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2003 DIGILAW 630 (GUJ)

C. I. T. v. D. P. KARAI

2003-11-01

D.H.WAGHELA, K.A.PUJ

body2003
K. A. PUJ, J. ( 1 ) THE Commissioner of Income Tax, Jamnagar, has filed this Tax Appeal No. 199 of 2003 under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") requesting this Court to frame and decide following substantial questions of law arising out of the order of the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot in ITA No. 5/rjt/2001 for the block period from 1. 4. 1987 to 29. 1. 1998 decided on 3rd January 2003;"whether on the facts and in the circumstances of the case the ITAT is legally justified in quashing the order of CIT passed U/s 263 of the IT Act ?""whether on the facts and in the circumstances of the case the ITAT is legally justified in holding that the order of Assessing Officer was not erroneous and prejudicial to the interest of revenue ?" ( 2 ) DURING the course of hearing of this Tax Appeal, one more substantial question of law is proposed to be raised by Mr. Pranav G. Desai, learned counsel appearing for the department, which is as under;"whether in the facts and circumstances of the case ITAT is right in law in relying upon the Affidavit of assessee retracting confession at its face value and not considering voluntary confession of disclosure made on oath before the authorities in presence of witnesses ?" ( 3 ) THE brief facts, giving rise to the present Tax Appeal are as follows. The respondent-assessee herein was intercepted on 29. 1. 1998 at Santa Cruz Airport and was searched under Section 132 of the Act. He was found to be in possession of cash worth Rs. 20 lakhs which was seized. His statement on oath was recorded under Section 132 (4) of the Act on the same date, i. e. , 29. 1. 1998 wherein he has stated that the cash seized was out of his undisclosed income and the same was being offerred for taxation in the current year being financial year 1997-1998. The said declaration of income of Rs. 20 lakhs was stated to have been made voluntarily and without any threat, coercion or undue influence. ( 4 ) PURSUANT to the said search and seizure, proceedings under Section 158-BC were initiated on 27. 2. 1998 in the form of issuance of notice calling for the return of the undisclosed income for the block period. 20 lakhs was stated to have been made voluntarily and without any threat, coercion or undue influence. ( 4 ) PURSUANT to the said search and seizure, proceedings under Section 158-BC were initiated on 27. 2. 1998 in the form of issuance of notice calling for the return of the undisclosed income for the block period. The respondent-assessee filed his return of income for the block year 1. 4. 1987 to 29. 1. 1998 showing undisclosed income at Rs. nil. For the Accounting Year, being Financial Year 1997-1998 relevant to the assessment year 1998-1999, it was stated that the year had not ended and hence the income was not ascertainable. The respondent-assessee has not disclosed the income of Rs. 20 lakhs which was declared by him while recording statement under Section 132 (4) of the Act and for that purpose he has filed an affidavit dated 7. 2. 1998 stating therein that the sum of Rs. 20 lakhs was part of Rs. 40 lakhs disclosed by him under Voluntary Disclosure of Income Scheme, 1997 ("vdis") and that he was compelled to accept Rs. 20 lakhs as his undisclosed income. ( 5 ) DURING the course of block assessment proceedings, the respondent-assessee, besides stating what was stated in the affidavit, relied upon certain decisions and contended that though admission of income was a good piece of evidence, it was not conclusive. The fact of disclosure under VDIS was reiterated to show that his earlier statement was erroneous one. The Assessing Officer, after considering the detailed written submissions, the depositions made and the arguments put forward and after perusal of the details produced, arrived at the conclusion that the income from undisclosed sources for the block period was at Rs. nil as was returned by the respondent-assessee for the period under reference, vide his order dated 13. 7. 1998. ( 6 ) THE Commissioner of Income Tax, Jamnagar, the appellant herein, was of the view that the order passed by the Assessing Officer under Section 158-BC of the Act on 13/7/1998 was erroneous one and it was prejudicial to the interest of Revenue. He therefore initiated proceedings under Section 263 of the Act. 7. 1998. ( 6 ) THE Commissioner of Income Tax, Jamnagar, the appellant herein, was of the view that the order passed by the Assessing Officer under Section 158-BC of the Act on 13/7/1998 was erroneous one and it was prejudicial to the interest of Revenue. He therefore initiated proceedings under Section 263 of the Act. The main reason for holding the order so was that the affidavit dated 7/2/1998 was filed as late as on 25/5/1998 and that there was no purpose of opening supplementary cash book which contained entries relating to the disclosure made under VDIS only and the sum of Rs. 40 lakhs was credited in the cash book of Halar Maritime Agencies. The computer printouts of the respondent-assessees books were given after the assessment order was passed and therefore the Assessing Officer did not verify the correctness of the respondent-assessees contentions that the statement on the day of search was given under pressure and that there was no inquiry as to why the respondent assessee was carrying as much cash with him and hence the order under Section 158-BC sufferred from the vice of lack of inquiry and non-application of mind. Accordingly, the Commissioner of Income Tax had directed vide his order dated 27. 3. 