1996-VIL-03-ITAT-BLR
Equivalent Citation: TTJ 057, 159,
Income Tax Appellate Tribunal BANGALORE
Date: 31.07.1996
PV. AJAY NARAYAN.
Vs
INCOME TAX OFFICER.
BENCH
Member(s) : Smt. P. K. AMMINI., S. BANDYOPADHYAY.
JUDGMENT
This appeal is by the assessee. The assessment year involved is 1992-93. Two additions, one of Rs. 1,00,000 and other of Rs. 1,42,000 are challenged in this appeal.
2. The facts leading to this appeal are as follows. The assessee Ajay Narayan is a minor and represented by his natural guardian, the father. His only source of income is interest derived from investments made in business concerns. A return of income was filed on 26th Oct., 1993, declaring total income of Rs. 54,170 and it was processed by the AO under s. 143(1)(a) on 29th Oct., 1993, accepting the return. The assessment was reopened by issue of a notice under s. 148 on 20th July, 1994. In response to that notice a return was filed on 14th Sept., 1994, declaring an income of Rs. 54,170 again, as returned originally. The AO noticed that the assessee was a partner of M/s Vaishnavi Prints and M/s Pathi Silk Udyog. The share of the assessee had been clubbed with the income of his father P.S. Viswanath. The assessee was also getting interest on deposits made in various firms. He was not maintaining regular books of account. Statement of affairs, cash flow statement, bank pass book and ledger extracts for the relevant period were called for and these were examined by the ITO. It was noticed that a sum of Rs. 1,00,000 was deposited on 27th Dec., 1991, with Vysya Bank and another sum of Rs. 3,08,000 deposited on 1st Jan., 1992. The above two deposits were later on withdrawn and deposited in National Housing Bank under the Voluntary Deposits (Immunities & Exemptions) Scheme, 1991, hereinafter referred to as `VD (I&E) Scheme on 29th Jan., 1992, and 30th Jan., 1992, respectively. Therefore, it was claimed as the VD (I&E) scheme, 1991, applied and could not be subjected to tax again. This contention was not accepted by the AO on the ground that the assessee has availed of the immunity provisions under the above scheme in respect of Rs. 60,000 deposited in Vysya Bank on 10th Feb., 1992, and Rs. 1,84,000 deposited in the same bank, again on 10th Feb., 1992, for which the assessee had furnished copies of certificates of withdrawal under NHB (Voluntary Deposits) Scheme, 1991, along with application for withdrawal wherein the net deposits of Rs. 60,000 and Rs. 1,84,800 were proposed to be used in business. Hence, he made additions of Rs. 1,00,000 and Rs. 3,08,000 under s. 68 of the IT Act, 1961. The assessee appealed.
3. Regarding the addition of Rs. 1,42,800 the case of the AO was that one I.S. Prasad through whom the remittance of Rs. 1,00,000 and Rs. 3,38,000 from Vysya Bank, Madanapalli, were arranged had deposed before the Asstt. Director of Inspection, Bangalore, on 30th March, 1993, and 22nd March, 1993, that premium at the rate of 35 per cent was paid in advance on 23rd Dec., 1991, by the beneficiaries for obtaining remittance from Vysya Bank, Madanapalli, and the premium working to Rs. 1,42,800 was not reflected in the statements furnished and the assessee had also not properly explained the nature and source. This sum was added under s. 68.
4. Being aggrieved by the additions the assessee went in appeal to the CIT(A). The first ground before the CIT(A) was that the reopening of the assessment was bad in law. But the CIT(A) states in his order dt. 14th March, 1995, the assessee's representative expressed his inability to explain in how the ITO erred in taking action under s. 148. According to the CIT(A) though the assessee had shown remittance under the Foreign Exchange Remittance Scheme, 1991, for Rs. 3,08,000 but it was not a genuine remittance. He found that the reopening was valid in law. He also sustained the additions. Hence, this second appeal by the assessee.
5. The first contention raised before us is that the reopening is unjustified. The learned counsel for the assessee argued that the assessment under s. 143(1)(a) was completed on 29th Oct., 1993, and the notice under s. 148 was issued on 20th June, 1994. His point is that for reopening the assessment no reason is recorded by the ITO either in the notice or in the reassessment order. According to him, the assessee has complied with the notice issued to him under s. 148. On the other hand, the learned Departmental Representative argued that the ITO has recorded the reasons for reopening of the assessment. The reasons are that during the assessment year the assessee has received bogus remittances under the Foreign Exchange Remittances (Immunity) Scheme, 1991, by paying commission. The amounts found credited in the above of accounts was Rs. 4,08,000 and the commission said to have been paid was around Rs. 1,25,000. As the above-mentioned amounts have not been declared by the assessee the income chargeable to tax had escaped assessment for the asst. yr. 1992-93. He accordingly issued notice under s. 148. Relying on the above, the learned Departmental Representative contended that there are unexplained credits and, therefore, the reopening of the assessment is just and proper and the reopening is thus valid.
