NANDU ATMARAM WAJEKAR,PANVEL RAIGAD DISTRICT vs. ACIT CIRCLE PANVEL, PANVEL RAIGAD

Accordingly, notice u/s 148 of the Act was issued on 31.03.2021. However, the assessee did not file any valid return of income in response to the same. Subsequently, the Assessing Officer issued notice u/s 142(1) of the Act. However, despite sufficient opportunities granted by the Assessing Officer, there was no compliance from the side of the assessee for which the Assessing Officer proceeded to complete the assessment u/s 144 of the Act.

The Assessing Officer observed that the assessee had voluntarily offered undisclosed income under the Income Declaration Scheme, 2016 of Rs.11,59,01,141/- for various assessment years but failed to honour his commitment by paying statutory taxes as per the provisions of IDS, 2016. He therefore, made addition of Rs.11,59,01,141/- u/s 69A r.w.s. 115BBE of the Act by recording as under: “Further it is seen that the assessee have failed to honour his commitment by paying statutory taxes as per provisions of ITD-2016 scheme. Accordingly, the Principal Commissioner of Income Tax-2, Thane cancelled Form no.-2. being acknowledgement of declaration u/s 183 of the Finance Act.2016 in respect of Income Declaration Scheme, 2016, and passed order u/s 187(3) of the Finance Act,2016 on 03.08.2018 in respect of Income Declaration Scheme 2016. Thus as per section 197 of the Finance Act 2016 undisclosed income shall be chargeable to tax under the I. T. Act 1961 in the previous year in which such declaration is made i.e. for A. Yr. 2017-18. The assessee was repeatedly asked to provide the copy of P&L account. Balance sheet with all its annexure, Audit report, details of his all sources of income, computation of income, bank statements & details of investments and to explain as to why you have not made payment of due tax toward your declaration under IDS scheme-2016. But as stated above, the assessee has not provided the same instead of given several opportunity of being heard and remained non responsive toward assessment proceedings. Thus in the absence of any explanation and submission & documentary evidences in respect of nature and sources of undisclosed income of Rs. 11,59,01,141/-declared under IDS-2016 scheme by the assessee which was later cancelled by Pr.CIT due to non payment of due taxes by the assessee remained unexplained. However, the assessee has declared undisclosed income of Rs.11,59,01,141/- under IDS-2016 under business income and interest income for A. Yrs. 2014-15 & 2015-16 but in the assessment proceedings he has not come forward with any explanation in respect of declaration made by him in IDS-2016. Thus it could not be treated as his business income and interest income and accordingly charged at normal rate of tax. Doing so, would defeat the very purpose of IDS-2016 scheme which prescribes aggregate tax rate @ 45% including surcharge and penalty. Thus undisclosed income of Rs.11,59,01,141/- is treated as unexplained money of the assessee u/s 69A of the Act for the year under consideration and charged to tax as per provisions of section 115BBE of the Act. Addition of Rs.11,59,01,141/-”

Before the Ld. CIT(A) / NFAC, the assessee filed the following submission which has been reproduced by the Ld. CIT(A) / NFAC at para 6.3.1 and 6.3.2 and which read as under: “6.3.1 In the written submission uploaded on 05.11.2024, the appellant has stated the following: "Except information based in Form-1 of Income Declaration Scheme the Assessing Officer was not having any adverse material or information on his record. A) The Assessing Officer made addition on the basis of IDS 2016 as the Assessee could not pay the requisite installments of tax to be paid under IDS 2016. B) Being a layman Assessee could not assess the gravity of all this matter and also declaration under IDS2016 was also made under a wrong belief that the booking advances were Income and had remained to be offered for taxation. C) The income earned by completing the project known as KUMAR SIDDHACHAL should have been offered for taxation under regular income tax return filing process as the certificate of completion of the project is obtained on 16.09.2016 and 10.08.2017, then why an option of IDS 2016 was suggested is also not known to the Assessee. D) The Assessing Officer basically applied section 69A of the Income Tax Act when the same is not applicable. Nothing is unexplained. There is nothing available on record except Form-1 of IDS 2016 which suggests that there are unrecorded assets and hence Section 69A of the Income Tax Act is not applicable in this case. E) The Assessing Officer basically applied section 69A of the Income Tax Act because he wanted to tax the assessed income as per rates mentioned in 115BBE and to collect tax at the highest tax rate. The Assessee has reflected the above mentioned inadvertently declared Income recorded in its Books of Accounts and offered the same for Taxation in the Assessment Years 2017-18. The Assessee has declared the sales of Rs. 15,80,00,000/- for Assessment Years 2017-18 and Income of Rs. 11,59,01,141/-. The Assessee has declared the sales of Rs.11,79,92,000/- for Assessment Years 2018-19 and Income of Rs. 7,91,32,171/-. And the Assessment