2001, to treat the seized cash of Rs. 20 lakhs as undisclosed income and subject it to tax. ( 7 ) BEING aggrieved by the said order of the Commissioner of Income Tax, Jamnagar, the respondent-assessee filed an appeal before the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot, being Appeal No. 5/rjt/2001. It was contended by the respondent-assessee before the ITAT that the respondent-assessee is a retired "navy" Captain and he continued his maritime adventure by starting the business of Stevedoring from the Assessment Year 1987-88 to 1998-99. He was earning income from Rs. 1 lakh to Rs. 10 lakhs which was evident from the return filed by him. Under the VDIS 1997, he declared income of Rs. 40 lakhs for taxation on 31/12/1997. The said amount of Rs. 40 lakhs fully represented the cash and the tax of Rs. 12 lakhs on the said amount was fully paid by the respondent-assessee. Relevant certificate to that effect was produced before the ITAT. It was further contended before the ITAT that search took place at around 4. 00 a. m. and concluded at around 10. The said amount of Rs. 40 lakhs fully represented the cash and the tax of Rs. 12 lakhs on the said amount was fully paid by the respondent-assessee. Relevant certificate to that effect was produced before the ITAT. It was further contended before the ITAT that search took place at around 4. 00 a. m. and concluded at around 10. 30 a. m. On completion of search the respondent-assessee boarded the 1st flight for Chennai and on return from Chennai he swore an affidavit retracting his earlier admission offering Rs. 20 lakhs as cash. ( 8 ) AFTER considering the submissions made by both the parties and after appreciating the evidence produced by the respective parties, the ITAT, vide its order dated 3rd January 2003, held that as there was no long gap between the declarations made under VDIS and the date of search, and as there was no finding that the cash declared under VDIS was either converted into any other assets or was used for incurring any expenses by the date of search, the order of the Assessing Officer was not erroneous and prejudicial to the interest of Revenue and, therefore, the ITAT has quashed the order passed by the Commissioner of Income Tax, Jamnagar, under Section 263 of the Act. ( 9 ) BEING aggrieved by the said order of ITAT, the Commissioner of Income Tax, Jamnagar, the appellant herein, has filed the present Appeal under Section 260-A of the Act. ( 10 ) MR. Pranav G. Desai, learned Standing Counsel appearing for the Income Tax Department has submitted that the ITAT has substantially erred in law and on facts in coming to the conclusion that, even though there may not be any coercion on the part of the search party it did not necessarily mean that the person cannot come under pressure on his own. He has further submitted that there was no justification in arriving at the conclusion that the respondent-assessee must be wanting to get released as soon as possible to attend to his Chennai engagements and the pressure along with the sudden interception could have triggered a thought to accept Rs. 20 lakhs as undisclosed income. He has further submitted that there was no justification in arriving at the conclusion that the respondent-assessee must be wanting to get released as soon as possible to attend to his Chennai engagements and the pressure along with the sudden interception could have triggered a thought to accept Rs. 20 lakhs as undisclosed income. He has further submitted that the ITAT has erroneously jumped to the conclusion that much credence should not be given to the admission made by the respondent-assessee at the time of search and/or recording his statement under Section 132 (4) of the Act. The ITAT has also materially erred in accepting the explanation given by the respondent-assessee in the affidavit branding it as a palatable explanation. Mr. Desai has also objected to the finding given by the ITAT to the effect that there was no infirmity in the conclusion of the Assessing Officer and that it was not true to say that there was lack of inquiry or non-application of mind on the part of the Assessing Officer. Mr. Desai has further submitted that the ITAT has committed a very serious error in law in arriving at the conclusion that none of the reasons given by Commissioner of Income tax carried any real force or conviction to hold the order of the Assessing Officer to be erroneous. He has further submitted that the ITAT has not properly appreciated the provisions of law concerning carrying of currency during the travel by Airlines. Mr. Desai has further submitted that the ITAT has not applied its mind to the original-statement of the respondent-assessee recorded by the search party on 29. 1. 1998 and that the ITAT has solely decided the matter on the basis of the affidavit dated 7. 2. 1998. He has further submitted that the supplementary cash book prepared by the respondent-assessee was bogus and not genuine and it was prepared only with a view to justify his retraction. He has further submitted that the ITAT has not taken into consideration at all the corroborative piece of evidence and circumstances justifying the voluntary statement of the respondent-assessee recorded on 29. 1. 1998. Mr. He has further submitted that the ITAT has not taken into consideration at all the corroborative piece of evidence and circumstances justifying the voluntary statement of the respondent-assessee recorded on 29. 1. 1998. Mr. Desai has, therefore, submitted that when the relevant material is ignored and irrelevant material is taken into consideration by the ITAT and based on such consideration if an erroneous finding or conclusion is arrived at, a substantial question of law did arise out of the order of the ITAT and hence the question as proposed hereinabove should be framed by this Court for its determination and the present Appeal is therefore required to be admitted and allowed. ( 11 ) MR. KH Kazi, the learned advocate appearing for the respondent-assessee on the other hand supported the order passed by the Assessing Officer as well as by the ITAT. He has submitted that in December 1997, the respondent-assessee had declared Rs. 40 lakhs in VDIS and this amount of Rs. 40 lakhs was in the form of cash. The said amount was taken in supplementary cash book and after deducting Rs. 20 lakhs seized by the department the balance was transferred to the regular cash book. He has further submitted that the reason for opening supplementary cash book was that the regular cash book for the period ending on 31. 12. 