SHANMUGA SUNDARAM GOVINDARAJ,CHENNAI vs. DCIT, NON CORPORATE CIRCLE-19(1), CHENNAI

1 The assessee filed submissions contending that the income declared under the scheme related to Assessment Year 2006-07. However, the Assessing Officer was not satisfied with the explanation furnished by the assessee. The Assessing Officer held that since the assessee had failed to pay the full tax liability under the scheme within the prescribed time, the declaration under the scheme became invalid. Accordingly, invoking the provisions of Section 69 of the Income-tax Act, 1961 read with Section 115BBE of the Income-tax Act, 1961, the Assessing Officer treated the amount of Rs.25,62,000/- as unexplained investment and added the same to the income of the assessee. The total income was thus assessed at Rs.32,15,060/- vide assessment order dated 25.03.2022. 3. Aggrieved by the said order, the assessee preferred an appeal before the ld.CIT(A), who dismissed the appeal and confirmed the addition made by the Assessing Officer.

Aggrieved by the order of the CIT(A), the assessee is now in appeal before the Tribunal. A.Y. 2017-18

The ld. Authorised Representative (AR) for the assessee submitted that the addition made by the AO and confirmed by the ld.CIT(A) is not sustainable either on facts or in law. It was submitted that the assessee had filed a declaration under the Income Declaration Scheme, 2016 in Form-1 on 26.09.2016 declaring undisclosed income of Rs.25,62,000/-. The declaration specifically stated that the undisclosed income pertained to Assessment Year 2006-07. The ld. AR submitted that the assessee had made partial payments under the scheme by paying two instalments amounting to Rs.5,76,451/- and had filed Form-3 evidencing such payments. However, due to financial constraints, the final instalment could not be paid within the prescribed time. It was contended that the AO erred in bringing the declared income to tax in Assessment Year 2017-18 by invoking the provisions of Section 69 of the Income-tax Act, 1961. According to the ld.AR, Section 69 can be invoked only where an investment is made in the relevant financial year and the source thereof remains unexplained. In the present case, the investment admittedly relates to Financial Year 2005- 06 relevant to Assessment Year 2006-07 and not to Assessment Year 2017-18. 6. The ld. AR further submitted that the AO incorrectly relied upon the provisions of Section 197 of the Finance Act, 2016 while treating the declared income as taxable in Assessment Year 2017-18. It was argued that the said provision would apply only in cases where no tax, surcharge and penalty have been paid under the scheme. In the present case, the assessee had already paid two instalments of the tax liability and therefore the said provision would not apply.

The ld. Departmental Representative (DR), on the other hand, supported the orders of the lower authorities. It was submitted that A.Y. 2017-18

We have heard the rival submissions and perused the material available on record. The issue that arises for consideration is whether the AO was justified in taxing the amount of Rs.25,62,000/- declared under the Income Declaration Scheme, 2016 as unexplained investment u/s. 69 of the Income-tax Act, 1961 in Assessment Year 2017-18. 9. We have carefully considered the rival submissions and the material placed on record. It is an undisputed fact that the assessee had filed a declaration under the Income Declaration Scheme, 2016 declaring undisclosed income of Rs.25,62,000. It is also not in dispute that the assessee had failed to pay the entire tax liability under the A.Y. 2017-18

Further, Section 197(b) of the Finance Act, 2016 provides that where a declaration has been made but the tax, surcharge and penalty have not been paid within the time specified, the undisclosed income shall be chargeable to tax under the provisions of the Income-tax Act in the previous year in which the declaration is made.

In the present case, the declaration under the scheme was made during the Financial Year 2016-17. Therefore, in view of the above statutory provisions, the undisclosed income becomes chargeable to tax in Financial Year 2016-17 relevant to Assessment Year 2017-18. The contention of the assessee that the undisclosed income relates to Assessment Year 2006-07 cannot be accepted in view of the specific provisions contained in the Finance Act governing the consequences of non-payment under the scheme. Further, once the declaration under the scheme is rendered invalid due to non-payment of taxes, the assessee is required to explain the source of the investment. In the present facts and circumstances of the case, the assessee has failed to furnish any satisfactory explanation regarding the source of the investment of Rs.25,62,000/-. Accordingly, we find no infirmity in the action of the AO in invoking the provisions of Section 69 of the Income Tax Act hence, order of the ld.CIT(A) confirming the addition of Rs.25,62,000 is upheld. However, bringing the said amount to higher tax of 60% u/s.115BBE of the Income-tax Act, 1961 is not justifiable. (2024) ruled that the 60% tax rate on unexplained income under A.Y. 2017-18

In view of the foregoing discussion, we direct the AO to compute the rate of tax @30% in the light of the case referred supra. In the result, the appeal of the assessee is partly allowed in terms above order.

िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF A.Y. 2017-18