Commissioner Of Income Tax-I, Ludhiana v. Shri Prem Pal

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. ITA No. 155 of 2008 Date of decision: 14.12.2010 Commissioner of Income Tax-I, Ludhiana -----Appellant Vs. Shri Prem Pal Prop. ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. . Dinesh Goyal, Mr. Rajesh Katoch, and Ms. UrvashiDhugga, Advocates for the revenue. Mr. S.K.Mukhi and Deepak Sharma, Advocate for the assesses. Adarsh Kumar Goel,J. 1.This order will dispose of ITA nos.129, 155, 600, 640, 743,766 of 2008, 91, 83, 261 and 379 of 2009 as all the cases involve commonquestion raised on behalf of the revenue to the following effect:- “Whether on the facts and in law, the Hon’ble Income TaxAppellate Tribunal was justified in treating the initiation ofproceedings under section 147/148 unjustified and untenableand issuance of notice under section 148 to be invalid for theassessment year 1998-99 in which the assessee was found to beowner of Gold and diamond Jewellery as envisaged by section69A of the Income Tax Act, 1961? 2. In ITA No.155 of 2008, the assessee is individual and fileddeclaration on 31.12.1997 before the Commissioner under the VoluntaryDisclosure of Income Scheme, 1997 (VDIS) declaring that he had assets inthe form of gold and diamond jewellery acquired much earlier. However, tax having not been paid as per the declaration by virtue of section 67(1) ofthe Scheme, the declaration was treated to have never been made. Sincefrom the declaration, the assessee was found to be owner of the unexplainedinvestment in jewellery, the Assessing Officer (AO) invoked Section 69Araising statutory rebuttable presumption in favour of unexplainedinvestment to be in the year in which it is found and issued notice for re-assessment under section 148 and proceeded to make assessment therebymaking addition equal to the value of unexplained assets. On appeal, theCIT(A) upheld the addition but the Tribunal set aside the initiation of re-assessment proceedings holding that since as per declaration undisclosedincome was of the financial years 1985-86 and 1986-87 and the AO had noother material, the said declaration could not be the basis for re-assessmentfor the assessment year 1998-99. The finding recorded by the Tribunal is asunder:- “From a perusal of the aforesaid excerpts of the order of theTribunal, it is evident that the Tribunal was considering afact situation similar to the one which is presently before us.In the present case to the assessee had made a declarationunder VDIS Scheme whereby he declared the value ofjewellery and the same was declared to have been acquiredin the course of assessment year 1986-87 and 1987-88 i.e.,assessment years other than the assessment year underconsideration. That the Assessing Officer considered theaforesaid material and initiated proceedings under section147/148 for the assessment year 1998-99. Clearly theconclusion of the Tribunal that there was no material withthe department apart from the documents relating to VDISthat there was an escapement of income for the assessmentyear 1998-99 clearly emerges in this case also. The materialso relied upon clearly points out that the assets in question were acquired in the assessment year 1986-87 and 1987-88and not 1998-99. Thus rendering the said material as otiosefor assuming jurisdiction under section 147/148 for theassessment year 1988-89. Following the reasoning made outby the Tribunal in the case of Inder Kumar Bachani, HUF(supra) which we have extracted above, the initiation ofproceedings under section 147/148 are unjustified anduntenable. As a consequence, the subsequent assessmentframed is liable to be quashed. We hold so. Since we haveheld the issuance of notice under Section 148 to be invalid,the other grounds raised by the assessee are renderedacademic and are not being adjudicated by us.” were acquired in the assessment year 1986-87 and 1987-88and not 1998-99. Thus rendering the said material as otiosefor assuming jurisdiction under section 147/148 for theassessment year 1988-89. Following the reasoning made outby the Tribunal in the case of Inder Kumar Bachani, HUF(supra) which we have extracted above, the initiation ofproceedings under section 147/148 are unjustified anduntenable. As a consequence, the subsequent assessmentframed is liable to be quashed. We hold so. Since we haveheld the issuance of notice under Section 148 to be invalid,the other grounds raised by the assessee are renderedacademic and are not being adjudicated by us.” 3.In other cases, factual position is same except in ITA No.640 of2008 wherein the CIT(A) deleted the addition. It examined the alternativeissue of justification for addition on merits holding that assets in questionwere acquired in the financial year 1980-81 and not in the assessment year1998-99. This finding was recorded on the basis of purchase bills relating tothe ornaments in question. The Tribunal did not go into merits but upheldthe deletion on jurisdictional ground. 4.We have heard learned counsel for the parties and perused the record.5.Learned counsel for the revenue submitted that under Section69A of the Act, any unexplained money or jewellery not recorded in booksof account of the assessee can be added to the declared income of the yearwherein the same was found unless the assessee offers explanation aboutnature and source of acquisition thereof. In the present case, the valuableshaving been found to be from unexplained income during financial year1997-98, the same could be added to the income of the said year unless theassessee had acceptable explanation. Though assessee’s declaration of availability of unexplained investment could form basis for reassessment,mention of year of acquisition was not conclusive, unless found to beacceptable. The AO was not required to show any further material in viewof statutory presumption under Section 69A. Finding of unexplainedinvestment itself could be legal basis unless the statutory presumption wasrebutted, burden of which was on the assessee. 