1997 was already closed and even otherwise the said amount has to be shown in the supplementary cash book. He has further submitted that the admission made by the respondent-assessee should not be given undue importance as it was not a formal search in the sense that it was not at the place of residence or at the business place but was at the Airport and it had taken nearly 3 and 1/2 hours to record the statement. He has further submitted that no adverse inference should be drawn from the fact that the computer print-outs of the account books were furnished after the assessment order was passed in as much as that the original handwritten account books were examined by the Assessing Officer. Mr. Kazi has further submitted that the ITAT has taken pains to appreciate and analyse the order passed by the Commissioner of Income tax and observed that the Commissioner of Income Tax has given mainly four reasons for holding the assessment order to be erroneous. Mr. Kazi has further submitted that the ITAT has taken pains to appreciate and analyse the order passed by the Commissioner of Income tax and observed that the Commissioner of Income Tax has given mainly four reasons for holding the assessment order to be erroneous. The ITAT was of the view that the affidavit filed by the respondent-assessee retracting his earlier statement could not be brushed aside. With regard to supplementary cash book, computer print-outs, non-verification of reasons to carry the huge sum of cash by the respondent-assessee etc. , were also taken due care of and explained in detail. The ITAT has also taken into consideration two more reasons for accepting the explanation of the respondent-assessee and they are to the effect that there was no long gap between the declaration under VDIS and the date of search, and secondly there was no finding that cash declared under VDIS was either converted into any other asset or was used for incurring any expenses till the date of search. After taking into consideration all these aspects of the matter and the relevant materials, the ITAT has come to the conclusion that the order of the Assessing Officer was not erroneous and prejudicial to the interests of the Revenue and quashed the order passed by the Commissioner of Income tax under Section 263 of the Act. Mr. Kazi has, therefore, submitted that the Tribunal has come to the just and proper conclusion after appreciation of evidence and it being finding of fact it cannot be said that any question of law, much less the substantial question of law arises out of the order of the ITAT. ( 12 ) IN support of his submissions, Mr. Kazi has relied on the decision of the Honble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. Commissioner of Income tax - 243 ITR 83, wherein it is held as under;"a bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263 (1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase "prejudicial to the interests of the Revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. " ( 13 ) AFTER having considered the rival submissions of the parties and after having gone through the relevant materials and evidence produced before this Court and after having gone through the orders passed by the authorities below, this Court is of the view that what was done by the ITAT is appreciation of evidence and after such appreciation the conclusion drawn and finding arrived at is purely a finding of fact which does not give rise to any question of law much less a substantial question of law. The Assessing Officer has considered the relevant facts and circumstances of the case and the affidavit filed by the respondent-assessee during the course of proceedings under Section 158-BC and has come to the conclusion that the seized cash of Rs. 20 lakhs formed part of Rs. 40 lakhs which were already disclosed by the respondent-assessee under VDIS. Even if the Commissioner of Income Tax is empowered to initiate proceedings under Section 263 of the Act, looking to the facts and circumstances of the case, the said powers are not exercised in accordance with law as on facts coming on record, it cannot be said that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. The ITAT has also endorsed the view taken by the Assessing Officer and that too after proper appreciation of the facts on record and evidence produced before it and the finding arrived at is absolutely a finding of fact, it cannot be said that the said finding is either unreasonable or perverse. This Court is not endorsing the view canvassed by Mr. Desai that the Tribunal has not taken into consideration the relevant material and based its order on irrelevant material. This Court is also of the view that even on facts a different view is hardly possible. And in such facts, no question of law arises. This view is further fortified by the observations made by the Honble Supreme Court in the case of Malabar Industrial Co. Ltd. (Supra) wherein it is in terms held that "every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue. This view is further fortified by the observations made by the Honble Supreme Court in the case of Malabar Industrial Co. Ltd. (Supra) wherein it is in terms held that "every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue. " For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue , or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. Having regard to the facts and circumstances of the case, it cannot be said that the view taken by the Assessing Officer to the effect that the seized cash of Rs. 20 lakhs formed part of the amount of Rs. 40 lakhs disclosed by the respondent-assessee under VDIS is a view unsustainable in law. Simply because the Commissioner of Income Tax does not agree with the view, it cannot be said that the order passed by the Assessing Officer is an erroneous order prejudicial to the interests of the Revenue. In view of the facts and circumstances of the case and in view of the observations made hereinabove, we are of the view that no question of law, much less any substantial question of law arises out of the order of the Tribunal and hence the present Tax Appeal is dismissed without any order as to costs. .