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TMI Blog2009 (11) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds. 3.1 In the light of the arguments advanced by the respective parties the original grounds are substituted by the revised grounds raised by the assessee in each of these appeals. 4. It was the submission of the learned Authorised Representative that in each of these appeals identical grounds have been raised and except for the differences in the amounts mentioned in ground No. 4 the grievance of the assessee and its arguments in regard to the grounds are identical since facts and circumstances are the same. Accordingly for ready reference we reproduce the grounds raised in ITA No. 549/Kol/2007 hereunder: "1. For that the CIT(A) was grossly unjustified in confirming the order of AO and the issues arising therefrom have not been truly and fully discussed in the order. 2. For that the notice under s. 148 of the Act is void ab initio and bad in law. 3. For that the assessment completed under s. 147/148 of the Act is without jurisdiction and bad in law. 4. For that the entire amount of Rs. 18 lacs, Rs. 21 lacs in asst. yr. 1994-95, Rs. 23 lacs in asst. yr. 1995-96, Rs. 24 lacs in asst. yrs. 1996-97 and 1997-98 whether to be treated as business income or income fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der s. 148 was issued to the assessee. Considering the response of the assessee the AO made addition of Rs. 18,00,000 in asst. yr. 1993-94, Rs. 21,00,000 in 1994-95, Rs. 23,00,000 in asst. yr. 1995-96 and Rs. 24,00,000 in asst. yrs. 1996-97 and 1997-98. 6.2 Aggrieved by this the assessee went in appeal before the CIT(A). In appeal the CIT(A) however confirmed the said action of the AO. 6.3 It is seen that before the CIT(A) the assessee had challenged the action of the AO in passing the order under s. 147 of the Act. Arguments were also advanced assailing the assessment order relying upon the judgment of the Hon'ble apex Court in the case of Hemalatha Gargya vs. CIT (2003) 182 CTR (SC) 107 : (2003) 259 ITR 1 (SC) on the basis of which it was argued that if the declarant fails to pay the tax in respect of the VDIS income before the expiry of three months from the date of filing of the declaration the declaration by the assessee shall be deemed never to have been made under the scheme. Thus it was argued that since the declaration becomes non est the AO could not utilize the said declaration for the purpose of reassessment taking recourse to s. 147 of the Act. Accordingly it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re letter of the assessee in which it had made admission that it had undisclosed income as such the Tribunal's order in favour of the assessee had been upheld. It was submitted that the reference made by the Tribunal at the instance of the Revenue was decided against the Department by the Hon'ble Calcutta High Court. 7.2 It was also submitted by the learned Authorised Representative that various orders of the Tribunal have considered identical issue and decided the issue in favour of the assessee as such the point at issue it was submitted is fully covered in favour of the assessee. For the said submission attention was invited to the order of the Co-ordinate Bench in the case of Smt. Kamini Hanskamal Grover vs. ITO (2005) 95 TTJ (Ahd) 363 copy of which is filed before the Bench. Referring to the same it was submitted that considering the VDIS, 1997 the action of the AO in reopening the assessment was struck on the ground of lack of jurisdiction. 7.3 In similar view it was submitted that the Co-ordinate Bench in the case of Inder Kumar Bachani (HUF) vs. ITO (2006) 101 TTJ (Lucknow) 450 : (2006) 99 ITD 621 (Lucknow), the action of the AO to reopen the assessment under s. 147 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclaration under VDIS Scheme, 1997 was not accepted. As such no certificate thereon was issued by the learned CIT, WB-IX, Kolkata as the assessee failed to pay the tax as per the provisions of VDIS scheme, within the specified period i.e., upto 31st March, 1998. 8.2 These facts it was submitted by the learned Departmental Representative constitute sufficient information for the formation of belief of the AO on the basis of which he had reasons to believe that income has escaped assessment. Accordingly it was submitted that after recording reasons notice under s. 148 dt. 31st Aug., 1999 was duly served upon the assessee on 1st Sept., 1999. 8.3 Referring to the assessment order it was submitted that the reasons recorded have been brought to the notice of the assessee. For this assertion, attention was invited to the assessment order p. 1. On the basis of the same it was submitted that the reasons recorded were served on the assessee on 1st Sept., 1999. Inviting attention to p. 2 of the assessment order it was submitted that the AO thereafter issued notice under s. 142(1) which was served upon the assessee on 30th Jan., 2002 fixing the case on 8th Feb., 2002 and requiring the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1994-95, Rs. 23,00,000 for the asst. yr. 1995-96, Rs. 24,00,000 for the asst. yr. 1996-97 and Rs. 24,00,000 for the asst. yr. 1997-98. (5) Any other details and documents relating to asst. yrs. 1993-94 to 1997-98 as per notices under s. 142(1) issued and served on 30th Jan., 2002. 