1981 dated 6‑8‑1981. The I.T.O. pointed out that the appellant showed business capital of Rs. 30,000 declaring income at Rs. 15,000 and assuming that the income was 50% of the business capital thereby bringing the return within the ambit of immunity announced vide Circular No. 11 of 1981, but in the wealth statement the total assets were declared at R. 51,000 and C.B.R. vide letter No. C. 1 (3) IT 3181 (1) dated 26‑9‑1981 issued clarification regarding Self‑Assessment Scheme for 1981?82 holding that the capital at the close of income year shall be inclusive of all assets owned by assessee, Thus the return riled by the appellant was scrutinised under the normal procedure. The I.T.O called upon the appellant to submit proof of capital investment of Rs. 30,000 but the appellant continued to assert that the return filed by him enjoyed immunity and his case was wrongly selected for detailed scrutiny. The I.T.O ultimately rejected the declared version and estimated his total income as follows: Declared Gross Receipts????????? ??????????????????????? Rs. 48,000 Estimated Gross Receipts Rs. 70,000 Less Estimated expenses?????????? ??????????????????????? Rs. 30,000 Rs. 40,000 Add unexplained investment under section 13 as discussed above with the prior approval of I.A.C. Rs. 30,000 Total income. Rs. 70.000

4. Being aggrieved with the above treatment the appellant preferred first appeal before the learned C.I.T. (A) reiterating the contention that the return filed by the appellant enjoyed immunity and that it was wrongly selected for detailed scrutiny. The contention was repelled by the learned C.I.T. (A) holding that the case was correctly selected for detailed scrutiny, as the same did not fulfil the conditions laid down for immunity. According to learned CIT (A) the income declared to claim immunity should bear a certain proportion to the net assets of the appellant and not the capital investment as clarified through C.B.R. Circular No. 1(3)‑IT‑3/81(1) dated 26‑9‑1981. Since the income declared at Rs. 15,000 was much less than 50% of the net assets of Rs. 51,000 therefore, the treatment meted out by the I.T.O. was confirmed. Being still dissatisfied the appellant has preferred the second appeal before us.

5. I have heard Mr. Nariman, ITP, learned A.R. for the appellant and Mr. A.R. Memon, learned D.R. for the Department. Mr. Nariman has contended that the C.B.R. announced details of Self‑Assessment Scheme for the assessment year 1981‑82 vide Circular No. 11 dated August 6, 1981 According to this scheme a new tax payer declaring 50% of capital investment where capital investment does not exceed Rs. 50,000 enjoyed immunity from detailed scrutiny and in pursuance of the said scheme the appellant filed return of income for the first time on 13‑9‑1981. On 26‑9‑1981 the C.B.R. issued a clarification bearing C. No. 13(13)‑IT‑3/81(1) in response to the queries raised on various issues regarding the implementation of Self‑Assessment Scheme for the assessment year 1981‑

82. In para 2(3) of this letter the following decision was incorporated "Assessees filing returns of income for the first time with a capital of Rs, 1,00,000 as per para 1(B)(1) of Circular No. 11 of 1981 at the close of year have sought clarification on the question of the definition of capital as envisaged in the Self‑Assessment Scheme. It is clarified that capital at the close of income year shall be inclusive of all assets owned by assessee." Mr. Nariman has contended that clue to the above strange definition of capital by C.B.R. the I.T.O excluded the return filed by the appellant from the purview of Self‑Assessment Scheme. Mr. Nariman has contended that the term capital has a known connotation in accountancy and this expression has a definite meaning understood in the business and commercial parlance. The word capital never includes all the assets like residential house, jewellery and other household effects. The term capital is always understood to mean net amount invested by merchant or firm in business. The "capital and assets" are d1stinct terms having specific connotations and are not interchangeable terms. Mr. Nariman has submitted that the terms and conditions specified in the Self‑Assessment Scheme announced by the C.B.R. amount to an offer and as soon as an assessee filed return in response to the offer made by C.B.R. the assessee notified his acceptance thereby bringing a contract between the C.B.R. and assessee. The contract thus entered between C.B.R. and assessee cannot be modified unilaterally by any of the parties to the prejudice of other party and deviation from the terms and conditions announced in the scheme by any subsequent unilateral declaration or clarification would be deemed to be inoperative and having no binding effect. Thus Mr. Nariman has vehemently argued that after having announced immunity for new tax‑payers if they declare their income at 50% of capital invested, the C.B.R. could not be allowed to take a somersault by changing the connotation in the garb of clarification of the term capital. He has, therefore, submitted that the return filed by the appellant fulfils the conditions specified in Para 1(b)(1) of Circular No. 11 dated August 6, 1981 and, therefore, it enjoys immunity and the exclusion thereof from the purview of self?-assessment scheme was not justified. "

