SHANKAR R. MHATRE v. ASSISTANT COMMISSIONER OF INCOME TAX
[Citation -2007-LL-0824-11]

Citation 2007-LL-0824-11
Appellant Name SHANKAR R. MHATRE
Respondent Name ASSISTANT COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 24/08/2007
Assessment Year 1998-99
Judgment View Judgment
Keyword Tags income from house property • computation of income • agricultural income • gross total income • additional income • limitation period • original return • local authority • rental income • net wealth • vdis
Bot Summary: 00 Please note that this return of income-tax, I am revising only because I have made a declaration voluntarily before the CIT that I have earned and invested those fund which relates from last so many years, the years may be beyond the limitation of the Acts also. We can find from computation of income filed by the assessee, that a clear note has been given that, he had earned and invested funds which relate from the last so many years and that the same do not pertain to the impugned assessment year. Though VDIS declaration clearly shows that the income in question pertains to earlier years, in effect, the AO has brought to tax income from house property for assessment years from 1983-84 to 1996-97 and investments made in earlier year, that too without granting statutory deductions in a single year, i.e. asst. The years of investment and the years in which income is earned are to be taken as declared, as there is no other evidence with the Revenue to enable them to come to a contrary conclusion. Even otherwise, the addition cannot be sustained under s. 69 of the Act, as for invoking s. 69 the primary requirement is that investments had to be made by the assessee in the financial year immediately preceding the assessment year. Neither the income was earned in this case, nor the investment has been made in the financial year immediately preceding the assessment year. As earlier stated, the assessee had clearly given a note that he has earned and invested those funds in the earlier years, i.e. not in the impugned financial year, and also brought to the notice of the AO that the orders in question may be beyond the limitation period prescribed in the Act.


J. SUDHAKAR REDDY, A.M. ORDER This is appeal filed by assessee directed against order of learned CIT(A) dt. 13th Nov., 2006 for asst. yr. 1998-99. Brief facts are as follows : 2. assessee filed its original return of income declaring rental income and income from other sources as well as agricultural income on 3rd Sept., 1999 with ITO, Ward-I(5), Kalyan. During previous year 1997-98, assessee wanted to take advantage of VDIS and filed declaration. Later, assessee had not paid taxes due on VDIS declaration. AO received information from concerned authority i.e. CIT-III, Thane, that assessee had not been granted certificate by CIT, and that he cannot be allowed benefit of VDIS-97, in respect of his disclosures made. 3 . assessee in declaration under VDIS-97disclosed assets i.e. lands and buildings totally valued at Rs. 33,85,000, but did not pay tax on assets so disclosed. Based on information received, AO reopened proceedings under s. 147 and issued notice under s. 148 dt. 24th March. 2005. assessee had, in response to notice under s. 148, filed revised return of income for asst. yr. 1998-99 on 20th July, 2005 declaring total income of Rs. 36,30,843 which included additional income of Rs. 33,85,000 under s. 69 of IT Act, which was subject to note annexed. computation of income as per p. 3 of assessment order is extracted for ready reference : "Computation of income Net income as per original return shown : (i) House property 237,236.00 (ii) Other sources 8,610.00 245,846.00 Additional declaration 3,385,000.00 income under s. 69 of Act Total 3,630,846.00 Add : Agricultural 60,000.00 income Gross total income 3,690,846.00 income rounded up 3,690,850.00 Please note that this return of income-tax, I am revising only because I have made declaration voluntarily before CIT that I have earned and invested those fund which relates from last so many years, years may be beyond limitation of Acts also. But tax was remained to be paid. Due to shortfall of funds, now I am rectifying this mistake by revising return of that periods by offering to pay tax upon such declaration provided no interest or penalty be levied upon such tax. In compliance to notice issued under s. 148 though challenged its legality this return is revised." (emphasis, italicised in print, own) After considering detailed submissions of assessee, AO made addition of Rs. 33,85,000 under s. 69 of Act. On appeal first appellate authority upheld order of AO. Further aggrieved, assessee is before us. 4. We have heard Sri N.A. Kulkarni on behalf of assessee and Sri D.K. Rao on behalf of Revenue. assessee challenged impugned order on following grounds : (a) that reopening is bad in law; and (b) that addition made under s. 69 based on VDIS declaration is bad in law. 5 . We first consider merits of addition made. We can find from computation of income filed by assessee, that clear note has been given that, he had earned and invested funds which relate from last so many years and that same do not pertain to impugned assessment year. In short, what was stated here is that income in question does not pertain to previous year relatable to asst. yr. 1998-99. statement of VDIS income at pp. 34 and 35 of assessee s paper book reads as under : Annexure to form of declaration under VDIS Item No. 5 Statement of voluntarily disclosed income If income is represented by cash (including bank deposits), Amount Assessment jewellery, of income S. years to which bullion, declared (in No. income investment in figures and relates shares, words) debts due from other persons, commodities or any other assets. Description Name in Amount Remarks of assets which held Shankar R. 1. 