SHANTI KUMAR SETHI AND SONS,JAIPUR vs. ACIT CIRCLE-1, JAIPUR, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 332/JP/2024 fu/kZkj.k o"kZ@Assessment Years : 2017-18 cuke Shanti Kumar Sethi & Sons ACIT Vs. 417 Shethi Bhawan, Hanuman Ji Circle-01, Jaipur Ka Rasta Johri Bazar, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACHS 6269 R vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Rajeev Sogani, CA & Sh. Rakesh Kedia, CA jktLo dh vksj ls@ Revenue by : Sh. Rajesh Kumar Meena, Add. CIT lquokbZ dh rkjh[k@ Date of Hearing : 26/06/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 22/07/2024 vkns'k@ ORDER

PER: RATHOD KAMLESH JAYANTBHAI, AM

The present appeal is because the assessee was dissatisfied with the order of the National Faceless Appeal Centre, Delhi dated 12/02/2024 [here in after ‘NFAC’ ] for assessment year 2017-18, wherein the appeal of the assessee was dismissed. That appeal before the ld. CIT(A) was filed by the assessee against the order dated 07.12.2019 passed under section 143(3) of the Income Tax Act, by ACIT, Circle-01, Jaipur.

2 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT 2. In this appeal, the assessee has raised following grounds: -

“1 In the facts and circumstances of the case and in law, the Id. CIT(A)/National Faceless Appeal Center (NFAC) has erred in confirming the action of the Id. AO in treating the subsequent interest income earned on Money Lending Transaction declared under IDS, 2016 amounting to Rs.55,65,000 as unexplained cash credit u/s 68 of the Act. The action of the Id. CIT(A)/NFAC in confirming the action of ld. AO is illegal, unjustified, arbitrary and against the provisions of Income Declaration Scheme, 2016. Relief may please be granted by treating the interest income as explained. 2 In the facts and circumstances of the case and in law, the Id. CIT(A)/National Faceless Appeal Center (NFAC) has erred in confirming the action of the ld. AO in treating the interest income earned on Money Lending declared under IDS, 2016 amounting to Rs.55,65,000 as unexplained cash credit u/s 68 of the Act, and invoking the provision of section 115BBE. The action of the Id. CIT(A)/NFAC in confirming the action of ld. AO is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by treating the interest income as explained and liable for tax at normal rates. 3 The assessee craves his right to add, amend or alter any of the grounds on or before the date of hearing.”

HUF M/s Shanti Kumar Sethi & Sons filed its returns of income on

30.07.2017 declaring total income of Rs. 69,49,800/- for the year under

consideration. The case was selected for scrutiny assessment through

CASS under "Limited scrutiny" with respect to "Cash deposit during year

and during demonetization period" and notice u/s 143(2) of the I.T. Act,

1961 (henceforth stated as "the Act") was issued on 13.08.2018 through

ITBA-portal, which was duly served. The assessee earned income from

house property and other sources during the year under consideration. The

3 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT ld. AO noted that during the year under consideration, the assessee

deposited cash amounting to Rs. 6,58,86,500/- in the Bank account bearing

No. 676005062750 of the ICICI Bank. In the assessment order the ld. AO

has tabulated the date wise deposit of cash into the bank account along

with the explanation given by the assessee on pages 2 & 3. Substantially

the assessee explained the deposits as being interest from Market Lending

of Rs. 9,15,000/- and Market Lending of Rs. 6,02,00,000/- declared in IDS,

2016 and out of Cash withdrawals from the same bank account in July,

2016.

3.1 The ld. AO noted that since the assessee had claimed source of search

cash deposits as interest on market lending, whereas the list of the parties

from which such interest received has not been furnished by the assessee

and due to which it cannot be ascertained the genuineness of the source of

such cash deposits. Thus, the notice under section 142(1) of the act

annexing specific questionnaire has been issued to the assessee on 21.11.

