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2011 DIGILAW 1129 (KER)

A. P. Mohammed v. Income Tax Officer

2011-11-17

C.N.RAMACHANDRAN NAIR, K.VINOD CHANDRAN

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Judgment :- RamachandranNair, J. The appeal is field by the assesse against the order of the Tribunal confirming income escaping assessment completed under Section 147 of the Income Tax for the assessment year 1998-99. We have heard Senior counsel Dr. K.B. Mohammedkutty appearing for the appellant and Standing Counsel for respondent. 2. The assessee was a partner in a firm wherefrom he was getting taxable income by way of salary for services rendered as working partner and interest on excess maintained in the capital account. According to assessee, there was omission to pay tax for several years and, therefore, he filed a declaration under the Voluntary Disclosure of Income Scheme 1997. Even though income was accounted for six years prior to the financial year 1997-98, the assessee admittedly did not file a proper application under the V.D.I. scheme or remitted the tax on the due date. Consequently based on assessee’s own declaration of income, the Assessing Officer invoked the provisions of Section 147 and assessed income to tax against which first appeal filed was allowed by the C.I.T.(Appeal) on the ground that assessment is not tenable because income should have been assessed during the assessment years relevant to which disclosures were made. Against the C.I.T. (Appeal)’s order department filed appeal before the Tribunal stating that since the disclosure was made in the financial year 1997-98, the income so disclosed is assessable as income of the assessment year 1998-99. The Tribunal allowed the department’s appeal against which this appeal is filed. 3. During hearing Senior counsel submitted that the department had no material to make assessment except the disclosure made by the assessee which was for six years prior to the financial year 1997-98. According to Senior counsel, when assessment is made based on disclosure made by the assessee, the assessment should be in terms of the disclosure so made i.e, declaration of income for six financial years including financial year 1997-98. Senior counsel has also referred to decision of the Madhya Pradesh High Court in Khandelwal Oil Industries Vs. Commissioner of Income Tax reported in 223 ITR 176. Even though the contention raised by the appellant’s counsel is tenable, what we notice is that income disclosed is not in the form of any deposits or income based on accounts. On the other hand, the income disclosed is nothing but cash and gold held by the assessee. Commissioner of Income Tax reported in 223 ITR 176. Even though the contention raised by the appellant’s counsel is tenable, what we notice is that income disclosed is not in the form of any deposits or income based on accounts. On the other hand, the income disclosed is nothing but cash and gold held by the assessee. When assessee has not complied with the conditions of V.D.I. Scheme, necessarily the Officer gets powers under Section 147 to make an income escaping assessment, though based on information furnished by the assessee himself. The unexplained cash and gold are assessable under Section 69A in the assessment year relevant for the previous year in which disclosure is made which in this case in 1998-99 as the disclosure was made on 31.12.1997. We, therefore, notice that the assessment under Section 147 read with Section 69A of the Income Tax Act is perfectly in order. Even though Tribunal’s order is not rendered on the right reasons, we upheld the order for the reasons above stated. It is seen that penalty proceeding under Section 271(1C) is separately initiated besides demanding interest. We feel there is no scope for penalty because assessment itself is based on disclosure made by the assessee and no more addition is made over and above the declared income. So far as interest demanded under Section 234A and 234B is concerned, if interest is charged except with reference to the assessment year concerned i.e. 1998-99, the department will grant waiver of interest over and above what could be charged treating the income as that of the financial year 1997-98. If by chance penalty is levied, on production of copy of this judgment, the order will be rectified as recalled.