6.Learned counsel for the assessee supports the impugned finding. 7.There is no dispute about the proposition that under Section69A, any undisclosed income or valuables found with the assessee can beadded to the income of the year in which the same are found. Learnedcounsel for the assessee could not dispute this legal proposition.Presumption being rebuttable, if the assessee gives an acceptableexplanation, presumption can stand rebutted. The Tribunal held thatinitiation of proceedings under sections 147/148 was unjustified anduntenable in absence of any material with the department about escapementof income. Reliance was placed on judgments of different benches of theTribunal to that effect. 8. The view taken cannot be accepted as the Tribunal failed toappreciate that burden was not on the department but on assessee to showthat income did not relate to the year in which it was found. 9.It will be appropriate to refer to the relevant statutoryprovisions:- Unexplained money, etc. 69A. Where in any financial year the assessee is found to bethe owner of any money, bullion, jewellery or other valuablearticle and such money, bullion, jewellery or valuable article isnot recorded in the books of account, if any, maintained by himfor any source of income, and the assessee offers no explanation about the nature and source of acquisition of themoney, bullion, jewellery or other valuable article, or theexplanation offered by him is not, in the opinion of theAssessing Officer, satisfactory, the money and the value of thebullion, jewellery or other valuable article may be deemed to bethe income of the assessee for such financial year. Issue of notice where income has escaped assessment. Unexplained money, etc. 69A. Where in any financial year the assessee is found to bethe owner of any money, bullion, jewellery or other valuablearticle and such money, bullion, jewellery or valuable article isnot recorded in the books of account, if any, maintained by himfor any source of income, and the assessee offers no explanation about the nature and source of acquisition of themoney, bullion, jewellery or other valuable article, or theexplanation offered by him is not, in the opinion of theAssessing Officer, satisfactory, the money and the value of thebullion, jewellery or other valuable article may be deemed to bethe income of the assessee for such financial year. Issue of notice where income has escaped assessment. 148. (1) Before making the assessment, reassessment orrecomputation under section 147, the Assessing Officer shallserve on the assessee a notice requiring him to furnish withinsuch period, as may be specified in the notice, a return of hisincome or the income of any other person in respect of whichhe is assessable under this Act during the previous yearcorresponding to the relevant assessment year, in the prescribedform and verified in the prescribed manner and setting forthsuch other particulars as may be prescribed; and the provisionsof this Act shall, so far as may be, apply accordingly as if suchreturn were a return required to be furnished under section139: Provided that in a case— (a)where a return has been furnished during the periodcommencing on the 1st day of October, 1991 andending on the 30th day of September, 2005 in responseto a notice served under this section, andcommencing on the 1st day of October, 1991 andending on the 30th day of September, 2005 in responseto a notice served under this section, and (b)subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelvemonths specified in the proviso to sub-section (2) ofsection 143, as it stood immediately before theamendment of said sub-section by the Finance Act,2002 (20 of 2002) but before the expiry of the timelimit for making the assessment, re-assessment orrecomputation as specified in sub-section (2) ofsection 153, every such notice referred to in this clauseshall be deemed to be a valid notice:section (2) of section 143 after the expiry of twelvemonths specified in the proviso to sub-section (2) ofsection 143, as it stood immediately before theamendment of said sub-section by the Finance Act,2002 (20 of 2002) but before the expiry of the timelimit for making the assessment, re-assessment orrecomputation as specified in sub-section (2) ofsection 153, every such notice referred to in this clauseshall be deemed to be a valid notice: Provided further that in a case— (a)where a return has been furnished during the periodcommencing on the 1st day of October, 1991 andending on the 30th day of September, 2005, inresponse to a notice served under this section, andcommencing on the 1st day of October, 1991 andending on the 30th day of September, 2005, inresponse to a notice served under this section, and (b)subsequently a notice has been served under clause (ii)of sub-section (2) of section 143after the expiry oftwelve months specified in the proviso to clause (ii) ofsub-section (2) ofsection 143, but before the expiry ofof sub-section (2) of section 143after the expiry oftwelve months specified in the proviso to clause (ii) ofsub-section (2) ofsection 143, but before the expiry of the time limit for making the assessment, reassessmentor recomputation as specified in sub-section (2) ofsection 153, every such notice referred to in this clauseshall be deemed to be a valid notice.] (b)subsequently a notice has been served under clause (ii)of sub-section (2) of section 143after the expiry oftwelve months specified in the proviso to clause (ii) ofsub-section (2) ofsection 143, but before the expiry ofof sub-section (2) of section 143after the expiry oftwelve months specified in the proviso to clause (ii) ofsub-section (2) ofsection 143, but before the expiry of the time limit for making the assessment, reassessmentor recomputation as specified in sub-section (2) ofsection 153, every such notice referred to in this clauseshall be deemed to be a valid notice.] Explanation.