2019 fixing the date for furnishing submission by 25.11.2019. The

assessee submitted the reply contending that the interest income offered

for tax is extension of the amount offered for tax under Income Declaration

Scheme, 2016 by way of market lending. As the scheme read with the

4 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT CBDT circular provides immunity from disclosing the names to whom the

amount was lent. Once the immunity is applicable to the advances the

subsequent interest received on that amount till that amount is received

back by the assessee should be considered as income from that source.

Mere non-disclosure of person from whom the interest is received cannot

be considered as undisclosed income within the meaning of section 68 of

the Act. The ld. AO noted that the contention of the assessee is nothing but

trying to distract from the facts of the case. The ld. AO noted that no

inquiries made from the assessee regarding the income declared by the

assessee under IDS, Scheme 2016 but inquiries were made to explain the

source of interest income claimed to have been earned on such declaration

to justify the cash deposit over and above the amount declared in the IDS.

The assessee contended that once immunity is accepted by the

Department, the natural corollary was that the names of the persons would

not be asked from whom the interest is received till the amount is

recovered from those persons. The assessee contended that question

number 8 of CBDT Circular number 25 of 30th June, 2016 covers its case

because the relevant answer by the CBDT confirms the grant of immunity

in respect of the transaction of that nature and it would not be justified to

exclude its transaction from the ambit of that clarification. He thus noted

5 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT that as the assessee did not file any details regarding the identity of

persons from whom the interest was claimed to have been earned post the

IDS disclosure the ld. AO did not accept the reply to the show cause.

Further the AO held that the case was not covered by question number 8 of

CBDT Circular which applied to purchase of property and that question

number 9 of CBDT Circular went against the assessee. Thus, he noted that

the false claim cannot sustain before the test of “Human Probabilities”. He

further hold that no prudent person will hold cash in hand in large number

and deposit the cash over a period for more than 90 days. Thus, the AO

held that the amount of Rs. 55,65,000/- was liable to be treated as

unexplained cash deposit u/s 68 and was to be taxed as per the rate

specified u/s 115BBE of the Act. For this the ld. AO placed reliance on the

"Human Probability Test" as laid down in the case of CIT vs. Durga Prasad

More (1971) 82 ITR 540 (SC) and followed in the case of Sumati Dayal vs.

CIT (1995) 214 ITR 801 (SC). No separate addition was made as the sum

of Rs. 55,65,000/- was already declared in the return of income as part of

returned income of Rs. 69,49,800/- but the same was held taxable u/s 68

r.w.s. 115BBE of the Act.

6 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT

ld. CIT(A). Apropos to the grounds so raised before ld. CIT(A), the relevant

finding of the ld. CIT(A)/NFAC is reiterated here in below:

“6.0 Decision: 6.1 I have carefully considered the facts of the case, the grounds of appeal, the submissions made and the details mentioned in the assessment order. Grounds no. 1 and 2 are against the sum of Rs. 55,65,000/- being interest income from money lending being considered as income falling u/s 68, liable to be taxed u/s 115BBE. 6.2 The appellant in its justification for not offering the delayed interest under IDS has submitted "that if the Assessee would not have declared interest income of Rs. 55,65,000/- on the delayed recoveries of market lending, the Department would have raised the question for earning interest for the delayed period and would have definitely added the sum on human probability test as no one can believe that further interest would not have been earned by the Assessee till the amount is recovered". This is a peculiar argument as if the delayed interest income pertains to AY 2017-18 then the same could not have been covered under immunity given by IDS. The relevant section 183 of the of the Finance Act, 2016 is reproduced below for ready reference: 183. (1) Subject to the provisions of this Scheme, any person may make, on or after the date of commencement of this Scheme but before a date to be notified by the Central Government in the Official Gazette, a declaration in respect of any income chargeable to tax under the Income-tax Act for any assessment year prior to the assessment year beginning on the 1st day of April, 2017- (a) for which he has failed to furnish a return under section 139 of the Income-tax Act; (b) which he has failed to disclose in a return of income furnished by him under the Income-tax Act before the date of commencement of this Scheme; (c) which has escaped assessment by reason of the omission or failure on the part of such person to furnish a return under the Income-tax Act or to disclose fully and truly all material facts necessary for the assessment or otherwise Even if the delayed interest income pertained to years before AY 2017-18 also, no immunity can be granted as immunity under IDS is subject to disclosure and payment of taxes. Section 184 is reproduced hereunder: 184. (1) Notwithstanding anything contained in the Income-tax Act or in any Finance Act, the undisclosed income declared under section 183 within the time specified therein shall be chargeable to tax at the rate of thirty per cent. of such undisclosed income.