6. We have considered the rival submissions. The assessee, in this case, has shown in his return, the remittance in the foreign exchange under the Foreign Exchange (Immunity) Scheme, 1991, Rs. 1,00,000 and Rs. 3,08,000. According to the learned counsel for the assessee the remittance under the Foreign Exchange Remittance Scheme is genuine. In this case, Viswanath, the father of the assessee and also his natural guardian, deposed before the Asstt. Director of Inspection on 16th June, 1993, that remittance of Rs. 1,00,000 and Rs. 3,08,000 were arranged by I.S. Prasad to whom the cash was handedover in advance. After about 10 days I.S. Prasad told him that the said remittance had not originated from a genuine NRI account and also did not give him the remittance certificate. Then the question arises as to whether the remittance are genuine or not. This has to be enquired into. When the assessment was processed under s. 143(1)(a) this question had not been enquired into. It is argued on behalf of the Revenue that no case was made out that under the NRE account they tried to pay Indian currency through intermediaries by paying commission at the rate of 35 per cent. I.S. Prasad was a practising Chartered Accountant. How did the father give him Rs. 4,05,000 by way of draft from Vysya Bank, Madanapalli, and how Rs. 1,42,000 was paid as commission at the rate of 35 per cent. I.S. Prasad deposed that there were three parties involved in these transactions which include Pathi group to which the assessee advanced. The assessee has deposited an amount of Rs. 1,00,000 on 27th Dec., 1991, with Vysya Bank and like amount was withdrawn on 30th Dec., 1991, and, on the same day it was deposited with M/s Pathi Silk House, on 1st Jan., 1992 he received an amount of Rs. 3,08,000 from Vysya Bank, Madanapalli, and deposited in Vysya Bank Bangalore, on the same date it was withdrawn and deposited with M/s Pathi Saree Emporium. The assessee was asked about the source. The assessee explained that the above were gifts from NRE accounts. According to the ITO there was no evidence to show that these were gifts from NRE accounts. As per the ITO these remittances are under Foreign Exchange Remittance (Immunity) Scheme, which are not applicable to the facts of this case. Therefore, it is the contention of the learned Departmental Representative that the reopening of the assessment is valid. Agreeing with the above contention of the learned Departmental Representative we hold that the reopening of the assessment in respect of Rs. 1,00,000 and Rs. 3,08,000 is valid. The contention of the assessee to the extent of Rs. 4,08,000 is rejected.
7. Coming to the reopening in respect of the amount of Rs. 1,42,800, we see that the reopening is done only on the basis of the statements of I.S. Prasad before the Asstt. Director of Inspection that he has received commission at the rate of 35 per cent. The ITO worked out the commission paid to IS Prasad at the rate of 35 per cent at Rs. 1,42,800. We have gone through the statement of I.S. Prasad. Nowhere it is stated by him that he was given the commission by the assessee; he has referred only to Pathi Panduranga Group Silk Merchants. He has stated that on 23rd Dec., 1991, he took Rs. 10 lakhs from Pathi Group. But (sic-it) is nobody's case that this sum of Rs. 10 lakhs was for the assessee. He has further stated that he has given Rs. 50 lakhs approximately to one K.V. Kishore. During this time I.S. Prasad informed him that said DD's and certificates where not received from NRE accounts but all the transactions were made by Samad Krishnappa and Radhakrishna Murthy, the bank manager. It is argued on behalf of the assessee that the statement of I.S. Prasad cannot be relied on for the reason that the assessee was not allowed to cross- examine him in spite of repeated requests. Assessee's father sent a letter to the Asstt. Director of Inspection on 11th Nov., 1993, requesting to furnish a copy of all the statements given by I.S. Prasad. On behalf of the assessee a copy of the letter addressed by I.S. Prasad to the Asstt. Director of Inspection requesting for adjournment of the case to 18th on the ground that he was unable to appear before the Asstt. Director of Inspection on 8th and 9th as his father aged 74 years had undergone surgery at a hospital and required care as he was a diabetic patient and had no vision. Subsequently no opportunity was given by Asstt. Director of Inspection to the assessee to cross-examine I.S. Prasad. Hence, it is submitted that reliance on the statement of I.S. Prasad which the assessee could not rebut as no opportunity was given to him to cross-examine I.S. Prasad will not be proper. It is also contended that on the basis of the above statement of I.S. Prasad the assessment cannot be reopened. There is violation of natural justice. We find considerable force in the above argument of the learned counsel for the assessee. Hence, we hold that the reopening of the assessment in respect of Rs. 1,41,800 is bad in law.
8. It is further contended by the learned counsel for the assessee that the addition cannot be made under s. 68 because the assessee has not been maintaining regular books of account. It is contended that only in cases where regular books are maintained the provisions of s. 68 would be applicable. But the learned Departmental Representative, on the other hand, submitted that misquoting of a section is not fatal to the case of the Revenue. For this proposition, he relied on the following case law :
(i) CIT vs. Gilbert and Barker Manufacture Inc. Co. U.S.A. 1977 CTR (Bom) 347 : (1978) 111 ITR 529 (Bom).
