MAHENDRA M. SHETH vs. ASSTT. C. I. T.

O/TAXAP/117/2001 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 117 of 2001 With TAX APPEAL NO. 180 of 2003 With TAX APPEAL NO. 181 of 2003 With TAX APPEAL NO. 182 of 2003 With TAX APPEAL NO. 183 of 2003

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI Sd/- and HONOURABLE MR.JUSTICE K.J.THAKER Sd/- =========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? No 2 To be referred to the Reporter or not ? No 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? No 5 Whether it is to be circulated to the civil judge ? No ================================================================ MAHENDRA M. SHETH....Appellant(s) Versus ASSTT. C. I. T.....Opponent(s) ================================================================ Appearance: MR RK PATEL, ADVOCATE for the Appellant(s) No. 1 MR.VARUN K.PATEL, ADVOCATE for the Opponent(s) No. 1 ================================================================ Page 1 of 11

O/TAXAP/117/2001 JUDGMENT CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 14/10/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.By way of this Appeal, the assessee has challenged the judgment and order of the Income Tax Appellate Tribunal, Ahmedabad Bench 'A' dated 29.12.2000 whereby the Tribunal has reversed the findings of the Commissioner (Appeals) and has restored the findings of the Assessing Officer. 2.While admitting the matter on 07.09.2007, the following substantial questions of law were framed :- “(A) Whether on the facts and in the circumstances of the case, the Tribunal has substantially erred in law in interpreting the provisions of Kar Vivad Samadhan Scheme, 1998? (B) Whether on the facts and in the circumstances of the case, the Tribunal has substantially erred in unnecessary and indirectly equated the KVSS, 1998 with earlier Voluntary Disclosure Income Scheme introduced by the Government? (C) Whether on the facts and in the circumstances of the case, the ultimate finding and conclusions of the Tribunal can be allowed to stand as finding in the eyes of law on cogent reading of Income-tax Act, Page 2 of 11

O/TAXAP/117/2001 JUDGMENT 1961 with special reference to the provisions

relating

Settlement Commission, double taxation as well as KVSS, 1998?” 3.The facts in brief giving rise to this Tax Appeal are that :- The appellant – an individual derives income from salary, share from various partnership firms, interest, dividend etc. The appellant is regularly being assessed by the Income-tax Department since years and for Assessment years 1988-89, 1989-90 and 1990-91, relevant assessing officers made several additions and / or disallowances in the assessment orders after scrutinising the returns of income filed by the appellant. Being aggrieved by the assessment orders, the appellant preferred appeal before the Commissioner of Income-tax (Appeals). The appellate authorities decided certain issues in favour of appellant and certain other issues were decided against the appellant. Being aggrieved by the order of the CIT (Appeals), the Revenue preferred appeals for the relevant three assessment years as stated above before Income-Tax Appellate Tribunal, Ahmedabad Bench on the issues which were decided in favour of the appellant by the CIT (Appeals). The Ahmedabad Bench of the Page 3 of 11

O/TAXAP/117/2001 JUDGMENT Tribunal reversed the order of the CIT (Appeals) on various grounds and accepted the contentions of the appellant on certain grounds. 4.Learned Counsel for the appellant Mr. R.K. Patel contended that under the Scheme, the same and the issues were settled. Learned Counsel for the appellant has taken us to the relevant observations made by the Tribunal which read as under :- “During the pendency of revenue appeal, assessee availed the benefit of KVSS, 1988 meaning thereby he has accepted the addition as made by the Assessing Officer in the assessment order. The learned D.R. concluded that for the Asstt. Year under reference salary is received by the assessee in benami name and Shri Alkesh K. Shah has not rendered any services to the company. As a matter of fact assessee, like in the earlier years, could have gone for K.V.S.S. for the assessment year under appeal also. Since this was not done the order of the learned CIT(A) be reversed and it may be held that addition on account of salary received by Shri Alkesh K. Shah is correctly made by the Assessing Officer for all the three assessment years under appeal.” 5.Learned Counsel for the appellant has also pointed to the order passed by the Officer of Commissioner of Income Tax which reads as Page 4 of 11

O/TAXAP/117/2001 JUDGMENT under :- “3. Ground No.3 relates to an addition of Rs.20,400/- being salary paid to Mr. Alkesh K. Shah who was employee of Empire Pumps Pvt. Ltd. It is stated by the appellant's representative that in the case of Alkesh K. Shah for the A.Y. 1988-89, the

C.I.T.

(Appeals)- XII/CC.1(4)/163/92-93 dated 11.08.94 has held that the salary income received by Alkesh K. Shah, from M/s. Empire Pumps Ltd., should be taxed on substantive basis. In view of this specific findings of CIT (Appeals) in the case of Shri Alkesh K. Shah, the salary of Rs.20,400/- paid to Shri Alkesh K. Shah, cannot be added in the hands of the appellant and same is therefore, deleted. 4. Ground No.5 & 6 relates to the addition of Rs.24,473/- being the bank interest and Rs.12,670/- being dividend and interest earned by the wife of the appellant. These two grounds

are

not

pressed

and therefore, these are also dismissed. 5. Ground No.9 & 11 relates to an addition

Rs.25,200/-

being interest

promissory

notes belonging to M/s. Dutt Intercom Services and Rs.38,167/- being income of Smt. Ushaben M. Shah.” 6.Learned Counsel for the appellant has drawn our attention to the Government Circular which was reported in 233 ITR 122 which reads as under :- Page 5 of 11