7 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT 6.3 It is trite law that even an income duly declared under IDS, if the taxes thereon were not paid within the time limit allowed under the IDS, had no immunity. Further, immunity to the appellant is only to the extent of the declaration made and not for anything that may, as per appellant's argument, logically flows from it. Reliance is placed on the decision of the Hon'ble SC in the case of DCIT vs M.R. Shah Logistics (P.) Ltd [2022] 136 taxmann.com 373 (SC) wherein the Hon'ble SC has held as under: "30. That brings the court to the scope and effect of the Income Declaration Scheme (IDS), introduced by Chapter IX of the Finance Act, 2016. The objective of its provisions was to enable an assessee to declare her (or his) suppressed undisclosed income or properties acquired through such income. It is based on voluntary disclosure of untaxed income and the assessee's acknowledging income tax liability. This disclosure is through a declaration (section 183) to the Principal Commissioner of Income-tax within a time period, and deposit the prescribed amount towards income tax and other stipulated amounts, including penalty. Section 192 grants limited immunity to declarants, and states as follows: "192. Notwithstanding anything contained in any other law for the time being in force, nothing contained in any declaration made under section 183 shall be admissible in evidence against the declarant for the purpose of any proceeding relating to imposition of penalty, other than the penalty leviable under section 185, or for the purposes of prosecution under the Income-tax Act or the Wealth-tax Act, 1957." 31. As noticed previously the declarant was Garg Logistic Pvt. Ltd and not the assessee. Facially, Section 192 affords immunity to the declarant: nothing contained in any declaration made under section 183 shall be admissible in evidence against the declarant for the purpose of any proceeding relating to imposition of penalty... Therefore, the protection given, is to the declarant, and for a limited purpose. However, the High Court proceeded on the footing that such protection would bar the revenue from scrutinizing the assessee's return, absolutely. Quite apart from the fact that the re-opening of assessment was not based on Garg Logistic's declaration, the fact that such an entity owned up and paid tax and penalty on amounts which it claimed, were invested by it as share applicant, (though the share applicants were other companies and entities) to the assessee in the present case, cannot by any rule or principle inure to the assessee's advantage. In similar circumstances, dealing with another scheme (the Kar Vivad Samadhan Scheme 1988, a previous tax amnesty scheme) this court had, in State, CBI v. Sashi Balarubramanian [2006] 157 Taxman 261/[2007] 289 ITR 8 held as follows: "an immunity is granted only in respect of offences purported to have been committed under direct tax enactment or indirect tax enactment, but by no stretch of imagination, the same would be granted in respect of offences under the Prevention of Corruption Act. A person may commit several offences under different Acts; immunity granted in relation to one Act