However, the Ld. CIT(A) / NFAC was not satisfied with the submissions made by the assessee and upheld the action of the Assessing Officer by observing as under: “6.4.1 In this context, it is important to go through the provisions of section 197 of The Income Declaration Scheme, 2016 are reproduced below: Removal of doubts. 197. For the removal of doubts, it is hereby declared that- (a) … (b) where any declaration has been made under section 183 but no tax, surcharge and penalty referred to in section 184 and section 185 has been paid within the time specified under section 187, the undisclosed income shall be chargeable to tax under the Income-tax Act in the previous year in which such declaration is made; (c) …” [Emphasis supplied) 6.4.2 A plain reading of clause (b) of section 197 of The Income Declaration Scheme, 2016 would make it clear and unambiguous that where any declaration has been made under section 183 but no tax, surcharge and penalty referred to in section 184 and section 185 has been paid within the time specified under section 187, the undisclosed income shall be chargeable to tax under the Income-tax Act in the previous year in which such declaration is made. Hence, the contention of the appellant Hence, the contention of the appellant since the provisions of IDS Scheme 2016 was a separate enactment of Finance Act 2016 which was applicable to valid applications made under the Schemes and also that the assessee's Declaration under the IDS Scheme was cancelled by the Principal Commissioner of Income Tax-2 Thane vide order U/s.187(3) dated 03.08.2018 cancelled Form-2 being acknowledgement of declaration U/s. 183 of Finance Act 2016 and also 'Since the Declaration was void the Normal Provisions of Taxation of Income Tax Act 1961 would apply, is not acceptable. 6.4.3 As pointed out above, as per section 197(b), where any declaration has been made under section 183 but no tax, surcharge and penalty referred to in section 184 and section 185 has been paid within the time specified under section 187, the undisclosed income shall be chargeable to tax under the Income-tax Act in the previous year in which such declaration is made. In the instant case, the appellant, even after declaring a total amount of Rs. 11.59,01,141/- for various years, has failed to pay tax, surcharge etc. on the same. Therefore, the appellant's case is squarely covered by the provisions of clause (b) of section 197 of The Income Declaration Scheme, 2016. Therefore, the amount declared in the financial year 2016-17, shall be the undisclosed income chargeable to tax under the Income-tax Act in respect of the assessment year 2017-18. 6.4.4 In view of the fact that the appellant has not been able to demonstrate the nature and source of amount of Rs. 11,59,01,141/- declared under IDS-2016, the Assessing Officer was justified invoking the provisions of section 69A in this case. Therefore, I find no reason to interfere with the impugned assessment order dated 23.03.2022. Accordingly, I uphold the addition of Rs.11,59,01,141/-. In the result, the appeal filed by the appellant is DISMISSED.” 7.0

Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: 1) The authorities below erred on facts and circumstances of the case and as per law in arriving at the opinion that amount declared under IDS 2016 is unexplained money under section 69A of the Income Tax Act. Just and proper relief be granted to the assessee in this respect. 2) The learned commissioner of Income Tax Appeals erred on facts and circumstances of the case and as per law in not appreciating the fact that declared income under IDS 2016 is nothing but business income of the assessee by ignoring the submission made before his good office. Just and proper relief be granted to the assessee in this respect. 3) The authorities below erred in facts and circumstances of the case and as per law in changing the character of income as declared in IDS 2016 and treating the same as unexplained money. Just and proper relief be granted to the assessee in this respect. 4) The authorities below erred in facts and circumstances of the case and as per law in making and confirming the addition under section 69A of the Income Tax Act and thereby computing the tax payable as provided under section 115BBE of the Income Tax Act. Just and proper relief be granted to the assessee in this respect. 5) The authorities below erred in the facts and circumstances of the case and as per law in charging interest under sections 234A and 234B. Just and proper relief be granted to the assessee in this respect. 6) The Appellant prays to be allowed to add, amend, modify, rectify, delete, raise any ground of appeal before or at the time of hearing.

The Ld. Counsel for the assessee strongly challenged the order of the Ld. CIT(A) / NFAC in confirming the order of the Assessing Officer. He submitted that the assessee filed Form No.1 under IDS, 2016 and due to non-payment of tax as per the provisions enumerated in the said scheme, the PCIT, Thane rejected the application made under IDS, 2016. He submitted that the Assessing Officer thereafter issued notice u/s 148 of the Act and in the order passed u/s 144 r.w.s. 147 of the Act treated the amounts so declared under the IDS, 2016 as unexplained money u/s 69A of the Act as against business income declared by the assessee in the declaration under the IDS, 2016. Further, the Assessing Officer also invoked the provisions of section 115BBE of the Act. He submitted that the nature and character of income cannot be changed just because the assessee could not make payment of taxes as enumerated in IDS scheme 2016.

