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2014 (7) TMI 1220 - HC - Income TaxTaxation of undisclosed income - taxation in the hands of HUF - Held that- Once a person files an application under Section 64 in accordance with the provisions of Section 65 in respect of any income chargeable to tax under the Act, which earlier he has not offered it to tax, the Commissioner on consideration of such application can grant a certificate to him setting forth the particulars of voluntary disclosed of income and the amount of income tax paid in respect of the same. Once such a certificate is granted, the amount of the voluntary disclosed income shall not be included in the total income of the declarant for any assessment year under the income tax Act. Once a particular income is included in the income of the person and taxed and such person pays the tax, the same income. Cannot be taxed in the hands of another person. In the instant case the amount has been taxed in the hands of HUF. Once the tax is paid for that undisclosed income, again the same income cannot be taxed in the hands of the member of the HUF, that is the assessee. Therefore, in the light of the provisions of VDIS scheme as well as the provisions of the Act, the Appellate Authorities were justified in holding that as long as the certificate is in force, the income which was the subject matter of the certificate cannot be taxed not only in the hands of the declarant but also in the hands of any other person. If such a certificate is obtained by misrepresentation misleading the Commissioner, the proper course would be to recall the said certificate. No such steps are taken. The certificate is still in force. When that being the case, the same income cannot be assessed over and a gain in the hands of the individuals who are the members of the HUF.
Issues:
1. Whether income accepted under VDIS can be assessed in the hands of the assessee-individual? 2. Can the assessing authority assess income in the hands of an individual after it has been accepted as belonging to another person under VDIS? 3. Can the income be assessed in the hands of an HUF when a certificate under VDIS has been obtained in the status of HUF? 4. Can the same income be taxed in the hands of different individuals after being assessed in the hands of one person under VDIS? Analysis: Issue 1: The Tribunal upheld the order of the Commissioner of Income Tax (Appeals) stating that income accepted under VDIS cannot be assessed in the hands of the assessee-individual. The Tribunal found that once the department accepted the income as belonging to another person under VDIS, it was improper for a lower assessing authority to reassess the same income in the hands of a different individual. Issue 2: The Appellate Authority set aside the assessment order, holding that the Assessing Authority could not assess the income in the hands of the individual after it had been declared under VDIS and accepted by the Commissioner. The Appellate Authority reserved the liberty to proceed against the assessee in the hands of the HUF under Section 158BD of the Act. Issue 3: The Tribunal reiterated that once a certificate is issued under VDIS, the income cannot be taxed in the hands of the declarant or any other person. The Tribunal found that as long as the certificate is valid, the income subject to the certificate cannot be taxed in the hands of the declarant or any other individual. Issue 4: The Tribunal emphasized that the same income cannot be taxed in the hands of different individuals once it has been assessed and tax paid by one person under VDIS. The Tribunal held that if a certificate is obtained through misrepresentation, the proper course would be to recall the certificate. Since no such steps were taken and the certificate was still valid, the income could not be reassessed in the hands of different individuals. In conclusion, the High Court dismissed the appeal filed by the revenue, stating that the orders passed by the Tribunal and the Appellate Authority were in accordance with the law. The Court ruled in favor of the assessee, emphasizing that the income accepted under VDIS cannot be reassessed in the hands of different individuals once it has been taxed and the tax paid by one person.
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