70,000 1983-84 Building 70,000 Mhatre 2. 4,32,000 1984-85 Building -do- 4,32,000 3. 3,23,000 1985-86 Building -do- 3,23,000 4. 3,23,000 1986-87 Building -do- 3,23,000 5. 4,72,000 1987-88 Building -do- 4,72,000 6. 2,14,000 1988-89 (i) building -do- 73,600 Pararatibai (ii) building 47,800 S. Mhatre (iii) Parasharam 47,600 building S. Mhatre Shankar R. (iv) vehicle 45,000 Mhatre Shankar 7. 19,000 1989-90 Building Raghunath 19,000 Mhatre Income 3,92,000 8. 4,07,000 1990-91 Building -do- from house 15,000 property Income Shankar R. 5,000 9. 45,000 1991-92 Building from house Mhatre 40,000 property 2,40,000 10. 3,05,000 1992-93 -do- -do- -do- 65,000 5,000 11. 90,000 1993-94 -do- -do- -do- 85,000 25,000 25,000 12. 1,65,000 1994-95 -do- -do- -do- 1,40,000 1,60,000 13. 3,20,000 1995-96 Vehicles -do- -do- 1,60,000 5,000 14. 2,00,000 1996-97 -do- -do- 1,95,000 Rupees Thirty three lacs 33,85,000 eighty five thousand only 6 . perusal of above clearly shows that none of these assets have been acquired by assessee during previous year relatable to asst. yr. 1998-99. While so, entire income in question is brought to tax during impugned assessment year. In our considered opinion, this is not legally correct to tax this income in year under appeal. Looking at description of assets, they are buildings in most of cases and only in two cases reference is made to vehicles. income from buildings has been declared year-wise. While so, entire income is sought to be brought to tax in single year, though statute does not permit same. Though VDIS declaration clearly shows that income in question pertains to earlier years, in effect, AO has brought to tax income from house property for assessment years from 1983-84 to 1996-97 and investments made in earlier year, that too without granting statutory deductions in single year, i.e. asst. yr. 1998-99. very foundation for bringing to tax income is declaration given before CIT by assessee under VDIS. This material has to be taken in its entirety and all facts recorded in such declaration should also be considered in its entirety and law is to be correctly applied to these facts. years of investment and years in which income is earned are to be taken as declared, as there is no other evidence with Revenue to enable them to come to contrary conclusion. Only selected portions of declarations cannot form part of evidence for purpose of addition. Thus, when in declaration year of earning of income is stated, AO cannot, without evidence to contrary, treat this income as that which is earned in different assessment year. Even otherwise, addition cannot be sustained under s. 69 of Act, as for invoking s. 69 primary requirement is that investments had to be made by assessee in financial year immediately preceding assessment year. None of investments in this case were made in immediately preceding assessment year. Neither income was earned in this case, nor investment has been made in financial year immediately preceding assessment year. Thus, we have to necessarily delete above addition on ground that income sought to be added does not pertain to impugned accounting year. 7. On issue of assessee filing conditional revised return, we are of considered opinion that same cannot be held against assessee. As earlier stated, assessee had clearly given note that he has earned and invested those funds in earlier years, i.e. not in impugned financial year, and also brought to notice of AO that orders in question may be beyond limitation period prescribed in Act. Thus, filing of return of income was under protest and without prejudice to his rights and this cannot form basis of bringing to tax income of assessee of earlier years, in this year. Even if it is held otherwise, filing of return is fundamental error of law on part of assessee, and that is no ground for bringing to tax, amount which is not otherwise taxable during impugned assessment year under provisions of IT Act. It is well settled that there cannot be estoppel against statute and Art. 265 of Constitution of India in unmistakable terms provided that no taxes shall be levied or collected except by authority of law. Acquiescence cannot take away from party relief he is entitled to when tax is levied or collected without authority of law. jurisdictional High Court in case Nirmala L. Mehta vs. A. Balasubramaniam, CIT (2004) 191 CTR (Bom) 8 : (2004) 269 ITR 1 (Bom) at p. 11 place tam F onwards observed as follows : "The problem arose because petitioner in her return for asst. yr. 1988-89 filed on 30th June, 1988, offered prize money of lottery