ITA No.155 of 2008 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No. 155 of 2008 Date of decision: 14.12.2010 Commissioner of Income Tax-I, Ludhiana -----Appellant Vs. Shri Prem Pal Prop. ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. . Dinesh Goyal, Mr. Rajesh Katoch, and Ms. Urvashi Dhugga, Advocates for the revenue. Mr. S.K.Mukhi and Deepak Sharma, Advocate for the assesses. Adarsh Kumar Goel,J. 1. This order will dispose of ITA nos.129, 155, 600, 640, 743, 766 of 2008, 91, 83, 261 and 379 of 2009 as all the cases involve common question raised on behalf of the revenue to the following effect:- “Whether on the facts and in law, the Hon’ble Income Tax Appellate Tribunal was justified in treating the initiation of proceedings under section 147/148 unjustified and untenable and issuance of notice under section 148 to be invalid for the assessment year 1998-99 in which the assessee was found to be owner of Gold and diamond Jewellery as envisaged by section 69A of the Income Tax Act, 1961? 2. In ITA No.155 of 2008, the assessee is individual and filed declaration on 31.12.1997 before the Commissioner under the Voluntary Disclosure of Income Scheme, 1997 (VDIS) declaring that he had assets in the form of gold and diamond jewellery acquired much earlier. However, 1 ITA No.155 of 2008 tax having not been paid as per the declaration by virtue of section 67(1) of the Scheme, the declaration was treated to have never been made. Since from the declaration, the assessee was found to be owner of the unexplained investment in jewellery, the Assessing Officer (AO) invoked Section 69A raising statutory rebuttable presumption in favour of unexplained investment to be in the year in which it is found and issued notice for re- assessment under section 148 and proceeded to make assessment thereby making addition equal to the value of unexplained assets. On appeal, the CIT(A) upheld the addition but the Tribunal set aside the initiation of re- assessment proceedings holding that since as per declaration undisclosed income was of the financial years 1985-86 and 1986-87 and the AO had no other material, the said declaration could not be the basis for re-assessment for the assessment year 1998-99. The finding recorded by the Tribunal is as under:- “From a perusal of the aforesaid excerpts of the order of the Tribunal, it is evident that the Tribunal was considering a fact situation similar to the one which is presently before us. In the present case to the assessee had made a declaration under VDIS Scheme whereby he declared the value of jewellery and the same was declared to have been acquired in the course of assessment year 1986-87 and 1987-88 i.e., assessment years other than the assessment year under consideration. That the Assessing Officer considered the aforesaid material and initiated proceedings under section 147/148 for the assessment year 1998-99. Clearly the conclusion of the Tribunal that there was no material with the department apart from the documents relating to VDIS that there was an escapement of income for the assessment year 1998-99 clearly emerges in this case also. The material so relied upon clearly points out that the assets in question 2 ITA No.155 of 2008 were acquired in the assessment year 1986-87 and 1987-88 and not 1998-99. Thus rendering the said material as otiose for assuming jurisdiction under section 147/148 for the assessment year 1988-89. Following the reasoning made out by the Tribunal in the case of Inder Kumar Bachani, HUF (supra) which we have extracted above, the initiation of proceedings under section 147/148 are unjustified and untenable. As a consequence, the subsequent assessment framed is liable to be quashed. We hold so. Since we have held the issuance of notice under Section 148 to be invalid, the other grounds raised by the assessee are rendered academic and are not being adjudicated by us.” 3. In other cases, factual position is same except in ITA No.640 of 2008 wherein the CIT(A) deleted the addition. It examined the alternative issue of justification for addition on merits holding that assets in question were acquired in the financial year 1980-81 and not in the assessment year 1998-99. This finding was recorded on the basis of purchase bills relating to the ornaments in question. The Tribunal did not go into merits but upheld the deletion on jurisdictional ground. 4. We have heard learned counsel for the parties and perused the record. 5. Learned counsel for the revenue submitted that under Section 69A of the Act, any unexplained money or jewellery not recorded in books of account of the assessee can be added to the declared income of the year wherein the same was found unless the assessee offers explanation about nature and source of acquisition thereof. In the present case, the valuables having been found to be from unexplained income during financial year 1997-98, the same could be added to the income of the said year unless the assessee had acceptable explanation. Though assessee’s declaration of 3 ITA No.155 of 2008 availability of unexplained investment could form basis for reassessment, mention of year of acquisition was not conclusive, unless found to be acceptable. The AO was not required to show any further material in view of statutory presumption under Section 69A. Finding of unexplained investment itself could be legal basis unless the statutory presumption was rebutted, burden of which was on the assessee. 6. Learned counsel for the assessee supports the impugned finding. 