O/TAXAP/117/2001 JUDGMENT “233 ITR 122 Question No.21 : By filing declaration under Samadhan Scheme for one assessment year, does the taxpayer fogo his right of appeal on the same issue in other assessment years ? Answer : No. The order under the Samadhan Scheme does not decide any judicial issue. It only determines the sum payable under the Scheme with reference to tax arrears. Please see 233 ITR Statute 122 which is the relevant portion of the clarification made by the Under Secretary to the Government of India to all the Chief Commissioners of Income-Tax and Director Genrals of Income-tax.” 7.Learned Advocate for the appellant has further taken us to Paragraph 3 of the Income Tax Appellate Tribunal which reads as under :- “3. The next common ground of appeal is that learned CIT (A) erred in law and on facts in deleting the additions of Rs.25,000/-, Rs.25,200/- & Rs.25,2000/- being interest on promissory note for the A.Y. 1988-89, 1989-90 and 1990-91 respectively. 3.1. We have heard both the sides. The Assessing Officer made the addition for the reasons mentioned in para 10 of the assessment order for the A.Y. 1988-89. We also find that Page 6 of 11

O/TAXAP/117/2001 JUDGMENT the basis of these addition is that in the A.Y. 1986-87 wherein an addition of Rs.1,68,000/- was made on the basis of a promissory note found during the course of search at the residential premises of the assessee. A statement was also required and on that basis Assessing Officer made the addition. On appeal, learned CIT (A) deleted the addition of Rs.1,65,000/- vide order dtd. 29.03.1993. Against this order, appeal was preferred by the revenue and during the pendency of appeal the assessee made a declaration under KVSS, 1998 in respect of revenue appeal. The Assessing Officer has made the addition in respect of interest of this promissory note of Rs.1,68,000/- for all the three asstt. Years under appeal. By making declaration under KVSS, 1998 for the A.Y. 1986-87, in our opinion, the assessee has admitted that promissory note of Rs.1,68,000/- pertains to him. Therefore, we are of the opinion that Assessing Officer is fully justified in taxing interest income on this promissory

note

for

all

the assessment years under Appeal. Looking to the entirety of the facts and circumstances of the case, we hereby reverse the order of learned CIT(A) and restore that of the Assessing Officer. This would mean that additions of Rs.25,000/-, Rs.25,000/- and Rs.25,200/- were correctly made by the Assessing Officer.” 8.Regarding Issue No.3, learned Advocate for the appellant has taken us to the Paragraphs 4 to 4.4 which regards deleting the addition Page 7 of 11

O/TAXAP/117/2001 JUDGMENT of Rs.38,167/-, Rs.67,657/- & Rs.71,831/- being income in the name of Smt. Ushaben M. Shah made by the Assessing Officer for the A.Ys

1988-89,

1989-90

and

1990-91 respectively. 9.Learned Advocate Mr. V.K. Patel for the respondent contended that in all the Appeals except Appeal No.1, the Issue No.1 is not raised in all the other Appeals, Issue Nos. 2 and 3 are common issues and Issue No.1 is raised only in this Appeal. 10. Learned Counsel has drawn attention to the findings of the Tribunal which reads as under :- “6.3 Having heard both the sides, we have carefully gone through the orders of authorities below as well as

cash

flow

statement

from 01.04.1987 to 30.04.1987 furnished by the assessee before the CIT(A). As a matter of fact this cash flow statement has been reproduced by learned CIT(A) in para-7 of his appellate order. Looking to the entirety of the facts and in view of benefit of KVES scheme, 98 availed by the assessee in immediately three preceding assessment years, we are of the opinion that cash flow statement needs verification at the end of Assessing Officer. We therefore, direct the Assessing Officer to make necessary verification and re- adjudicate the impugned addition made afresh after giving opportunity of Page 8 of 11

O/TAXAP/117/2001 JUDGMENT being heard to the assessee and in accordance with law. The only other ground of appeal is ground No.1 in A.Y. 1989-90 which reads as under :- The learned CIT(A) has erred in law and on facts in deleting Rs.12,499/- being interest from Empire Pumps Pvt. Ltd. as addition of Rs.2,817/- being interest from Empire Pumps P. Ltd. disclosed by the assessee in the return of income ought to have been upheld.” 7.1. After having both the sides, we feel that issue involved in this ground needs verification at the end of Assessing Officer. We, therefore, set-aside the order of learned CIT(A) on this issue and direct the Assessing Officer to make necessary verification and read judicate the issue involved in this ground afresh after giving an opportunity of being heard to the assessee. 8. In the result, for statistical purpose all the appeals are partly allowed.” He therefore, contended that there was finding of facts and therefore, there is no need for any interference in the findings of the Tribunal and no substantial questions of law are raised. 11. Incase of Issue No.2, learned Counsel for the respondent has contended that the deduction made by the Tribunal is just and Page 9 of 11

O/TAXAP/117/2001 JUDGMENT proper, and therefore, no interference is called for. 12. In case of Issue No.3, learned Counsel for the respondent has supported the order of the Tribunal. 13. Taking into consideration, the findings of

the

Tribunal

more

particularly, Paragraphs 2 and 4, in our view, the issue No.1 is answered by the Tribunal and we are in complete agreement with the view taken by the Tribunal. No interference is called for and the issue No.1 is decided in favour of the assessee in view of the finding of facts. 14. Further, regarding Issue No.2, we are of the opinion that the Commissioner (Appeal) was justified in taking the appropriate view. 15. Regarding Issue No.3, the view taken by the Tribunal is just and proper and we are in favour of the Department and against the assessee. 16. In the aforesaid terms, these Tax Appeals stands disposed of. Sd/- (K.S. JHAVERI, J.) Page 10 of 11

O/TAXAP/117/2001 JUDGMENT Sd/- (K.J. THAKER, J) CAROLINE Page 11 of 11