to tax rather fundamental error of law on part of assessee, but that error of law once detected by petitioner, it was urged before CIT that prize money earned by petitioner could not be taxed under IT Act, 1961. It is true that it was at later stage that such contention was raised by petitioner, but said contention was pure question of law and CIT ought to have considered said contention on its merits and ought not to have declined to entertain it on ground of delay. There cannot be any estoppel against statute, Art. 265 of Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from party relief that he is entitled to where tax is levied or collected without authority of law. Constitution Bench of Supreme Court in Amalgamated Coalfields Ltd. vs. Janapada Sabha AIR 1961 SC 964, held thus (p. 965) : It may be stated at outset that tax now impugned has been imposed by local authority from 12th March, 1935, and that first occasion when its validity was attacked was in only 1957, though if petitioners are right in their submissions their acquiescence might not itself be ground for denying them relief. Before however we set out points urged by learned Attorney General in support of petition, it would be convenient if we narrate briefly history of levy of this tax. Supreme Court, thus, held that acquiescence to illegal tax for long time is not ground for denying party relief that he is entitled to." Hon ble Kerala High Court in case of CIT vs. D.K.B. & Co. (2000) 161 CTR (Ker) 187 : (2000) 243 ITR 618 (Ker) had held that it is well settled proposition in law that there cannot be estoppel against statute. At p. 625 it is held as follows : "...........It is settled position in law that there cannot be estoppel against statute. There is no provision in statute which permits compromise assessment. above position was indicated by apex Court in Union of India vs. Banwari Lal Agarwal (1999) 156 CTR (SC) 300 : (1999) 238 ITR 461 (SC). It cannot be laid down as principle of universal application that whenever assessment has been completed by accepting offer of assessee, no penalty can be imposed." Hon ble Calcutta High Court in case of Maynak Poddar (HUF) vs. WTO (2003) 181 CTR (Cal) 362 : (2003) 262 ITR 633 (Cal) held as follows : "4. We have heard learned counsel for parties at length. In our view whether item of property is chargeable to tax or not is dependent on true construction of s. 3 of WT Act, in strict sense it is enacted. There cannot be any ambiguity in charging section. If two views are possible, one beneficial to assessee is to be adopted. Unless property is chargeable under charging section, no tax can be levied thereupon. 10. Thus, unless definition of net wealth read with definition of asset as provided in s. 2(m) and s. 2(ea), respectively, includes building let out to tenant used for commercial purposes, same cannot be subjected to wealth-tax. Even if assessee had included same in his return, that would not preclude assessee from claiming benefit of law. There cannot be any estoppel against statute. property, which is not otherwise taxable, cannot become taxable because of misunderstanding or wrong understanding of law by assessee or because of his admission or on his misapprehension. If in law item is not taxable, no amount of admission or misapprehension can make it taxable. taxability or authority to impose tax is independent of admission. Neither there can be any waiver of right by assessee. Department cannot rely upon any such admission or misapprehension if it is not otherwise taxable." (emphasis, italicised in print, own) Thus even if it is held that assessee had suo motu filed his return of income declaring additional income, it is no ground for bringing to tax income not pertaining to year to tax in this year as made by AO. Thus for all these reasons we have to necessarily hold that addition in question has to be deleted for reason that it does not pertain to impugned previous year relevant to asst. yr. 1998-99 and AO has no authority to tax same in this year. 8. Coming to issue of reopening, we have to necessarily hold that there is no application of mind by AO on material and information received by him from CIT-III, Thane. VDIS declarations clearly state that income in question and investments pertain to asst. yrs. 1983-84 to 1990-91 and 1991-92 to 1996-97 respectively. reading of VDIS declarations clearly shows that no income pertaining to impugned assessment year i.e. 1998-99 escaped assessment. While so, AO issued reopening notice for impugned assessment year. It is well settled that there should be live link between material gathered and income that has escaped assessment of that particular year. No reasonable person would come to conclusion based on these evidences that income of impugned assessment year has escaped taxation. If law permits, AO should have issued reopening notice for respective assessment year in which assessee had earned income and in which assessee had made investments in fixed assets. Thus, on these facts, we have to also hold that reopening in question is also bad in law. 9. In result, appeal of assessee is allowed. *** SHANKAR R. MHATRE v. ASSISTANT COMMISSIONER OF INCOME TAX
Report Error