8 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT

would not mean that immunity granted would automatically extend to others. By way of example, we may notice that a person may be prosecuted for commission of an offence in relation to property under the Indian Penal Code as also under another Act, say for example, the Prevention of Corruption Act. Whereas charges under the Prevention of Corruption Act may fail, no sanction having been accorded therefore, the charges under the Penal Code would not." 32. In Tanna & Modi v. CIT [2007] 161 Taxman 329/292 ITR 209 also, this court held, similarly that immunity granted for one purpose, cannot be extended for another: "20. It may be necessary for the aforementioned purpose to bear in mind that the immunity granted pursuant to acceptance of a declaration made under the voluntary taxation scheme or Kar Vivad Samadhan Scheme, 1998 does not lead to a total immunity. Immunity granted under the Scheme has its own limitations. The Scheme must be applied only in the event the conditions precedent laid down therefore are applicable. See State, CBI v. Sashi Balasubramanian and Anr. [2007) 289 ITR 8 (SC) and Alpesh Navinchandra Shah v. State of Maharashtra and Ors. 2007 (3) SCR 223 21. A raid was conducted in the premises of the firm. Search warrant might have been issued in the name of a partner of the firm. The partner made certain statements. The search revealed some undisclosed income. The firm has a separate legal entity, it could have made a declaration, but it was done in respect of the same amount regarding the partner of the firm made disclosures. What would be the effect of his subsequent retraction is not a matter which we are required to deal with herein. It is one thing to say that when a firm has concealed income, each partner need not make a declaration but it would be another thing to say that when a search has been made on the premises of the firm and the books of accounts of the firm are inspected, on the strength of a search warrant issued in the name of one of the partners thereof, a declaration can be made by the firm so as to cover the loopholes. In a case where sub-section (2) of section 64 is applied, sub- section (1) thereof would not apply inasmuch as it starts with the term "nothing contained" in sub-section (1) shall apply in relation to. What are the conditions which would make sub-section (1) of section 64 inapplicable is the income assessable for any assessment year for which a notice under section 142 or 148 of the Income-tax Act has been served upon such person and the return has not been furnished before commencement of the Scheme and upon strict construction, it is possible to argue that the word "such person" must relate to that declaring which being a firm would not include within its purview its partners. But, in a case of this nature where fraud is alleged, we cannot be oblivious of the fact that each firm acts through its partner. A firm is the conglomeration of its partners, and is not a juristic person. In the instant case, the purported disclosure made by the firm relates to the same amount which has been disclosed by the partner. Even the source of income was found to be the same. As the income of a firm vis- a-vis its partners have a direct co-relation, in our opinion, while construing a statute granting immunity, it should not be construed in such a manner so as to frustrate its object."

9 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT

10 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT

CIT(A), the assessee has preferred the present appeal before this Tribunal

on the ground as reproduced hereinabove. To support the various grounds

so raised by the assessee the ld. AR of the assessee, has filed the written

submissions and the same is reproduced herein below:

GIST OF SUBMISSIONS Ground No.1: Treating interest deposit of Rs.56,50,000 as unexplained u/s 68. Ground No.2: Invoking the provisions of Section 115BBE. BACKGROUND FACTS The Assessee HUF declared a sum of Rs.6,02,00,000 under Income Declaration Scheme “(IDS)”, 2016. The Assessee had filed Form No.1 under IDS with the following narration: Market Lending along with interest Rs.6,02,00,000. The Assessee had paid tax @45% on the above income declared under IDS. The declaration was accepted by the Department. The Assessee deposited the said cash in its bank account on the following dates, (the chart of which is appearing at AO page 2): S. No. Date of Deposit Amount Deposited Source 1 10.10.2016 20,00,000 2 10.10.2016 20,00,000 Interest on Market Lending 3 08.11.2016 3,00,000 4 23.11.2016 2,00,00,000 Interest on Market Lending of 5 24.11.2016 1,04,35,000 Rs.9,15,000/- and Market Lending of Rs.6,02,00,000/- declared in IDS, 6 25.11.2016 2,00,00,000 2016 and Rs.20,000/- out of Cash withdrawal from the same bank on 7 03.12.2016 1,07,00,000 30th July, 2016 8 26.12.2016 500 Out of Cash withdrawals from same 9 30.12.2016 1,000 bank. Interest on Market Lending of 10 18.03.2017 4,50,000 Rs.3,50,000/- and Rs.1,00,000/- out of Cash withdrawal from the same

