Decision Of The Madhya Pradesh High Court In Khandelwal Oilindustries v. Ita 184/2010

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN THURSDAY, THE 17TH DAY OF NOVEMBER 2011/26TH KARTHIKA 1933 ITA.No. 184 of 2010 ( ) ======================= (ITA.562(COCH)/2007 of I.T.A.TRIBUNAL,COCHIN BENCH) APPELLANT/RESPONDENT IN ITA ============================ A.P.MOHAMMED, AMBALAPARAMBIL HOUSE CHOOLAM VAYAL KUNNAMANGALAM CALICUT. BY ADV.DR.K.B.MUHAMED KUTTY (SR.) SRI.K.M.FIROZ RESPONDENT/APPELLANT IN ITA ============================== THE INCOME TAX OFFICER, WARD-2(3), RANGE-2 KOZHIKODE. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 17-11-2011 , THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX ANNEXURE A: TRUE COPY OF ASSESSMENT ORDER DT.27.3.2006. ANNEXURE B: TRUE COPY OF LETTER DT.27.3.2006 FILED BY THE APPELLANT BEFORE THEASSESSMENT AUTHORITY. ANNEXURE C: TRUE COPY OF MEMORANDUM OF APPEAL DT.2.5.2006 FILED BY THEAPPELLANT BEFORE THE FIRST APPELLATE AUTHORITY. ANNEXURE D: TRUE COPY OF THE FIRST APPEAL ORDER DT.21.3.2007. ANNEXURE E: TRUE COPY OF THE APPEAL MEMORANDUM FILED BY THE REVENUEBEFORE THE APPELLATE TRIBUNAL DT.20.4.2007. ANNEXURE F: TRUE COPY OF APPELLATE TRIBUNAL ORDER DT.30.4.2009. TRUE COPY P.S. TO JUDGE C.N.RAMACHANDRAN NAIR &K.VINOD CHANDRAN, JJ. .................................................................... I.T. Appeal No.184 of 2010 .................................................................... Dated this the 17th day of November, 2011. C.R. JUDGMENT Ramachandran Nair, J. The appeal is filed by the assessee against the order of theTribunal confirming income escaping assessment completed underSection 147 of the Income Tax Act for the assessment year 1998-99.We have heard Senior counsel Dr.K.B.Mohammedkutty appearing for the appellant and Standing Counsel for respondent. 2. The assessee was a partner in a firm wherefrom he was gettingtaxable income by way of salary for services rendered as workingpartner and interest on excess maintained in the capital account.According to assessee, there was omission to pay tax for several yearsand, therefore, he filed a declaration under the Voluntary Disclosure ofIncome Scheme 1997. Even though income was accounted for sixyears prior to the financial year 1997-98, the assessee admittedly didnot file a proper application under the V.D.I. scheme or remitted the tax ITA 184/2010 on the due date. Consequently based on assessee's own declaration ofincome, the Assessing Officer invoked the provisions of Section 147and assessed income to tax against which first appeal filed was allowedby the C.I.T.(Appeal) on the ground that assessment is not tenablebecause income should have been assessed during the assessment yearsrelevant to which disclosures were made. Against the C.I.T.(Appeal)'sorder department filed appeal before the Tribunal stating that since thedisclosure was made in the financial year 1997-98, the income sodisclosed is assessable as income of the assessment year 1998-99. TheTribunal allowed the department's appeal against which this appeal isfiled. 3. During hearing Senior counsel submitted that the departmenthad no material to make assessment except the disclosure made by theassessee which was for six years prior to the financial year 1997-98.According to Senior counsel, when assessment is made based ondisclosure made by the assessee, the assessment should be in terms ofthe disclosure so made i.e. declaration of income for six financial yearsincluding financial year 1997-98. Senior counsel has also referred to ITA 184/2010 3. During hearing Senior counsel submitted that the departmenthad no material to make assessment except the disclosure made by theassessee which was for six years prior to the financial year 1997-98.According to Senior counsel, when assessment is made based ondisclosure made by the assessee, the assessment should be in terms ofthe disclosure so made i.e. declaration of income for six financial yearsincluding financial year 1997-98. Senior counsel has also referred to ITA 184/2010 decision of the Madhya Pradesh High Court in KHANDELWAL OILINDUSTRIES VS. COMMISSIONER OF INCOME TAX reported in223 ITR 176. Even though the contention raised by the appellant'scounsel is tenable, what we notice is that income disclosed is not in theform of any deposits or income based on accounts. On the other hand,the income disclosed is nothing but cash and gold held by the assessee.When assessee has not complied with the conditions of V.D.I. Scheme,necessarily the Officer gets powers under Section 147 to make anincome escaping assessment, though based on information furnishedby the assessee himself. The unexplained cash and gold are assessableunder Section 69A in the assessment year relevant for the previous yearin which disclosure is made which in this case is 1998-99 as thedisclosure was made on 31.12.1997. We, therefore, notice that theassessment under Section 147 read with Section 69A of the IncomeTax Act is perfectly in order. Even though Tribunal's order is notrendered on the right reasons, we uphold the order for the reasonsabove stated. It is seen that penalty proceeding under Section 271(1C)is separately initiated besides demanding interest. We feel there is no ITA 184/2010 scope for penalty because assessment itself is based on disclosure madeby the assessee and no more addition is made over and above thedeclared income. So far as interest demanded under Section 234A and234B is concerned, if interest is charged except with reference to theassessment year concerned i.e. 1998-99, the department will grantwaiver of interest over and above what could be charged treating theincome as that of the financial year 1997-98. If by chance penalty islevied, on production of copy of this judgment, the order will berectified and recalled. C.N.RAMACHANDRAN NAIRJudge pms K.VINOD CHANDRANJudge