2014 (7) TMI 1220 - HC - Income Tax

VDIS protects income from reassessment; High Court upholds decision.

The Commissioner of Income Tax Bangalore Versus Sri Kundanmal Babulal Jain Prop: M/s. B. Praveen Kumar,

The Commissioner of Income Tax Bangalore Versus Sri Kundanmal Babulal Jain Prop: M/s. B. Praveen Kumar, - TMI Issues:1. Whether income accepted under VDIS can be assessed in the hands of the assessee-individualRs.2. Can the assessing authority assess income in the hands of an individual after it has been accepted as belonging to another person under VDISRs.3. Can the income be assessed in the hands of an HUF when a certificate under VDIS has been obtained in the status of HUFRs.4. Can the same income be taxed in the hands of different individuals after being assessed in the hands of one person under VDISRs.Analysis:Issue 1:The Tribunal upheld the order of the Commissioner of Income Tax (Appeals) stating that income accepted under VDIS cannot be assessed in the hands of the assessee-individual. The Tribunal found that once the department accepted the income as belonging to another person under VDIS, it was improper for a lower assessing authority to reassess the same income in the hands of a different individual.Issue 2:The Appellate Authority set aside the assessment order, holding that the Assessing Authority could not assess the income in the hands of the individual after it had been declared under VDIS and accepted by the Commissioner. The Appellate Authority reserved the liberty to proceed against the assessee in the hands of the HUF under Section 158BD of the Act.Issue 3:The Tribunal reiterated that once a certificate is issued under VDIS, the income cannot be taxed in the hands of the declarant or any other person. The Tribunal found that as long as the certificate is valid, the income subject to the certificate cannot be taxed in the hands of the declarant or any other individual.Issue 4:The Tribunal emphasized that the same income cannot be taxed in the hands of different individuals once it has been assessed and tax paid by one person under VDIS. The Tribunal held that if a certificate is obtained through misrepresentation, the proper course would be to recall the certificate. Since no such steps were taken and the certificate was still valid, the income could not be reassessed in the hands of different individuals.In conclusion, the High Court dismissed the appeal filed by the revenue, stating that the orders passed by the Tribunal and the Appellate Authority were in accordance with the law. The Court ruled in favor of the assessee, emphasizing that the income accepted under VDIS cannot be reassessed in the hands of different individuals once it has been taxed and the tax paid by one person.