IT: Where tax was not paid in further compliance of VDIS declaration, information provided through VDIS Scheme would vest necessary jurisdiction with Assessing Officer to reopen assessment
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[2013] 37 taxmann.com 270 (Madras)
HIGH COURT OF MADRAS
Commissioner of Income-tax-X, Chennai
v.
R. Selvaraj*
MRS. CHITRA VENKATARAMAN AND MS. K.B.K. VASUKI, JJ.
TAX CASE (APPEAL) NO. 1233 OF 2005†
JULY 22, 2013
Section 147 of the Income-tax Act, 1961, read with section 67 of the Voluntary Disclosure of Income Scheme, 1997 - Income escaping assessment - Non-disclosure of primary facts [VDIS disclosure] - Assessment year 1989-99 - Whether where assessee having admitted to particulars furnished in declaration made under voluntary disclosure scheme as true which was not disclosed in regular course, if assessee had not taken this declaration for further compliance by paying tax, etc., details given therein could not be lost sight of as providing information for purpose of reopening assessment - Held, yes - Whether information provided through VDIS certainly vested necessary jurisdiction with Assessing Officer under section 147 to reopen assessment - Held, yes [Para 8][In favour of revenue]
FACTS
| ■ | The assessee filed declaration of income under VDIS Scheme, 1997 but failed to pay requisite tax under the Scheme. | |
| ■ | Subsequently, the Assessing Officer reopened the assessment on the ground that income was liable to be taxed has escaped assessment. | |
| ■ | On appeal, the Commissioner (Appeals) held that statement made under VDIS Scheme was made for purpose of reopening the assessment by pointing out that assessee had not disclosed the fact about possession of those assets before declaration. | |
| ■ | On revenue's appeal, the Tribunal set aside the reassessment proceeding on ground that no independent reason was given by the Assessing Officer. | |
| ■ | On revenue's appeal: |
HELD
| ■ | It is no doubt true that under the circular issued by the Commissioner, the declaration made by the assessee was to be placed for the information of the Assessing Officer for the purpose initiation of proceedings under section 147. But that, by itself, would not lead to an automatic mechanical exercise of jurisdiction under section 147. Given the fact that the assessee had disclosed the particulars of his income for the purpose of VDIS Scheme before the Commissioner who was the competent authority on the failure to comply with the terms of the VDIS Scheme, the declaration was forwarded to the respective Assessing Officer for further action. Thus, when the Assessing Officer has had the necessary materials indicating the concealment of income or income which had escaped assessment irrespective of the source from which it had come, it being the information and the material indication of escapement of income from assessment for the Assessing Officer to reopen the assessment, rightly the Assessing Officer assumed jurisdiction under section 147 and no exception could be taken to this by the assessee, contending that the Assessing Officer had no jurisdiction under section 147. [Para 7] | |
| ■ | The appellant submits that the declaration made was later on found by the assessee as not correct and hence, the claim made by the revenue that the income had escaped assessment without any independent inquiry, was not correct. There is no substance to accept this kind of reasoning, for, when the assessee makes a declaration under the VDIS Scheme, the assessee was fully conscious of the details given under the Scheme. There was no compulsion on the assessee to opt for the scheme. Thus, having admitted to the particulars as true and not disclosed in the regular course, if the assessee had not taken this declaration for further compliance, the details given therein cannot be lost sight of as providing information for the purpose of reopening the assessment. In the circumstances, it is to be held that the information thus provided through VDIS Scheme certainly vests the necessary jurisdiction with the Assessing Officer under section 147 to reopen the assessment. The observation of the Tribunal that the information was given as per the directions of the Additional Commissioner and that the Assessing Officer had not applied his mind independently, had no material, particularly in the context of the assessee's declaration as to his possession under the VDIS Scheme. [Para 8] | |
| ■ | Thus the Tax Case filed by the revenue is allowed, holding that the reopening of assessment was based on necessary material. [Para 9] |
J.Narayanaswamy for the Appellant. V.S. Jayakumar for the Respondent.
JUDGMENT
Mrs. Chitra Venkataraman, J. - This Tax Case Appeal, filed at the instance of the Revenue against the order of the Income Tax Appellate Tribunal, relating to the assessment year 1998-99, was admitted on the following substantial question of law:
"Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that 90% of dyeing charges ought not to be reduced from the 'profits of business' for the purpose of computation of deduction under Section 80HHC, disregarding the plain wording of Explanation (baa) to Section 80HHC of the Income Tax Act, as per which, 90% of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in the profits has to be reduced from the 'profits of business'? "
2. The assessee herein filed a declaration under the Voluntary Disclosure of Income Scheme, 1997 (VDIS) before the Commissioner of Income Tax, Tamil Nadu - IV on 30.12.1997, declaring income in the form of value of assets at Rs.79,55,710/-. Admittedly, the assessee did not discharge his obligation of paying the required tax under the Scheme.