11 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT bank on 13th Feb, 2017 (Rs.50,000/- ) and 29th Dec, 2016 (Rs.50,000/-) TOTAL 6,58,86,500

Since, it was a case of Market Lending, post declaration under IDS, Assessee started recovering the sum from the borrowers along with interest from the date of IDS till actual recovery of the money. The income declared under IDS amounting to Rs.6,02,00,000 and further interest earned thereon, during the intervening period, amounting to Rs.55,65,000 was deposited in the bank. The Assessee filed his Return of Income on 30/07/2017 declaring Total Income of Rs.69,49,800. The Returned Income was accepted vide order u/s 143(3) dated 07/12/2019. However, the interest income of Rs.55,65,000 which was offered for tax in Return of Income was taxed at a higher rate invoking the provisions of section 115BBE. 1. ASSESSING OFFICER Ld.AO sought the details of persons from whom said interest of Rs.55,65,000, for the intervening period, was earned and on Assessee's failure to do so invoked the provisions of Section 115BBE. 2. COMMISSIONER OF INCOME TAX (APPEALS) Ld. CIT(A) placed reliance on certain judicial pronouncements and dismissed the Appeal holding that Assessee had no immunity from disclosing the names in respect of subsequent interest earning amounting to Rs.55,65,000.

12 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT frustrate the very objective of IDS. In the peculiar facts of the present case, the interest income earned, till money is finally recovered, after a short period from the said borrowers, is not a new immunity but extension of IDS immunity. [Para 6 page 5 of CIT(A)] 1.3 The human probability test was in favor of the Assessee as nobody would believe that post IDS, the Assessee waived interest. [Para 9 and 10 page 6] 1.4 It was also submitted that the explanation offered deserves acceptance and reliance was placed on the judgment of Hon’ble Supreme Court in the case of Sreelekha Banerjee v. CIT [1963] 49 ITR 112. [Paras 11 to 14] 1.5 It was also explained that Assessee having disclosed and paid taxes on Rs.60200000 would not attempt to save differential tax of 15% on a comparatively meager sum of Rs.56,50,000. [Paras 15 & 16] 1.6 It was also explained that Section 68 converts non-income to income and since income had already been offered for tax in Return of Income filed by the Assessee, section 68 had no application. [Para 17] 1.7 It was also explained that Section 115 BBE was not applicable prior to 28/11/2016. [Para 18] It is prayed that the said submissions may please be appreciated in correct perspective at this stage.

Ld. CIT(A) has misplaced his reliance on the above four judgements which are distinguished from the present case on the basis of facts and legal issues involved therein. All the four judgements are distinguished below: - 3.1 DCIT vs M.R. Shah Logistics (P.) Ltd [2022] 136 taxmann.com 373(SC): -

13 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT

The said judgement relates to reopening of the case of a non -declarent under IDS. The relevant facts are available from para 7 of the order which para has reproduced the reasons recorded by ld. AO for reopening the case, the same, for ready reference, are reproduced below: - “2.2 It is also noticed that assessee company had received credit amount in its books but has failed to establish that the cash declared by Garg logistics Pvt. Ltd under Income Declaration scheme was not actually the cash of the assessee- company. Assessee had only submitted Income Declaration Form no. 2 of Garg Logistics Pvt. Ltd and failed to provide documentary evidence of investment of cash declared by Garg Logistics Pvt.. Ltd in the assessee company. Even the list submitted by assessee had discrepancies with data submitted to registrar of companies as discussed in above para. In other words, the assessee has not been able to establish that the income admitted under IDS 2016 by Garg Logistics Pvt.. Ltd. went in the books of investor companies. It is worth to highlight that Investor companies are independent paper companies and they have provided entries independently and not through Garg Logistics Pvt. Ltd. 2.3 Thus the claim of the assessee company that Cash declared by Garg Logistics was utilized to make investment in assessee company through paper companies remains unexplained……..” The Hon'ble Supreme Court at para 34 of the order has held as under: -

“This court is, therefore, of the opinion that the High Court fell into error, in holding the sequitur to a declaration under the Income Declaration Scheme can lead to immunity (from taxation) in the hands of a non-declarant.”