(ii) Steel Containers Ltd. vs. CIT (1978) 112 ITR 995 (Cal), and
(iii) D.M. Neterwalla vs. CIT (1980) 122 ITR 880 (Bom).
The above decisions point out to one thing that the Tribunal has power to allow the Revenue to raise a ground for the first time before it. It is also held therein that the Tribunal can uphold disallowance under another section. In the light of the above decisions we hold that mentioning of a wrong section is not fatal to making an assessment under any other section.
9. The next question that arises for our consideration is whether the additions of Rs. 1,00,000 and Rs. 3,08,000 are justified. According to the learned counsel for the assessee, the existence of local black money is not in dispute. At the time of presentation of the Budget for the asst. yr. 1991-92, the Hon'ble Minister for Finance has also taken steps to surface the black money in existence in the country. The learned counsel for the assessee also placed reliance on the speech of the Hon'ble Finance Minister which reads as follows:
"I propose to institute a scheme, under which any person would be allowed to make a deposit with the National Housing Bank on or before close of business on 30th Nov., 1991. Thereupon, 40 per cent of such deposit would be deducted and set apart as a special levy, which would form the corpus of a fund in the National Housing Bank. This fund will be utilised for financing slum clearance and low cost housing for the poor, in accordance with the guidelines and priorities laid down by the Government. The depositor would be allowed to draw the balance amount in one or more instalments through account payee cheques for any stated purpose of his choice."
The Finance Minister has further stated in his speech that the IT Act may contain a provisions under which the taxpayers could avail of the facility of waiver of penalty and interest on the amount disclosed once in a lifetime. He has also stated that to those who have already availed of this facility, he proposes to give just one more opportunity to disclose their unaccounted incomes. The Finance Bill also contained a proposal for making suitable amendments to s. 273A of the IT Act for the above purpose.
10. The settlement commission was set up to provide an opportunity to assessee to declare their undisclosed income and wealth. The settlement commission will, however, continue to call for and take into account the CIT's report, provided it is furnished within a period of six months. Thus, the Voluntary Deposits (Immunities and Exemptions) Bill, 1991, was introduced in the Lok Sabha on 9th Sept., 1991 with a statement of objects and reasons. As per the second paragraph the bill was introduced with a view to such canalisation the Central Government has decided to allow voluntary deposits being made with the National Housing Bank in accordance with a scheme to be formulated by that bank whereunder forty per cent of the amount of such deposits will be credited to special fund to be created for financing slum clearance and low cost housing for the poor, and sixty per cent of the amount of such deposits can be utilised by the depositors for purposes specified by them. It was, therefore, considered necessary to provide for certain immunities and exemptions to render it possible for persons in possession of black money to make such deposits. For the purposes of deposits with the National Housing Bank the specified date is 1st Dec., 1991. It is argued on behalf of the assessee that he was having black money and he wanted to avail of the benefits under the above Act, viz., the Voluntary Deposits (Immunities & Exemptions) Act, 1991. For the purpose, he obtained gift of Rs. 1,00,000 on 30th Dec., 1991, from an NRE account. In order to show how the assessee deposited the amount he filed a cash flow statement for the asst. yr. 1991-92. The cash flow:
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"Immunitiesâ(1) Notwithstanding anything contained in any other law for the time being in force,â
(a) no person, who has made a deposit with the National Housing Bank in accordance with the scheme, shall be required to disclose, for any purpose whatsoever, the nature and source of the deposit;
(b) no enquiry or investigation shall be commenced against any person under any such law on the ground that he has made the deposit;
(c) the fact that a person has made the deposit shall not be taken into account and shall be inadmissible as evidence in any proceedings relating to any offence or the imposition of any penalty under any such law."
11. Hence, from the facts and in the circumstances of the case, it is clear that the assessee has got the amount as black money and it was in existence during the asst. yr. 1991-92 when the VD (I&E) Act, 1991, came into force. Under the provisions of the said Act, the assessee is entitled to deposit his black money with the National Bank and the Department is not entitled to ask, nor is the assessee obliged to disclose, the source of the deposit. The assessee has also filed a cash flow statement to show how he has handled the money during this period. He has also withdrawn 60 per cent of the amount deposited with the National Housing Bank after retaining 40 per cent of the deposit still with the bank. He has complied with all the conditions in order to get the exemption under the provisions of VD (I&E) Act, 1991. Hence, we hold that the authorities below were not justified in making additions of Rs. 1,00,000 and Rs. 3,08,000. The additions are deleted. The orders of the authorities below in this regard are cancelled.
12. Coming to the addition of Rs. 1,42,800, we have already held that the reopening in respect of this amount was not valid for the reason that the assessee was not given a chance to cross-examine I.S. Prasad in respect of his statement. Further, Prasad has not stated in his statement that the assessee has paid commission at 35 per cent. For all the above reasons, we delete the addition of Rs. 1,42,800 as well.
13. In the result, the appeal filed by the assessee is allowed as indicated above.
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