3. It is seen from the file produced before this Court on the directions issued to the learned Standing Counsel, that the declaration was forwarded to the Assessing Authority by inviting his attention to the office circular in VDIS/99-2000 dated 24.01.2000, which stated that in the VDIS Scheme, if the tax had not been paid within the specified period, the Assessing Officer should reopen the assessment immediately. Thus the declaration was sent to the Officer for necessary action. Based on this, the Assessing Officer reopened the assessment under Section 147 of the Income Tax Act and a notice was issued under Section 148 of the Income Tax Act, holding that he had reason to believe that income liable to tax had escaped assessment. The assessee resisted the proceedings on the ground that the declaration made was only for the sake of information of the Department and that there was no suppression. The Assessing Officer, however, rejected the contention of the assessee and finalised the assessment based on the materials available and the declaration made under the VDIS Scheme.
4. Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax (Appeals). On going through the details filed and the declaration made, the Commissioner of Income Tax (Appeals) found that the assessee was also in possession of gold jewellery as well as other properties, but the assessee had not disclosed the facts about the possession of those assets anywhere prior to 31.12.1997. The Commissioner of Income Tax (Appeals) pointed out that the letter written by the assessee to the Income Tax Officer on 27.02.2002 revealed that it was only as regards the cash that the assessee had denied possession and not the other assets. The Commissioner further pointed out that having given a declaration as regards the assets offered under the VDIS Scheme, the assessee could not retract his own statement, unless there were evidences available with him to show that the declaration made was inconclusive or incorrect. In other words, it was always open to the assessee who made the admission, to contend that his admission was incorrect. In the circumstances, the Commissioner held that the statement made under the VDIS scheme was made for the purpose of reopening the assessment. Thus, going by the materials available, the Commissioner of Income Tax (Appeals) dismissed the appeal.
5. Aggrieved by this, the assessee went on appeal before the Tribunal, which pointed out that the assessment itself was reopened only at the behest of the superior authority and the Assessing Officer had not applied his mind independently. In the circumstances, unless the Assessing Officer had had materials available by recording the reasons for coming to the conclusion that the income had escaped assessment for the assessment year, the reopening could not be held to be valid in law. Thus, in the absence of any independent reason given, the assessment was set aside. Aggrieved by this, the Revenue is on appeal before this Court.
6. Learned Standing Counsel appearing for the Revenue pointed out that when the assessee had made the statement on a solemn verification that he was offering his income under the Voluntary Disclosure Scheme, on the failure to comply with the further condition under the VDIS Scheme, namely, payment of tax, the statement made would nevertheless be materials providing the information for the purpose of assumption of jurisdiction under Section 147 of the Income Tax Act. He further pointed out that going by Section 147 of the Income Tax Act, the declaration made being information available at the hands of the Revenue, the reopening was justly made.
7. We agree with the submission of the learned Standing Counsel appearing for the Revenue. It is no doubt true that under the circular issued by the Commissioner, the declaration made by the assessee was to be placed for the information of the Assessing Officer for the purpose initiation of proceedings under Section 147 of the Income Tax Act. But that, by itself, would not lead to an automatic mechanical exercise of jurisdiction under Section 147 of the Income Tax Act. Given the fact that the assessee had disclosed the particulars of his income for the purpose of VDIS Scheme before the Commissioner who was the competent authority on the failure to comply with the terms of the VDIS Scheme, the declaration was forwarded to the respective Assessing Officer for further action. Thus, when the Assessing Officer had had the necessary materials indicating the concealment of income or income which had escaped assessment irrespective of the source from which it had come, it being the information and the material indication of escapement of income from assessment for the Assessing Officer to reopen the assessment, rightly the Assessing Officer assumed jurisdiction under Section 147 of the Income Tax Act and no exception could be taken to this by the assessee, contending that the Assessing Officer had no jurisdiction under Section 147 of the Income Tax Act.
8. Learned counsel appearing for the appellant submits that the declaration made was later on found by the assessee as not correct and hence, the claim made by the Revenue that the income had escaped assessment without any independent inquiry, was not correct. We do not find any substance to accept this kind of reasoning, for, when the assessee makes a declaration under the VDIS Scheme, the assessee was fully conscious of the details given under the Scheme. There was no compulsion on the assessee to opt for the scheme. Thus, having admitted to the particulars as true and not disclosed in the regular course, if the assessee had not taken this declaration for further compliance, the details given therein cannot be lost sight of as providing information for the purpose of reopening the assessment. In the circumstances, we have no hesitation in holding that the information thus provided through VDIS Scheme certainly vests the necessary jurisdiction with the Assessing Officer under Section 147 of the Income Tax Act, to reopen the assessment. The observation of the Tribunal that the information was given as per the directions of the Additional Commissioner of Income Tax and that the Assessing Officer had not applied his mind independently, had no material, particularly in the context of the assessee's declaration as to his possession under the VDIS Scheme.
In the circumstances, we have no hesitation in setting aside the order of the Tribunal and restoring the matter back to the Tribunal for considering the re-assessment on merits. Thus the Tax Case filed by the Revenue is allowed, holding that the reopening of assessment was based on necessary material. Consequently, the Tax Case Appeal stands allowed. No costs.
Regards
Prarthana Jalan
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