Referring to the decision of the Visakhapatnam Bench of the Tribunal in the case of Jiyyana Venkatrayudu vs. ACIT vide for assessment year 2017-18, order dated 10.08.2023, he submitted that under identical circumstances the Tribunal in the said decision has held that the Revenue authorities are not justified in treating the said income declared under the IDS, 2016 as undisclosed income u/s 68 r.w.s 115BBE of the Act.

Referring to the decision of the Visakhapatnam Bench of the Tribunal in the case of ACIT vs. Jiyyana Venkatrayudu (HUF) vide for assessment year 2017-18, order dated 09.10.2024, he submitted that the Tribunal dismissed the appeal filed by the Revenue against the order of the CIT(A) directing the Assessing Officer to re-compute the total income in the hands of HUF under the head ‘capital gain’ as against undisclosed income u/s 68 r.w.s. 115BBE of the Act by the Assessing Officer. He accordingly submitted the Ld. CIT(A) / NFAC is not justified in upholding the order of the Assessing Officer in treating such income declared under the IDS, 2016 as unexplained money u/s 69A of the Act and charged to tax as per the provisions of section 115BBE of the Act.

The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has filed Form No.1 under the IDS, 2016 declaring the undisclosed income of Rs.11,59,01,141/- for two assessment years i.e. assessment years 2014-15 and 2015-16, the details of which have already been reproduced in the preceding paragraphs. We find due to non- payment of tax as per the provisions of the said scheme, the PCIT rejected the application made under the IDS, 2016. Since the amount declared by the assessee as per the income declaration scheme, 2016 remained to be brought to tax, the Assessing Officer, after recording reasons, reopened the assessment and issued notice u/s 148 of the Act. Since there was no valid return filed by the assessee and the various statutory notices remained un-complied with, the Assessing Officer proceeded to complete the assessment u/s 144 of the Act and brought to tax the amount of Rs.11,59,01,141/- as unexplained money of the assessee u/s 69A r.w.s. 115BBE of the Act. We find the Ld. CIT(A)/NFAC upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs.

We do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue. It is an admitted fact that despite number of opportunities granted by the Assessing Officer, the assessee did not furnish the copies of Profit and Loss Account, Balance Sheet with all its annexures, audit report, details of his sources of income, computation of income, bank statements and details of investments, etc. The assessee failed by brining on record any evidence to prove that the income so declared under IDS-16 was in fact from business and not from any undisclosed sources.

As per the provisions of section 197 of The Income Disclosure Scheme, 2016 where any declaration has been made u/s 183 but no tax, surcharge and penalty referred to in sections 184 and 185 has not been paid within time specified u/s 187, the undisclosed income shall be chargeable to tax under the Income Tax Act in the previous year in which such a declaration is made. Further, in absence of any evidence to substantiate the nature and source of the amount of Rs.11,59,01,141/- declared under IDS, 2016 the Assessing Officer in our opinion was fully justified in bringing to tax the same under the provisions of section 69A r.w.s. 115BBE of the Act. The argument of the Ld. Counsel for the assessee that the nature and character of income cannot be changed just because assessee could not make the payment of taxes cannot be accepted in absence of any evidence produced by the assessee to substantiate that the said income is from business and not from undisclosed sources.

So far as the decision of the Visakhapatnam Bench of the Tribunal in the case of Jiyyana Venkatrayudu vs. ACIT (supra) relied upon by the Ld. Counsel for the assessee is concerned, we find the assessee in that case has proved the nature and source of income which is from capital gain. On account of non-payment of tax under IDS-2016 the Assessing Officer brought to tax the same as income from other sources which was upheld by Ld. CIT(A). The Tribunal directed the Assessing Officer to treat the same as capital gain in the hands of the assessee and not as income from undisclosed sources since the assessee during the course of assessment proceedings had filed requisite details to substantiate that the income so declared was from capital gain. However, in the instant case, as mentioned earlier, the assessee neither filed the return of income in response to the notice u/s 148 nor filed any details to substantiate the nature and source of income as business income despite several opportunities granted. Therefore, the decisions relied on by the Ld. Counsel for the assessee are distinguishable and are not applicable to the facts of the present case. In view of the above discussion and in view of the elaborate reasonsings given by the Ld. CIT(A) / NFAC upholding the action of the Assessing Officer in bringing to tax the amount of Rs.11,59,01,141/- as unexplained money u/s 69A r.w.s. 115BBE of the Act, we do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue. Accordingly the order of the Ld. CIT(A) / NFAC is upheld and the grounds raised by the assessee are dismissed.

In the result, the appeal filed by the assessee is dismissed.