8.6 Accordingly it was the submission of the learned Departmental Representative that the reasons recorded have been communicated to the assessee and again and again the AO has given the assessee opportunity to address the issue on merits and the said action of the AO is fully in compliance with the principle laid down by the Hon'ble apex Court in the case of GKN Driveshafts (India) Ltd. vs. ITO (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC) as such it was his submission that any arguments qua ground Nos. 2 and 3 that procedures have not been followed deserve to be dismissed outright. As such the reopening cannot be assailed on this ground. 8.7 It was the submission, of the learned Departmental Representative that in none of the arguments before the Bench or before the CIT (A) the facts on record have been disputed by the assessee. Specific attention was invited to the finding of fact that cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Departmental Representative submitted that therein their Lordships of the Calcutta High Court were considering the s. 24 of the Finance (No. 2) Act, 1965. Sub-s. (11) of that section which provides as under [See (1965) 58 ITR (St) 10 and 11]: "(11) Notwithstanding anything contained hereinabove or in any other law for the time being in force, nothing contained in any declaration made under this section shall be admissible as evidence against the declarant for the purpose of any assessment proceeding or any proceeding relating to imposition of penalty or for the purpose of prosecution under any of the Acts mentioned in sub-s. (9) or the WT Act, 1957 (27 of 1957), in respect of any amount specified in an order made by the CIT under sub-s. (4) or, if such amount is altered by an order of the Board under sub-s. (6), then such altered amount." 8.9 Referring to the same it was submitted by the learned Departmental Representative that as per the said scheme it was held that nothing shall be admissible evidence against the declarant for the purpose of any assessment proceedings etc. It was his submission that the user of the letter 6y the Revenue for the purposes of satisfyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no declaration made by the assessee. As such declaration made in some other year could not be considered to constitute reason to believe for reopening the assessment in some other year. 8.13 Similarly the order of the Tribunal in the case of Inder Kumar Bachani (HUF) it was submitted by the learned Departmental Representative was also of no help to the assessee in view of the fact that in the VDIS the disclosure pertains to some other assessment year and not the asst. yr. 1998-99 which was sought to be reopened. Accordingly, the facts, it was argued are entirely distinguishable from the present case. In the facts of the present case the learned Departmental Representative referring to the impugned order submitted that herein the information available with the AO is the declaration of the assessee himself filed under VDIS for the specific years. The assessment for these years has been reopened. It was emphasised that the declaration was filed by the assessee himself pursuant to the fact that the assessee was found to be in possession of Rs. 1.10 crores cash at his residence by the Enforcement Directorate. These facts it was argued sufficiently constitute information with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the specific amounts as per assessee's own bifurcation given in his declaration. This constitutes sufficient material for the AO to act and proceed. 8.16 Relying upon the judgment of the Hon'ble Patna High Court which had been taken into consideration by the CIT(A) in the case of Baldeo Prasad vs. CIT it was the submission of the learned Departmental Representative that the said issue fully covers the case at hand as therein also the disclosure petition under the VDIS scheme was not accepted. The addition confirmed by the Tribunal was upheld by the Hon'ble High Court and the reference moved before the Hon'ble High Court at the instance of the assessee was dismissed. 8.17 Reliance was also placed upon the Addl. CIT vs. Popular Jewellers (1984) 42 CTR (Del) 205 : (1984) 149 ITR 666 (Del) for the proposition that the declaration made under VDIS is a piece of evidence. Specific attention was invited to p. 670 of the said judgment. 8.18 Inviting attention to the judgment of the Hon'ble Delhi High Court in the case of Avtar Singh Sandhu vs. WTO (1981) 129 ITR 531 (Del) it was the submission of the learned Departmental Representative that in the facts of that case the wealth-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that since the cash was found in the possession of the assessee the presumption that the assessee is the owner has been held by the Hon'ble High Court and the assessee in the present proceedings has lead no arguments or facts to disclose the source. 8.2Q Reliance was also placed on the Allahabad High Court in the case of Shyam Sunder Jalan vs. CIT (2002) 172 CTR (All) 67 : (2002) 254 ITR 596 (All) wherein it was held that if the disclosure made by the assessee is not total then there is no bar on the AO to apply the provisions of ss. 147 and 148 and make assessments of the actual escaped income. 8.21 Similarly if on the basis of declaration filed by the assessee under VDIS scheme if the AO found that despite the declaration made any income remains unassessed or underassessed the AO can use the information for reopening. For the said submission reliance was placed on the decision of the Bombay High Court in the case of Smt. Vasantibai N. Shah vs. CIT (1995) 126 CTR (Bom) 205 : (1995) 213 ITR 805 (Bom). 