IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. I.T.A. No. 5 of 2004 Judgment reserved on : 12.8.2009. Date of decision: 26.11. 2009. Commissioner of Income Tax ....Appellant Vs. H.P.State Forest Corporation ..Respondent. _________________________________________________________ Coram The Hon’ble Mr.Justice R.B.Misra, Acting Chief Justice. The Hon’ble Mr. Justice Kuldip Singh, Judge. Whether approved for reporting ? Yes For the Appellant : Mr. Vinay Kuthiala, Advocate. For the Respondent : Mr. M.M.Khanna, Senior Advocate with Mr. Surinder Mohan, Advocate. __________________________________________________________ Per Kuldip Singh, Judge The revenue has come in appeal under Section 260-A of the Income Tax Act, 1961 against the order of Income Tax Appellate Tribunal (ITAT), Chandigarh Bench ‘A’ dated 5.11.2003 passed in ITA No. 23/Chandi/2001 – A.Y. 1992-93. 2. The facts, in brief, as per revenue are that the assessee is a Government owned Corporation, who filed return on 31.3.1993 declaring income Rs. 76.31 lacs on the basis of proforma balance sheet and profit and loss account. But no audited P & L account and balance sheet was _____________________ 1 Whether reporters of Local Papers may be allowed to see the Judgment ? yes filed with the return. The Assessing Officer treated the return nonest and issued notice under Section 148 on 2.1.1996. The assessee did not file any return in response to the notice under Section 148. The Assessing Officer made assessment under Section 144 on 22.9.1997 and the income was assessed at Rs. 1.30 crores. The Assessing Officer initiated penalty proceedings under Section 271 (1) (c ) of the Act. The assessee filed appeal against the order of Assessing Officer before the CIT (A) which was subsequently withdrawn and CIT (A) accordingly dismissed the appeal of the assessee on 27.2.1998. 3. The Assessing Officer vide order dated 28.8.1998 imposed penalty of Rs. 1,00,91,259/- under Section 271 (1) (c ) at the rate of 150% of the tax sought to be evaded which was worked out to Rs. 67,27,500/-. The assessee filed appeal against the order dated 28.8.1998, the CIT (A) vide order dated 7.11.2000 confirmed the order of the Assessing Officer to the extent that the assessee had not disclosed the income. However, CIT(A) directed the Assessing Officer to again calculate the amount of penalty after reducing the tax on return income and accordingly penalty was reduced to Rs. 41,67,690/-. The CIT (A) in the order dated 7.11.2000 had observed that assessee had made declaration under Voluntary Disclosure Income Scheme, 1997 (for short VDIS) where income for A.Y. 1992 – 1993 was declared at Rs. 3,58,58,590/- and on that amount tax Rs. 1,25,50,510/- was paid. The CIT(A) held that income as per audited accounts declared by assessee in VDIS was Rs. 3,58,58,590/- against Rs. 76,31,000/- declared on the basis of proforma audit, which was much higher and makes it clear that assessee had not disclosed true particulars of income and, therefore, Section 271 (1) (c ) of the Act was attracted. 4. The assessee filed appeal before the ITAT against the order dated 7.11.2000 of CIT (A) which was allowed on 5.11.2003 and the order of Assessing Officer imposing penalty under Section 271 (1) (c ) was quashed. It was held that assessee had declared the income under VDIS and therefore, assessee is entitled to immunity and no penalty can be imposed under Section 271 (1) (c ) of the Act. 5. The revenue has assailed the order of ITAT on the grounds that declared income of assessee at Rs. 76.31 lacs in the return filed on 31.3.1993 was held nonest. The assessment under Section 144 / 147 was made at taxable income of assessee at Rs. 1.30 crores vide order dated 22.9.1997 on the basis of audited accounts. The total income of assessee was assessed at Rs. 4,88,56,586/- and after reducing the income already assessed at Rs. 1,30,00,000/-, the assessee declared an amount of Rs. 3,58,58,580/- under VDIS. The penalty under Section 271 (1) (c ) was imposed on the tax sought to be evaded on assessed income of Rs. 1,30,00,000/- and not on the income declared under VDIS. Therefore, assessee was not entitled to any immunity under VDIS. 6. The declaration made by the assessee on 30.12.1997 under VDIS was not in order. The assessee was not entitled to any immunity under VDIS inasmuch as no return was filed by assessee before the commencement of scheme in response to notice under Section 148 on 2.1.1996 so as to avail immunity against penalty under the Act. 7. The withdrawal of the appeal by assessee cannot be accepted as bonafide on the ground of true and fair declaration under VDIS. In any case, the withdrawal of the appeal cannot exonerate the assessee from default committed in filing the false particulars of income. The assessee was aware that as per audited accounts the income was much higher, the declaration was made by the assessee with respect to additional income and not assessed income at Rs. 1,30,00,000/-. 