It is submitted that the Assessee himself is declarant under IDS, 2016 and he himself is seeking immunity from disclosing the names of those persons to whom, he had advanced his unaccounted money on interest. Thus, a declarant seeking immunity is different from non-declarant seeking immunity. 3.2 State CBI v. Sashi Balarubramanian [2006] 157 taxmann 261/ [2007] 289 ITR 8: - In the said case, the Hon’ble Supreme Court has held as under: -

Whether an immunity under Section 91 is granted only in respect of offences purported to have been committed under Direct Tax enactment or Indirect Tax enactment, but by no stretch of imaginations, same would be granted in respect of offences under Prevention of Corruption Act, 1988- held, yes

Thus, the above case has no relevance because Appellant is seeking immunity under the proceedings under Income Tax Act. 3.3 Tanna & Modi v. CIT [2007] 161 Taxmann 329/292 ITR 209: -

14 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT In this case, relied upon ld. CIT(A), search was carried on against Partner of the Firm. The Partner surrendered certain on-money received by Firm on the basis of documents ceased during the course of search. The firm against whom no search warrant had been issued, later on, opted VDIS 1997 and offered the same on-money income under the said scheme. The said scheme had a clause that, if income was already detected by the department, the said income was not eligible for disclosure and immunity under VDIS 1997 The VDIS granted to the firm, later on, withdrawn on account of this ineligibility as the on-money income was detected by the Department during the course of search. Firm contended that there was no search against the firm. On a writ by the firm, the Hon'ble High Court of Bombay dismissed the petition of the Assessee Firm and later on Hon'ble Supreme Court also dismiss the Appeal for the reason of fraud practiced upon the Statutory Authorities.

The case before The Hon'ble ITAT, in the present Appeal of the Assessee, is altogether different and the Assessee himself is seeking extension of immunity to make the immunity granted under IDS workable.

In a way, the judgement of the Hon'ble Supreme Court supports the case of the Assessee, wherein, Hon'ble Supreme Court in para 21 of the order has held as under: ‘In our opinion, while construing a statute granting immunity, it should not be construed in such a manner so as to frustrate its object. Keeping in view the purport and object which the 1997 Scheme seeks to achieve, we are of the opinion that in the place of literal interpretation, the rule of purposive construction should be applied.’

3.4 Tekchand v. Competent Authority [1993] 2 SCR 864: - This judgement is also with reference to seeking immunity under Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA).

The Hon’ble Court held that Voluntary Disclosure Act, 1976 provided for immunity under Income Tax and cannot be extended to any other law.

15 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT nature of receipt is interest. The said explanation was corroborated by the disclosure made in IDS which had following narration

Market Lending along with interest Rs.6,02,00,000.

In respect of source also, the explanation given was that the source of interest was the borrowers to whom unaccounted money was lent on interest. The said explanation was also corroborated by the declaration so made under IDS.

The interest income, otherwise also, stands explained because, corresponding capital which earned the interest for the intervening period was offered for tax under IDS. It is not the case of Lower Authorities that, without capital having been offered for tax, interest income is claimed to have been earned.

Mere non-mentioning of the name and address would not render the income being unexplained. In this regard, parallel is drawn from a case of stock found short at the time of survey. The same is treated as an unaccounted sales and profit earned therefrom is treated as business income even without names of the persons to whom sales are made.

Similar position is in respect of excess stock found which is also treated as business income, in spite of the fact, that names of the suppliers of such excess stocks are not available.

Reliance is placed on the following judicial pronouncements: - � [2023] 152 taxmann.com 595 (Chennai- Trib.) Overseas Leathers. � [2021] 132 taxmann.com 73 (Andhra Pradesh) Deccan Jewellera (P.) Ltd.