—For the removal of doubts, it is herebydeclared that nothing contained in the first proviso or thesecond proviso shall apply to any return which has beenfurnished on or after the 1st day of October, 2005 inresponse to a notice served under this section. (2) The Assessing Officer shall, before issuing any noticeunder this section, record his reasons for doing so. THE VOLUNTARY DISCLOSURE OF INCOMESCHEME, 1997 VOLUNTARILY DISCLOSED ICNOME NOT TO BEINCLUDED IN THE TOTAL INCOME. 68(1) The amount of the voluntarily disclosed income shall notbe included in the total income of the declarant for anyassessment year under the Income Tax Act, if the followingconditions are fulfilled namely :- i) the declarant credits such amount in the books of account, ifany, maintained by him for any source of income or in anyother record and intimates the credit so made to the AssessingOfficer and ii) the income tax in respect of the voluntarily disclosed incomeis paid by the declarant within the time specified in section 66or section 67. 2) The Commissioner shall, on an application made by thedeclarant, grant a certificate to him setting forth the particularsof the voluntarily disclosed income and the amount of incometax paid in respect of the same. DECLARATION NOT ADMISSIBLE IN EVIDENCEAGAISNT DECLARANT. 71. Notwithstanding anything contained in any other law forthe time being in force, nothing contained in any declarationmade under sub section (1) of section 64 shall be admissible inevidence against the declarant for the purpose of anyproceeding relating to imposition of penalty or for the purposes of prosecution under the Income Tax Act or the Wealth TaxAct or the Foreign Exchange Regulation Act, 1973 or theCompanies Act, 1956. SECRECY OF DECLARATION 72. (1) All particulars contained in a declaration made undersub section (1) of section 64 shall be treated as confidential andnotwithstanding anything contained in any law for the timebeing in force, no court or any other authority shall be entitledto require any public servant or the declarant to produce beforeit any such declaration or any part thereof or to give anyevidence before it in respect thereof. (2) No public servant shall disclose any particulars contained inany such declaration except to any officer employed in theexecution of the Income tax Act or the Wealth Tax Act or toany officer appointed by the Comptroller and Auditor Generalof India or the Board to audit income tax receipts or refunds.” 10.A perusal of the above leads to the following conclusions:- 72. (1) All particulars contained in a declaration made undersub section (1) of section 64 shall be treated as confidential andnotwithstanding anything contained in any law for the timebeing in force, no court or any other authority shall be entitledto require any public servant or the declarant to produce beforeit any such declaration or any part thereof or to give anyevidence before it in respect thereof. (2) No public servant shall disclose any particulars contained inany such declaration except to any officer employed in theexecution of the Income tax Act or the Wealth Tax Act or toany officer appointed by the Comptroller and Auditor Generalof India or the Board to audit income tax receipts or refunds.” 10.A perusal of the above leads to the following conclusions:- i)If a declaration has been validly made by paying therequisite tax, the amount of income disclosed cannot beincluded in income of the declarant for any otherassessment year and nothing contained in the declarationis admissible in evidence in any proceedings for penaltyor prosecution. The particulars of the declaration are tobe treated as confidential. If tax is not paid, thedeclaration is to be treated to have never been made forthe purpose of the scheme and the said consequences donot follow.requisite tax, the amount of income disclosed cannot beincluded in income of the declarant for any otherassessment year and nothing contained in the declarationis admissible in evidence in any proceedings for penaltyor prosecution. The particulars of the declaration are tobe treated as confidential. If tax is not paid, thedeclaration is to be treated to have never been made forthe purpose of the scheme and the said consequences donot follow. ii) Such a declaration which is not valid for purposes ofthe scheme can constitute material for re-assessmentunder section 148 and if it is found that in accordancewith such declaration, the assessee had the jewellery orvaluables, the same can be deemed to be income for thefinancial year in which the valuables are found with theassessee, unless the assessee offers acceptable explanation about nature and source of acquisitionthereof to rebut the statutory presumption. 11.In the present case, declaration was made on 31.12.1997relating to the financial year 1997-98 relevant to assessment year 1998-99.The Assessing Officer was, thus, justified in initiating proceedings for re-assessment under Section 148 of the Act and holding that the valuablesfound were liable to be added to the income of the assessee for assessmentyear 1998-99 in absence of valid explanation. The addition could be setaside if the explanation of the assessee was found to be acceptable. It couldnot have been said that no re-assessment could at all be made on the basis ofdeclaration showing the assessee the owner of the valuables in the financialyear merely because the declaration stated that acquisition of valuables wasmuch earlier. Such declaration by itself was not enough to rebut thestatutory presumption under section 69A unless the assessee substantiatedthe same. 12.In view of above, the view taken by the Tribunal that it was notnecessary to go into the explanation of the assessee and holdingreassessment to be invalid for lack of jurisdiction, cannot be sustained.13.Accordingly, we answer the question in favour of the revenue,allow these appeals and set aside the impugned orders and remand thematter to the Tribunal for fresh decision on merits in accordance with law. (Adarsh Kumar Goel) Judge (Ajay Kumar Mittal) Judge