8. The appeal has been admitted vide order dated 21.4.2004 on the following substantial questions of law :- i. Whether on the facts and in the circumstances of the case the Tribunal was right in holding that there was no intention on the part of the assessee to conceal the income or to file inaccurate particulars of income, inspite of the fact that the penalty has been levied on the assessed income of Rs. 1,30,00,000/- and not on the income of Rs. 3,58,58,586/- declared under the VDIS Scheme, 1997. ii. Whether on the facts and in the circumstances of the case, the ITAT was right in holding that the declaration has been accepted and assessee has been granted immunity for any proceedings relating to imposition of penalty under the Income Tax Act although prior to declaration under VDIS, 97 proceedings u/s 148 had been initiated against the assessee for A.Y. 1992-93, and no return in response to said notice was filed by the assessee before the commencement of this Seheme. iii. Whether on the facts and circumstances of the case the Tribunal was right in holding that the withdrawal of appeal by the assessee was only for the purpose of making true and fair declaration under VDIS and there was no intention on the part of the assessee to conceal the income or file inaccurate particulars, although the income declared under VDIS, 97 was based on audited accounts and the assessee had originally declared less income without audited accounts which proved that the assessee had furnished inaccurate particulars of income. iv. That the Hon’ble ITAT has misconstrued and misinterpreted the material on records and the impugned order is contrary to law and facts. 9. We have heard Mr. Vinay Kuthiala, Advocate learned counsel for the appellant and Mr. M.M.Khanna, Senior Advocate, learned counsel appearing for the respondent. The learned counsel appearing for the appellant has submitted that the return filed by the assessee on 31.3.1993 was treated by the Assessing Officer nonest and notice was issued to the assessee under Section 148 on 2.1.1996. The assessee despite the notice under Section 148 did not file any return. In these circumstances, the Assessing Officer made the assessment on 22.9.1997 under Section 144 of the Act and assessed the income of the assessee at Rs. 1.30 crores. The Assessing Officer initiated penalty proceedings under Section 271 (1) (c ) of the Act against the assessee. The assessee had filed appeal against the order dated 22.9.1997. The assessee on 30.12.1997 made declaration under VDIS. The appeal filed by assessee against the order dated 22.9.1997 before CIT (A) was dismissed as withdrawn by CIT (A) on 27.2.1998. 10. It has been vehemently contended by Mr. Vinay Kuthiala that in the teeth of these facts, the assessee is not entitled to any immunity against penalty under VDIS in view of Section 64 (2) (i) of Finance Act, 1997. He has submitted that the acceptance of declaration filed under VDIS by CIT as per certificate issued under Section 68 (2) of the Act is inconsequential when the assessee is not entitled to any benefit under VDIS. In support of this contention, Mr. Kuthiala has relied Division Bench judgment dated 27.8.2008 in ITA No. 6 of 2002 wherein it has been held that declaration made by the assessee was totally contrary to the provisions of Section 64 (2) (ii) of the Act and, therefore, the certificate issued under Section 68 is not binding upon the Assessing Officer. 11. The learned Senior Advocate appearing on behalf of the assessee has submitted that it was not the case of the revenue before the ITAT that return filed by the assessee under VDIS was not in order and, therefore, the assessee is not entitled to any benefit under VDIS. The learned Senior Advocate has drawn our attention to para 3.1 of impugned judgment where contentions raised by the revenue before the ITAT have been noticed. It has been submitted that the substantial questions of law do not emerge from the case set up by the revenue before ITAT. The learned counsel for the appellant has submitted that the return filed by the assessee and consequences flowing from the return filed by the assessee under VDIS is matter of record, the appellant has right to draw attention of this Court and submit that the return filed by the assessee under VDIS was not in order and, therefore, under Section 64 (2) (i) of the Finance Act, 1997 the assessee is not entitled to any benefit under VDIS and seek immunity against penalty. 12. The question raised by the learned counsel for the appellant is legal but based upon facts. We have gone through the impugned judgment and the question of legality of return filed by the assessee under VDIS was not specifically raised before ITAT but simultaneously the question is important. The Section 64 (2) (i) provides that sub section (1) of Section 64 shall not apply in relation to the income assessable for any assessment year for which a notice under Section 142 or Section 148 of the Income tax Act has been served upon such person and the return has not been furnished before the commencement of the Scheme. The case of the revenue is that despite the notice under Section 148 of the Act, the assessee had not filed any return before the commencement of the VDIS and, therefore, assessee is not entitled to any benefit under VDIS. 13. In view of the fact that ITAT has not gone into the question of legality of the return filed by the assessee under VDIS, we propose to remand the case and we are not going into other questions and contentions raised by the parties. Accordingly, the appeal is allowed. The impugned order passed by ITAT is set-aside, the case is remanded to ITAT to decide the appeal afresh on all points including the question regarding the legality of return filed by the assessee under VDIS and consequences flowing from such return. 14. No costs. ( R. B. Misra ), Acting Chief Justice. November 26, 2009. ( Kuldip Singh ), (GR) Judge.