Date Amount 10/10/2016 20,00,000 10/10/2016 20,00,000 08/11/2016 3,00,000 Total 43,00,000 Therefore, cash deposit is linked to IDS and has no link with demonetization. In view of the above, the appeal may please be allowed.”

16 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT 6. The ld. AR of the assessee submitted that the issue here for the

consideration is that based on the facts of the case the assessee is

supposed to pay tax of @ 30 % or 60 % as the relevant income is already

forms part of the Income Tax return filed by the assessee. The ld. AR of the

assessee submitted that the assessee has paid tax @ 45 % in the IDS

scheme and that declaration was accepted. Since, the asset declared by

the assessee under IDS being the advances given on interest which the

assessee started recovering the said sum from the borrowers along with the

interest from the date of IDS till actual recovery of money. The income

declared under IDS accepted to have been given for an amount of Rs.

6,02,00,000/- further interest earned thereon during that intervening period

amounts to Rs. 55,65,000 cannot be considered as chargeable to tax @

60%, when the assessee was required to disclose the asset for a particular

date and the assets disclosed being interest bearing advances given

against security of hundi, undated cheque and property documents as on

31.03.2016 the interest earned thereon till the recovery of the said amount

cannot be considered as unexplained money. The case of the assessee is

covered by the CBDT circular and the immunity granted in the scheme to

the assessee for not disclosing that details of the persons to whom the

advances were given. The ld. AO till those advances realised cannot

17 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT considered that disclosed sources as undisclosed income of the assessee

and if it allowed then the purpose of the IDS will be frustrated and that

cannot be intention of the legislature. Thus, ld. AR of the assessee

submitted that test of human probability goes in favor of the assessee. The

ld. AR of the assessee also submitted that there cannot be so intention of

the assessee when there are paying tax @ 45 % why left that amount as on

31.03.2016 but since the advances disclosed were interest bearing the

assessee fairly based on the set of facts also disclosed the income of the

interest unearned by the assessee for which the disclosure is made. It is not

disputed that the assessee has already paid tax @ 30 % why the assessee

should do it for 15 % when they disclosed as on 31.03.2016 by paying it 45

% but it is the real fact that after the disclosure the interest is to be charged

as income of the year under consideration and that interest has same

immunity that is available to the principal amount and therefore, the same

cannot attract provision of section 68 of the Act. Even otherwise the ld. AR

of the assessee also submitted that the assessee has deposited a sum of

Rs. 43,00,000/- before the demonetization and the same is not specified

bank notes(SBN) and therefore even provision of section 115BBE cannot

be applied based on that facts of the case. When the assessee has availed

the Income Disclosure Scheme he had no idea of demonetization and the

18 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT advance were disclosed interest bearing so the interest income is disclosed

and offered for tax that interest cannot be termed as undisclosed income of

the assessee. The ld. AR of the assessee submitted that the case law relied

upon by the ld. CIT(A) has been distinguishable based on the facts of the

case and the same is not repeated as written submission covers that

aspects. Based on these arguments the ld. AR of the assessee submitted

that the considering the nature of disclosure made the assessee does have

the immunity for the interest income offered in the return of income.

order of the ld. CIT(A) and that of the ld. AO. The ld. DR submitted that the

ld. AO has not any inquiries regarding the income declared by the assessee

under IDS but inquiries were made to explain the source of interest income

claimed to have been earned on that advances disclosed by the assessee.