8.22 Referring to the judgment of the Hon'ble Madras High Court in the case of TVS Motor Co. Ltd. vs. Asstt. CIT (2007) 209 CTR (Mad) 334 : (2007) 293 ITR 394 (Mad) it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable to the AO to process under s. 147 of the IT Act; (ii) if the answer to the above question is in the affirmative then it falls for our consideration to decide whether the said information for the purpose of invoking ss. 147 and 148 of the Act can be considered to constitute the basis of the formation of the belief of the AO that the income has escaped assessment? 9.1 Accordingly in the light of the questions formulated by us we first and foremost propose to set out the accepted facts and thereafter proceed to examine the principles laid down in various judgments which have been referred for our consideration by the parties before us. The undisputed facts are: (i) that the assessee was subject to search by the Enforcement Directorate on 8th Nov., 1997; (ii) it is also an undisputed fact that the assessee was found in possession of currency of Rs. 1.10 crores; (iii) it is also an undisputed fact that on 24th Dec., 1997, the assessee made a declaration under VDIS bifurcating the said sum of Rs. 1.10 crores spreading over the money in five assessment years in the following manner: -------------------------------------- Asst. yr. Description Amount ----- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of the requirements of the scheme. 9.4 In the light of these above undisputed facts and arguments advanced on behalf of the assessee and the Department we now propose to examine the principles laid down by the apex Court in the case of Hemalatha Gargya vs. CIT cited supra. 9.4.1 A perusal of the said judgment shows that their Lordships therein were seized of the issue whether the time for payment fixed under ss. 66 and 67 of the VDIS, 1997 is extendible or not. On the said issue there were conflicting views taken by different High Courts and also by different Benches of the same High Court. Accordingly in the said background their Lordships examined ss. 66 and 67 of the said scheme. 9.4.2 For ready reference we reproduced the said sections: "66. The tax payable under this scheme in respect of the voluntarily disclosed income shall be paid by the declarant and the declaration shall be accompanied by proof of payment of such tax. 67. Interest payable by declarant-(1) Notwithstanding anything contained in s. 66, the declarant may file a declaration without paying the tax under that section and the declarant may file the declaration and the declarant may pay the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dships clearly enunciated that the Courts have no power to act beyond the terms of the statutory scheme under which benefits have been granted to the assessee and extend the time on considerations of even equity. 9.4.7 Accordingly considering these arguments and the relevant provisions of the scheme their Lordships in the context of the said provisions namely s. 67 considered that wherever in terms of the declaration, the taxes were not paid within the time prescribed either under s. 66 or under s. 67(1) in the case of different asses sees where period of default varied and the explanations on behalf of the different assessee also varied. Though the common factor that the reason for non-payment was stated to be beyond their control. Ruling out equity their Lordships rejected the arguments of the different assessees that the period under s. 67(1) was extendable. Their Lordships held that if the requirement provided by the general rule provided in s. 66 are not fulfilled the exception carved out in s. 67(1) comes into operation which however is subject to two conditions namely: (i) the payment of tax within three months from the date of filing the declaration together with, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luted. Thus in this background it was held that the benefit declared by those assessees who had not fully and strictly complied with the scheme cannot be extended to those assessees and the declaration filed therein for the purposes of the scheme shall be deemed never to have been made under the scheme. However, the Department was directed to refund or adjust the amounts already deposited by those assessees in purported compliance with the- provisions of the scheme to the concerned assessees in accordance with law. The declaration for the purposes of benefit under VDIS, 1997 was non est, however the contents of the declaration in the facts available on record, qua the present proceedings cannot be ignored by the AO and no such principle is laid down by the apex Court. Accordingly we are of the considered view that their Lordships did not lay down the principle that the declaration was to be ignored by the AO. Their Lordships merely laid down the principle that the declaration for the purposes of the scheme since the due payments have not been paid within the time shall be deemed to have not been filed and no protection in regard to the immunity etc. would be available to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing contained hereinabove or in any other law for the time being in force, nothing contained in any declaration made under this section shall be admissible as evidence against the declarant for the purpose of any assessment proceeding or any proceeding relating to imposition of penalty or for the purpose of prosecution under any of the Acts mentioned in sub-s. (9) or the WT Act, 1957 (27 of 1957), in respect of any amount specified in an order made by the CIT under sub-s. (4) or, if such amount is altered by an order of the Board under sub-s. (6), then such altered amount." 