6. Mr. A.R. Memon, `the learned DR. has frankly conceded that the deposition of term "capital invested" given in the clarificatory letter of C.B.R. dated 26‑9‑1981 is not in accordance with the connotation of the term capital in the commercial and accounting parlance.

7. I have carefully considered the contentions raised by the learned representatives for the parties. I find sufficient force in the contention of Mr. Nariman that the terms and conditions contained in the Self‑Assessment Scheme are in the nature of proposal to the assessees and once an assessee accepts the scheme and files return in pursuance thereof a complete contract comes into existence having binding force on both the parties to the contract. The transaction thus amounts to be in the nature of civil contract and cannot be modified unilaterally by C.B.R. or any of the parties to the prejudice of the other' party. The word capital has its specific connotation and it cannot be assigned al meaning which is totally strange to the accounting and commercial world. The net assets and capital are not the terms synonymous to each other and the C.B.R. has no authority to coin new definitions of these terms in contrad1stinction to their established and ordinary meanings. The term capital is confined to the net amount invested by a businessman, firm or company in business and is always understood in the sense of wealth end in the form of money or goods which is to be used for the creation of additional wealth. On the other hand, the assets include all the movable and immovable properties held by any person including residential houses, lands, jewellery and other household articles, etc. irrespective of the consideration if they are used for generating income or creating additional wealth or not. A perusal of the Self‑Assessment Scheme for the years subsequent to the assessment year 1981‑82 shows that the C.B.R. realised the fallacy of clarification issued by it vide letter dated 26‑9‑1981 and, therefore, in the subsequent years it was provided that the new tax‑payers shall enjoy immunity if the income declared by them is 50% of the net assets at the close of the income year. Be that as it may, the C.B.R. announced in the Self‑Assessment Scheme in the assessment year 1981‑82 that the new tax‑payers whose capital investment does not exceed Rs. 1,00,000 at the close of income year shall enjoy immunity if they declare income at 50%0 of the capital investment at the close of the income year in the case of first Rs. 50,000 and 40% of the capital investment in the case of next Rs. 50.000 which is of binding nature and this condition cannot be changed by any device to the prejudice of assessees in the assessment year 1981?

82. Thus the clarification issued by the C.B.R. vide letter dated 26th of September, 1981 stating that the capital at the close of income year shall be inclusive of all assets owned by the assessee is ultra vires, inoperative and of no legal effect. Having reached this conclusion it is held that return filed by the appellant fulfilled the conditions as laid down in the Self‑Assessment Scheme announced vide Circular No. 11 of 1981 which could not be altered unilaterally to the prejudice of appellant, the learned two officers below have, therefore, fallen in error by following a clarification of C.B.R. which is of no legal effect. The order of the two officers below excluding the return filed by the appellant from the purview of Self‑Assessment Scheme is, therefore, vacated. The I.T.O. is directed to accept the return filed by the appellant in accordance with the Self Assessment Scheme contained in Circular No. 11 of 1981.

8. The appeal is allowed in the manner as indicated above. M.B.A./694/T ???????????????????????????????????????????????????????????????????????????????????? Appeal allowed.