7. There is no dispute about the proposition that under Section 69A, any undisclosed income or valuables found with the assessee can be added to the income of the year in which the same are found. Learned counsel for the assessee could not dispute this legal proposition. Presumption being rebuttable, if the assessee gives an acceptable explanation, presumption can stand rebutted. The Tribunal held that initiation of proceedings under sections 147/148 was unjustified and untenable in absence of any material with the department about escapement of income. Reliance was placed on judgments of different benches of the Tribunal to that effect. 8. The view taken cannot be accepted as the Tribunal failed to appreciate that burden was not on the department but on assessee to show that income did not relate to the year in which it was found. 9. It will be appropriate to refer to the relevant statutory provisions:- Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no 4 ITA No.155 of 2008 explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. Issue of notice where income has escaped assessment. 148. (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 : Provided that in a case— (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub- section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case— (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of 5 ITA No.155 of 2008 the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice.] Explanation.—For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so. THE VOLUNTARY DISCLOSURE OF INCOME SCHEME, 1997 VOLUNTARILY DISCLOSED ICNOME NOT TO BE INCLUDED IN THE TOTAL INCOME. 68(1) The amount of the voluntarily disclosed income shall not be included in the total income of the declarant for any assessment year under the Income Tax Act, if the following conditions are fulfilled namely :- i) the declarant credits such amount in the books of account, if any, maintained by him for any source of income or in any other record and intimates the credit so made to the Assessing Officer and ii) the income tax in respect of the voluntarily disclosed income is paid by the declarant within the time specified in section 66 or section 67. 2) The Commissioner shall, on an application made by the declarant, grant a certificate to him setting forth the particulars of the voluntarily disclosed income and the amount of income tax paid in respect of the same. DECLARATION NOT ADMISSIBLE IN EVIDENCE AGAISNT DECLARANT. 71. Notwithstanding anything contained in any other law for the time being in force, nothing contained in any declaration made under sub section (1) of section 64 shall be admissible in evidence against the declarant for the purpose of any proceeding relating to imposition of penalty or for the purposes 6 ITA No.155 of 2008 of prosecution under the Income Tax Act or the Wealth Tax Act or the Foreign Exchange Regulation Act, 1973 or the Companies Act, 1956. SECRECY OF DECLARATION 72. (1) All particulars contained in a declaration made under sub section (1) of section 64 shall be treated as confidential and notwithstanding anything contained in any law for the time being in force, no court or any other authority shall be entitled to require any public servant or the declarant to produce before it any such declaration or any part thereof or to give any evidence before it in respect thereof. (2) No public servant shall disclose any particulars contained in any such declaration except to any officer employed in the execution of the Income tax Act or the Wealth Tax Act or to any officer appointed by the Comptroller and Auditor General of India or the Board to audit income tax receipts or refunds.” 10. A perusal of the above leads to the following conclusions:- i) If a declaration has been validly made by paying the requisite tax, the amount of income disclosed cannot be included in income of the declarant for any other assessment year and nothing contained in the declaration is admissible in evidence in any proceedings for penalty or prosecution. The particulars of the declaration are to be treated as confidential. If tax is not paid, the declaration is to be treated to have never been made for the purpose of the scheme and the said consequences do not follow. ii) Such a declaration which is not valid for purposes of the scheme can constitute material for re-assessment under section 148 and if it is found that in accordance with such declaration, the assessee had the jewellery or valuables, the same can be deemed to be income for the financial year in which the valuables are found with the assessee, unless the assessee offers acceptable 7 ITA No.155 of 2008 explanation about nature and source of acquisition thereof to rebut the statutory presumption. 11. In the present case, declaration was made on 31.12.1997 relating to the financial year 1997-98 relevant to assessment year 1998-99. The Assessing Officer was, thus, justified in initiating proceedings for re- assessment under Section 148 of the Act and holding that the valuables found were liable to be added to the income of the assessee for assessment year 1998-99 in absence of valid explanation. The addition could be set aside if the explanation of the assessee was found to be acceptable. It could not have been said that no re-assessment could at all be made on the basis of declaration showing the assessee the owner of the valuables in the financial year merely because the declaration stated that acquisition of valuables was much earlier. Such declaration by itself was not enough to rebut the statutory presumption under section 69A unless the assessee substantiated the same. 12. In view of above, the view taken by the Tribunal that it was not necessary to go into the explanation of the assessee and holding reassessment to be invalid for lack of jurisdiction, cannot be sustained. 13. Accordingly, we answer the question in favour of the revenue, allow these appeals and set aside the impugned orders and remand the matter to the Tribunal for fresh decision on merits in accordance with law. (Adarsh Kumar Goel) Judge December 14, 2010 (Ajay Kumar Mittal) ‘gs’ Judge 8