2016 (2) TMI 621 - AT - Income Tax

Refund of taxes paid under the VDIS, 1997 along with interest - Held that - The assessee is not entitled to the immunity and benefits of VDIS, 1997, in respect of the additional income surrendered by the assessee during the course of search and consequently, is to be assessed as undisclosed income in the hands of assessee. Further, following the directions of the Hon ble High Court, we hold that since the assessee is entitled to the refund of taxes paid under the VDIS, 1997 along with interest @ 6% from September, 1999, the same may be adjusted against the demand raised under the block assessment order.

Summary

Issues Involved:
1. Denial of immunity and benefits under the VDIS, 1997.
2. Credit for taxes paid under VDIS, 1997 against the demand raised under the block assessment.
3. Existence and assessment of income in the hands of an AOP (Mahendra Auto Services).
4. Enhancement of assessed income due to additional investment in Dewarpada (Malegaon) Petrol Pump.

Issue-Wise Detailed Analysis:

1. Denial of Immunity and Benefits under VDIS, 1997:
The primary issue raised by the assessee was against the denial of immunity and benefits under the VDIS, 1997, particularly when the issue was pending before the Hon'ble Bombay High Court at Aurangabad Bench in a Writ Petition. The Tribunal noted that the search and seizure action under section 132 of the Income Tax Act was conducted on 10/11 July 1997, during which various incriminating documents were seized. The assessee had made a declaration of undisclosed income under the VDIS, 1997, but the Assessing Officer rejected this on the grounds that the declaration was made after the search action. The Hon'ble Bombay High Court dismissed the Writ Petition, holding that the assessee was not entitled to the benefits of VDIS, 1997, as the scheme was not applicable post-search under section 132. Consequently, the Tribunal upheld the denial of immunity and benefits under VDIS, 1997.

2. Credit for Taxes Paid under VDIS, 1997:
The assessee raised an additional ground of appeal, requesting that if the declaration under VDIS, 1997, was considered nonest and void ab initio, then the taxes paid under the scheme should be credited against the demand raised under the block assessment. The Tribunal, following the Hon'ble Bombay High Court's order, directed that the taxes paid under VDIS, 1997, along with interest at 6% from September 1999, should be adjusted against the demand raised under the block assessment. This additional ground of appeal was allowed.

3. Existence and Assessment of Income in the Hands of an AOP:
The CIT(A) had observed that certain diaries found during the search indicated that the assessee, along with others, was engaged in the business of selling adulterated diesel, and the profits were shared among them, suggesting the existence of an AOP (Mahendra Auto Services). The CIT(A) held that the income from this business should be assessed in the hands of the AOP and not the individual. The Tribunal found no merit in the assessee's appeal against this finding and dismissed the ground of appeal, upholding the CIT(A)'s decision.

4. Enhancement of Assessed Income due to Additional Investment:
The assessee contested the enhancement of assessed income by Rs. 7,54,464/- for additional investment in Dewarpada (Malegaon) Petrol Pump, discovered during a search under section 133A. The CIT(A) had noted discrepancies between the investments made by the assessee and those recorded by M/s. Royal Finance, leading to the enhancement. The Tribunal found that the assessee failed to reconcile these differences and upheld the CIT(A)'s decision to enhance the assessed income.

Conclusion:
The Tribunal partly allowed the appeals of the assessee by granting credit for taxes paid under VDIS, 1997, against the demand raised under the block assessment. However, it dismissed the appeals concerning the denial of immunity and benefits under VDIS, 1997, the existence and assessment of income in the hands of an AOP, and the enhancement of assessed income due to additional investment. All appeals filed by the Revenue were dismissed due to the low tax effect, as per CBDT Circular No.21/2015.