9.5.3 Their Lordships held that it was a case where the amounts in dispute were admitted but in regard to the claim for deduction the disallowance/addition made by the AO on account of wastage of interest, cash credit and bank deposits etc. was held to be not proved. A perusal of p. 23 of the said judgment shows that their Lordships were careful and conscious while confirming the order of the Tribunal to hold as under: "Though we are not in a position to uphold the interpretation of the voluntary disclosure letter put by the Tribunal yet we affirm the conclusion reached by the Tribunal in confirming the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady reference we reproduce again the relevant provisions of the respective schemes namely s. (11) of s. 24 taken into consideration by the jurisdictional High Court in Bhartia Steel which reads as under: "(11) Notwithstanding anything contained hereinabove or in any other law for the time being in force, nothing contained in any declaration made under this section shall be admissible as evidence against the declarant for the purpose of any assessment proceeding or any proceeding relating to imposition of penalty or for the purpose of prosecution under any of the Acts mentioned in sub-s. (9) or the WT Act, 1957 (27 of 1957), in respect of any amount specified in an order made by the CIT under sub-s. (4) or, if such amount is altered by an order of the Board under sub-s. (6), then such altered amount." We reproduce s. 71 of VDIS, 1997 hereunder: "71. Notwithstanding anything contained in any other law for the time being in force, nothing contained in any declaration made under sub-section of s. 64 shall be admissible in evidence against the declarant for the purpose of any proceeding relating to imposition of penalty or for the purposes of prosecution under the IT Act or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... five partners could be held to be benami for all the seven partners of the firm. The matter as such was remanded to the Tribunal to see the effect of the answer to the question whether the sum of Rs. 50,000 is to be treated as the undisclosed income for the asst. yr. 1967-68 and whether the interest amounts are to be treated as allowable deductions for the asst. yrs. 1967-68, 1968-69 and 1969-70. However what is relevant for the purposes of the present proceedings their Lordships in regard to the declarations of the wives were very categorical in holding that declarations made under the VDIS are a piece of evidence. They further go on to observe as under: "To explain this point of view, it is necessary to say that the declarations made under the voluntary disclosure scheme are a piece of evidence. The Delhi High Court in Rattan Lal Ors. vs. ITO (1975) 98 ITR 681 (Del), had held that the declarations were conclusive. But, this view has been overruled as being incorrect by the Supreme Court. This does not mean that the opposite viewpoint, namely, that the declarations are false, has to be adopted. A declaration can either be true or it can be false. It depends on the facts of ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the said information constitute the basis of the formation of the belief of the AO that income has escaped assessment. It is seen that the Courts are unanimous in holding that the formation of the belief within the realm of the subjective satisfaction of the AO. The order passed is a speaking order setting out clearly the reasons for the action taken. Accordingly considering the following judgments which we would briefly refer to, we decide the second issue also in the affirmation. 9.7.4 A perusal of the principle laid down by the apex Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. and Raymond Woollen Mills Ltd. vs. ITO Ors. fortify the view taken. Their Lordships have held in the former that at the stage of issuance of notice under s. 148 the only question is whether there was relevant material on which a reasonable persons could have formed the belief. The formation of belief is a subjective satisfaction. In the latter judgment their Lordships have held that even the sufficiency or correctness of the material is not to be considered at the stage of issuance of notice under s. 148 and the only requirement is that some material on the basis of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT. A perusal of the principles laid down therein also fortifies the view taken. Accordingly ground Nos. 2 and 3 raised by the assessee for the detailed reasons given hereinabove are dismissed. 10. The next ground agitated by the assessee in the sequence of arguments is ground No. 1. On a perusal of the material available on record which has been discussed at length we do not find any merit in the ground raised by the assessee. It is seen that as the CIT(A) has fully discussed the issues, arguments and the case law while coming to the conclusion against the assessee accordingly the claim of the assessee is not borne out from the record. Ground No. 1 is also dismissed. 10.1 In regard to ground No. 4 which has been argued on behalf of the assessee that the same has not been decided by the CIT(A). The said submission has been found factually incorrect. It is seen that vide para 3.13, the CIT(A) has categorically observed that the assessee has failed to explain the source of the cash offered as undisclosed income for the year as such the same is added to the income declared by the assessee in different years. Before us also no effort was made to explain the sources of undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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