Since the assessee has not submitted those details the interest income was

considered as unexplained. The law is clear that the assessee has

explained the source of income. The assessee has relied on question no. 8

of circular 25 of 2016 issued by board. That question deals with the

property and not the advances. The ld. AO based on the question no. 9 [ of

CBDT circular no.25/2016] stated that the assessee cannot be given benefit

19 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT of any past income in the year under consideration. The assessee has

deposited huge amounts in cash in the bank account and the assessee was

already given the benefit to the extent of income disclosed by him. Thus,

considering the human probability as decided by the apex court in the case

of Durga Prasad More the income is correctly taxed as unexplained. Even

the ld. CIT(A) in detailed order confirmed the view of the ld. AO. He has

also discussed various case laws as to why the benefit claimed by the

assessee cannot be given under the IDS, 2016 as the assessee failed to

give the source of the cash deposited into the bank account in addition to

the amount disclosed in the IDS scheme, 2016. Based on these arguments

the ld. DR supported the order of the lower authority.

on record. The apple of discord in this case is that whether the interest

income received by the assessee after disclosure of the assets in the

income declaration scheme till it gets realised, whether that interest income

is to be considered as explained source of income or that of the

undisclosed income of the assessee as it is evident and undisputed that the

assessee has disclosed assets in the form of “Market lending inclusive

of interest, against security of hundi, undated cheque and property

20 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT document as on 31.03.2016.” The purpose of the scheme was to

encourage disclosure of hitherto undisclosed income. The assessee who

seeks the benefit of the scheme is bound to pay tax, surcharge and

penalty. Those who availed themselves of the scheme received immunity

from prosecution under the Income-tax Act and the Wealth-tax Act. Certain

conditions also provided immunity from the Benami Transactions

(Prohibition) Act, 1988. Since, the assets have been disclosed by the

assessee under the IDS, 2016, therefore, disclosure scheme Rule 4 allows

the assessee to file a declaration of income or income in the form of

investment in any assets. Based on that set of facts the declaration made

by the assessee was accepted. In the process of receiving back those

advances which were of course in cash but the assess also receive the

interest from the declared assets till the assets realised in terms of money.

It is not disputed that the assessee has made a declaration for advances

given on interest and disclosure of assets in the form of money advanced.

The assets along with the interest amount was disclosed along with the

modus operandi of doing that money lending activity. The assessee

explained that the interest income offered was not the past income, but the

income of interest earned on that advances post IDS till the date of

realisation of the advances by the assessee. The assessee explained that

21 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT out of the income earned on account of interest, Rs. 43,00,000/- was

deposited before the demonetization. Hence based on that set of fact, the

logic as explained in reply to question no. 8 of circular no. 25 of 2016 is

equally applicable to the facts of the present case, when there cannot be

disclosure of advances then as to how the disclosure of interest on that is

possible. When the assessee is given immunity not to disclose chicken

then as to how he can disclose the ovum. Thus, the immunity given to the

assessee cannot be take away merely on the fact that the assessee has

offered the interest for the intervening without disclosing the names of the

parties. The assessee cannot be expected to disclose the fact which

otherwise given immunity for not disclosing. The case laws relied upon by

the ld. CIT(A) are not applicable to the present set of facts and thus, since

the assessee was given immunity the details of the parties to whom the

advances given cannot be asked to the assessee at the back door of

explaining the interest when the declaration itself says that the advances

disclosed were attached with the interest thereon. In the light of the

discussion record ground no. 1 raised by the assessee is allowed the

immunity not to disclose the name of the parties for which the assessee

has realised the advances.

22 ITA No. 332/JP/2024 Shanti Kumar Sethi and Sons vs. ACIT 9. Ground no. 2 raised by the assessee is charging of tax u/s 115BBE of

the Act. Since we have in ground no. 1 considered the income as arising

out of the source disclosed the same cannot be subjected to tax u/s. 68

r.w.s. 115BBE of the Act. Based on this observation ground no. 2 raised by

the assessee is allowed.

In terms of these observations, the appeal of the assessee is allowed.

Order pronounced in the open court on 22/07/2024. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated:- 22/07/2024 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Shanti Kumar Sethi and Sons, Jaipur izR;FkhZ@ The Respondent- ACIT, Circle-01, Jaipur 2. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 332/JP/2024) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत