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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGH & SHRI MANJUNATHA.G
आयकरअपीलसं./ITA No.: 231/CHNY/2023 िनधा�रण वष�/Assessment Year: 1998-99 Shri T R Pachamuthu The Assistant Commissioner of (now known as T.R. Paarivendhar) vs. Income Tax, No.4 & 5, Prakasam Street, Central Circle I(3) Janaki Nagar, Chennai. Valasarawakkam, Chennai 600 087. [PAN AHMPP 3160B] (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ�क�ओरसे/Appellant by : Shri. D. Anand, Advocate ��यथ�क�ओरसे/Respondent by : Shri. Nilay Baran Som, IRS, CIT सुनवाई क� तारीख/Date of Hearing : 02.01.2024 घोषणा क� तारीख/Date of Pronouncement : 23.02.2024 आदेश /O R D E R
PER MAHAVIR SINGH, VICE PRESIDENT:
This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-18, Chennai in dated 21.11.2022. The assessment was framed by the Assistant Commissioner of Income Tax, Central Circle-I(3), Chennai for the assessment year 1998-1999 u/s.143(3) rws 263 rws 254 of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 31.12.2009.
At the outset, it is noticed that this appeal is time barred by 14 days and assessee had filed condonation petition stating that he was travelling officially as a Member of Parliament and hence could not sign the papers and this smaller delay has occurred. When this was confronted to ld. Departmental Representative he could not controvert the above. Going by the reasons stated in the condonation petition as well as short delay of 14 days, we condone the delay and admit the appeal.
The First issue in this appeal of assessee is as regards to the order of the ld. CIT(A) confirming the action of the ld. AO in making addition of Rs.1,50,10,000/- declared by assessee under Voluntary Disclosure of Income Scheme, 1997 (in short ‘VDIS, 1997’) as income for the period relevant to assessment year 1998-99.
The brief facts of the case are that assessee is an individual, director and founder of SRM Group of Companies was engaged in multiple businesses like education, media and transport business. He was also founder member of a political party named ‘’Indiya Jananayaka Katchi’’ and also a Member of Parliament. The assessee filed his return of income on 29.10.2001 admitting income from house property, profession of running a tutorial institute and agricultural income. The return was not acted upon as it was filed beyond the time limit. Later, a notice u/s.148 of the Act was issued and assessee has filed a letter to treat the return filed on 29.10.2001 as return filed in response to notice u/s.148 of the Act. The assessment was completed u/s.143(3) rws 147 of the Act on 25.04.2003. Later the original assessment was revised u/s.143(3) rws 263 of the Act dated 30.03.2006, the Assessing Officer considered the amount of Rs.1,50,10,000/- offered under VDIS 1997 as the undisclosed income for the assessment year 1998-99 and further the amount of tax paid under VDIS 97 for Rs.47,73,185/- on 31.03.1998 was not given credit to. Aggrieved, assessee preferred an appeal before the ld. CIT(A).
The ld. CIT(A) vide its order dated 19.10.2006 had directed the Assessing Officer to give credit of Rs.47,73,185/- under payment of tax following the decision of the Hon’ble Supreme Court in the case of Hemalatha Gargya vs. CIT & Another, 259 ITR 1. Aggrieved, against the order of the ld. CIT(A), assessee filed an appeal before the Income Tax Appellate Tribunal, Madras and the Income Tax Appellate Tribunal vide its order in & CO No.20/Md/2007 dated 10.12.2008 remand the matter back to the file of the ld. Assessing Officer on the issue of substance of addition of Rs.1,50,10,000/- added by the ld. AO being the amount declared in VDIS, 1997 and not accepted by the Department. The Tribunal set aside the issue vide para 15 of its order as under:- ‘’15. The Commissioner(Appeals) noticed that though the disclosure was the assessment year 1998-99, the income pertained to the assessment 1980-81 to 1997-98. The income pertaining to the earlier years was not disclosed to the department. It is not clear from the perusal of the assessment orders that actually whether this amount was credited in the year under consideration in the capital account or not. There is no categorical finding on this aspect. No clear-cut finding is given as to under what section the amount can be said to be assessed. The Commissioner (Appeals) has stated that the amount can be assessed under section 68 or atleast under section 69. It is incumbent on the Revenue authorities to first determine with exactitude the nature of income. Thereafter its exigibility with reference to the particular provision of law. This was not done. No categorical finding is rendered in the impugned order apropos the same. We, therefore, in the interest of justice set aside the order of the Commissioner (appeals) and restore the matter to the file of the Assessing Officer a direction to decide this issue de novo in accordance with law after providing adequate opportunity to the assessee of being heard’’.
In consequence to the above direction of the Tribunal, the ld. AO passed an order u/s.143(3) rws263 rws 254 of the Act dated 31.12.2009 and again repeated the addition i.e. disclosure under VDIS, 1997 u/s.68 of the Act of Rs.1,50,10,000/-. Aggrieved, assessee preferred an appeal before the ld. CIT(A). The Ld. CIT (A) confirmed the action of the ld. AO by holding that the capital account could be credited with the amount disclosed under VDIS 1997 only to the year in which disclosure was made. The disclosure was made on 26.12.1997 in the financial year 1997-98 and hence the amount to the assessed in the assessment year 1998-1999 and not in earlier years as claimed by the assessee. The ld. CIT(A) noted that the credit of this amount of Rs.1,50,10,000/- for the first time taken into capital account forming part of statement of affairs submitted by the assessee as on 31.03.1998. Therefore, according to the ld. CIT(A) the first condition that the credit is represented in the books of accounts of the assessee in the financial year 1997-98 relevant to the assessment year 1998-99 is satisfied. Hence, the addition can be made in this assessment year. Even the ld. CIT(A) noted that despite ample opportunities assessee failed to furnish any evidence that credit of this amount appear in the capital account and statement of affairs disclosed in the VDIS 97 as on 31.03.1998 is declared or disclosed in any prior assessment year including assessment year 1997-98. But assessee miserably failed to discharge the burden of proof that assets were declared prior to 1998-99. Hence, the ld. CIT(A) confirmed the addition and the relevant paras 10.9 to 12 reads as under:- ‘’10.9 The assessee despite ample opportunities in the assessment and appeal proceedings failed to furnish any evidence that the credit of Rs.1,50,10,000/- appearing in the capital account of the Statement of affairs as at 31.03.1998 had been disclosed in any assessment year prior including A.Y. 1997-98. It is also the submission of the assessee that the capital account would not reflect this amount prior to the date of declaration of VDIS'97 (since deemed void). Thus, the assessee has failed to discharge his burden of proof with regard to the source of the amount credited during the year relevant to A.Y. 1998-99. 10.10. An assessee can discharge his burden of proof by proving three things: Identity of the creditor, capacity of the creditor and the genuineness of the transaction in question. These three things were also not discharged by the assessee in this case. As the credit in the capital account is in his own name, the assessee has to explain the source of the credit, which the assessee failed in all the income tax proceedings.
From the above, the credit made by the assessee in the capital account of the Statement of affairs as at 31.03.1998 is an entry made in the books of account of the assessee by the assessee and has NOT been explained at all. The claim that it represents VDIS declaration is not acceptable as the same has become void as per section 67(2) of the Scheme. The credit remains unexplained and therefore, warrants addition u/s 68 of the Income-tax Act, 1961 for the failure of the assessee to prove the source of this credit in his books for the assessment year 1998-99.
Accordingly, the addition of Rs. 1,50,10,000 u/s 68 of the Income-tax Act, 1961 made by the AO is sustained but, for the detailed and modified reasons given above’’.
Aggrieved, assessee preferred an appeal before us.
We have heard rival contentions and gone through the facts and circumstances of the case. Now before us, ld. Counsel for the assessee stated that assessee declared an income of Rs.1,50,10,000/- under VDIS-97 including investments, purchases and expenditure on 26.12.1997 under the scheme and paid taxes to the tune of Rs.47,73,180/-. This declaration was not accepted by the Revenue for a reason that the last instalment of taxes were paid beyond the time limit prescribed under the scheme. Ld. Counsel for the assessee drew our attention to the details of expenditure/ investments/ purchases as under:-
FY AY Description Amount(Rs.) Upto Upto Construction of school building at No.32, 27,60,000 1989-90 1990-91 Veerasamy street, West Mambalam, Chennai-33 -do- -do- Construction of office building at 2 & 3, 4,00,000 Veerasamy street, West Mambalam, Chennai-33
-do- -do- Construction of hospital extension at No.68, 6,00,000 Tambiah Road, West Mambalam, Chennai-33 -do- -do- Construction of building at Valliammai Nagar, 3,00,000 Valasarawakkam, Chennai -87 1990-91 1991-92 Construction of office building at 2 & 3, 6,00,000 Veerasamy street, West Mambalam, Chennai-33 -do- -do- Construction of hospital extension at No.68, 6,00,000 Tambiah Road, West Mambalam, Chennai-33 -do- -do- Construction of building at Valliammai Nagar, 4,00,000 Valasarawakkam, Chennai -87 1991-92 1992-93 Construction of office building at 2 & 3, 5,00,000 Veerasamy street, West Mambalam, Chennai-33 -do- -do- Construction of hospital extension at No.68, 2,00,000 Tambiah Road, West Mambalam, Chennai-33 -do- -do- Construction of building at Valliammai Nagar, 4,00,000 Valasarawakkam, Chennai -87 -do- -do- Land at Vankatapuram Village, Saidapet, Chennai- 7,15,000 55 -do- -do- Eviction payment to unauthorized occupants and 20,35,000 other related expenses in regard with land purchase at Venkatapuram Village, Saidapet 1996-97 1997-98 Agricultural land at Gudalore Village, 5,00,000 Kancheerpruam Dist- 13 acres -do- -do- Invested as share capital in M/s. SRM Hotel 20,00,000 Private Ltd, Chennai -33 -do- -do- Invested as share capital in M/s. SRM Benefit 5,00,000 Fund Ltd, Chennai -33 -do- -do- Repayment of loan with interest to M/s. SRM 25,00,000 Benefit Fund Ltd, Chennai -33 Total 150,10,000 Ld. Counsel for the assessee also explained that the declaration was made for a number of years from assessment year 1989-1990 to assessment year 1997-1998. Admittedly, taxes were paid for various years on one go as per the notes of the scheme. The ld. Assessing Officer while framing the assessment treated the declaration made pertaining to assessment year 1998-99, the year under consideration and included the amount offered as Rs.1,50,10,000/- under VDIS-97 as unexplained credit u/s.68 of the Act for the reason as under:- ‘’The amount of credit in your capital account, though shown as the opening balance, could not be taken as reflecting disclosed investments in any earlier period to the period relevant to AY 1998- 99, because by making the declaration under VDIS, you have committed to the fact that such expenditure /investments had not been disclosed by you in any return filed prior to 1.7.97. Accordingly, the increase in the capital account has to be taken as made for the period relevant to AY 1998-99 and not for any earlier period’.
The ld. CIT(A) also noted that credit made by the assessee in the capital account of the statement of affairs as on 31.03.1998 is an entry made in the books of accounts of the assessee, which was not at all explained. As per the ld. CIT(A) assessee has not at all explained these investments/purchases/ expenditures. He noted that credit of Rs.1,50,10,000/- is made for the first time in the capital account forming part of the statement of affairs as an 31.03.1998 represented in the books of accounts of the assessee in the financial year 1997-98 relevant to assessment year 1998-1999.
From the above, it is noted that assessee has given a complete narration that investments / purchases/expenditures were incurred from assessment years 1991-92 to 1997-98 amounting to Rs.1,50,10,000/-. As pointed out by the ld. Counsel for the assessee that clarifications on VDIS 1997 vide question No.9 has clarified that the amount declared can be credited in the books of accounts or if there is no books of accounts in some other record, the year of credit is left to the declarant’s option. This question to No.9 and answer reads as under:-
Question No. 9: Whether under the VDIS, 1997, it is mandatory to credit the amount declared in the books of accounts, if so, in which year’s books of account it has to be credited - Whether the Assessment Year in respect of which it is declared or the Assessment Year relevant to Financial Year 1997-98 ? Answer : It is expected that the declarant will credit the amount declared in his books of account or if there are no books of account in some other record. The year of credit is left to the declarant’s option.
Further, the CBDT has clarified that the meaning of ‘’any other records’’ i.e means an entry which will evidence the availability of amount declared as question No.15 and answer as under:- ‘’Question No. 15 : Under section 68 of the Scheme the amount of the voluntary disclosed income is not to be included in the total income of any assessment year if (a) such amount is credited in the books of account or any other record and the credit so made is intimated to the Assessing Officer and (b) income-tax is paid on such amount. In such a case, three questions arise (i) what is the meaning of "any other record" particularly when declarant maintains no record ? (ii ) who will be the Assessing Officer - whether the regular AO or the designated officer in the office of the Commissioner ? and (iii ) what is meaning of "credited in the books of account" ? Answer : ( i) Where books of account are not maintained by the declarant, any other record means an entry which will evidence the availability of amount declared. ( ii) The regular Assessing Officer of the territory and not the designated officer in the office of the Commissioner of Income-tax. ( iii) The meaning of credit in the books of account will vary from case to case depending upon the nature of the disclosure whether it is under-statement of stock or under-statement of turnover or under-statement of sale consideration of a property, etc’’.
The Tribunal in earlier round also noted the facts noted by the ld. CIT(A) in and CO No.20/Mds/2007 vide order dated 10.12.2008, wherein the Tribunal recorded the facts as under:- ‘’15. The Commissioner (Appeals) noticed that though the disclosure was made in the assessment year 1998-99, the income pertained to the assessment years 1980-81 to 1997-98. The income pertainaing to the earlier years was not discl9sed to the department. It is not clear from the perusal of the assessment orders that actually whether this amount was credited in the year under consideration in the capital account or not. …………………..’’ The assessee has already furnished necessary evidence before the Assessing Officer vide letter dated 17.12.2009, wherein he has furnished documents pertaining to expenditures, investments and purchases which resulted in the declaration made in the VDIS on 26.12.1997.
We have gone through the facts and circumstances of the case. The fact that VDIS-97 of the assessee was not considered due to the fact that payment was made beyond the time limit prescribed under the scheme. Question in addition of the investment would arise the year of liability is to be determined included investments/purchases/ expenditure for the financial year 1997-98 relevant to assessment year 1998-99 for invoking the provisions of Section 68 of the Act. We noted from the facts of the case that none of the authorities below have brought out anywhere in the orders that the investments are made in financial year 1997-98 relevant to assessment year 1998-99, whereas assessee has tried to establish the fact that the investments related to earlier assessment years i.e from 1991-92 to 1997-98. We do not agree with the findings of the lower authorities that investments/ purchases/ expenditure were made in the financial year 1997-98 relevant to assessment year 1998-99 except amount declared under VDIS 97 on 26.12.1997. Assessee already tried to establish the fact that these investments were pertaining to previous assessments years 1991-92 to 1997-98. Hence, in our view addition made in the assessment year 1998- 1999 cannot be sustained and accordingly, we delete the addition. This issue of the assessee is allowed.
The next issue raised by the assessee in this appeal is with regard to assessment of income from house property by taking annual letting value of SRM Nightingale School property determining annual letting value of Rs.28,96,162/-. We note that the ld. CIT(A) has given directions to the assessee as well as the Assessing Officer to adopt annual letting value on the basis of Municipal valuation adopted by Chennai Corporation for rising the rental value. The ld. CIT(A) referred the matter back to the Assessing Officer for valuing annual letting value on the basis of municipal valuation after due verification as observed at paras 13 and 14 as under:- ‘’13 The other issue remitted to the file of CIT(A) is related to addition made on account of annual letting value of the property given to SRM Nightingale School. The facts of the issue are that the assessee did not return the income in respect of the property let to SRM Nightingale School. The AO determined the annual letting value at Rs.28,96,162/-. On appeal, the CIT(A) estimated the rate at Rs.2/- per sqft. Similarly, for the same reason in the case of SRM Nightingale Annex, the CIT(A) directed to adopt the same rate. The Hon'ble ITAT observed that "If the property is let out free and not fetching any rent, the municipal valuation would be determining the factor for arriving at the bona fide annual value.... The value is to be determined strictly in accordance with the provisions laid down in section 23 of the Act. We, therefore, in the interest of justice set aside the impugned order and restore the valuation issue to the file of the CIT(A) with a direction to decide it afresh in accordance with law after providing adequate opportunity to the assessee of being heard." 14. The assessee did not furnish any further evidence in the matter. The workings of the AO in arriving at the ALV appears to be based on valuation adopted by Chennai Corporation. Therefore, AO is directed to follow the ALV rate adopted as per the Chennai Corporation and accordingly, recompute the income from House property in respect of the above mentioned property. However, in the interests of principles of natural justice, the Assessee is allowed a period of time of 15 days of the receipt of this order, to produce any evidence related to the value adopted by the Chennai Corporation to the Assessing Officer, who shall, after due verification, consider the same and recomputed the income from house property as per law.’’ We find no infirmity in the findings of the ld. CIT(A) and further direct the Assessing Officer to adopt the municipal value adopted by Chennai Corporation for assessing rental value. This issue raised by the assessee is dismissed as per above direction.
The last issue raised by the assessee in this appeal is charging of interest u/s.234A, 234B and 234C of the Act. We find no infirmity in the order of the ld. CIT(A) and direct the AO to charge interest as per the provisions of the Act. This issue raised by the assessee stands dismissed.