2013 (2) TMI 270 - HC - Income Tax

Appellant entitled to benefits under VDIS for increased stock, cash, and debtors. No reduction for damaged goods.

M/s. Jainson Versus Income Tax Appellate Tribunal, Kolkata Bench A. Camp at Jashedpur& Ors.

M/s. Jainson Versus Income Tax Appellate Tribunal, Kolkata Bench A. Camp at Jashedpur& Ors. - [2013] 352 ITR 28 Issues Involved:1. Applicability and benefits of the Voluntary Disclosure of Income Scheme (VDIS) 1997.2. Presumption of existence of undisclosed assets for subsequent years.3. Reduction in stock value due to damaged goods.Issue-wise Detailed Analysis:1. Applicability and benefits of the Voluntary Disclosure of Income Scheme (VDIS) 1997:The appellant disclosed its undisclosed income under the VDIS 1997, which included stock, cash, and sundry debtors for the years 1994-95, 1995-96, and 1996-97. The appellant contended that the disclosure made on 26th December 1997 should include the stock, cash, and sundry debtors as on 31st March 1996, and these should be considered as the opening balance for 1st April 1996, thereby affecting the assessment for the year 1997-98.The appellant argued that under clause 64(2)(ii) of the VDIS, the benefit of voluntary disclosure was not applicable only for the 'previous year' in which the survey under section 133A of the Income Tax Act was conducted, but was available for earlier years. This was supported by CBDT Circulars No.754 and No.755, which clarified that the bar on disclosure was limited to the year of the survey and not to previous years.2. Presumption of existence of undisclosed assets for subsequent years:The appellant relied on the Division Bench judgment in Sri Gyan Chand Jain Vs. Commissioner of Wealth Tax and the Supreme Court judgment in Commissioner of Wealth Tax Vs. J.K. Cotton Manufacturers Ltd., which held that undisclosed income or assets presumed to exist at a particular time could be presumed to continue for a reasonable period unless proven otherwise by the Revenue. The appellant argued that since the Revenue accepted the undisclosed stock, cash, and sundry debtors for the years 1994-95 and 1995-96 under VDIS, these should be presumed to continue for the subsequent years, including 1997-98, unless proven sold or exhausted by the Revenue.3. Reduction in stock value due to damaged goods:In T.A No.35/2001, the appellant claimed a reduction in stock value by 5% due to damaged goods, which was allowed in a similar case (T.A No.36/2001) but denied in the present case. The appellant argued that the Assessing Officer calculated the stock value based on the sale price without considering discounts for cut pieces, outdated designs, or damaged goods.Judgment Analysis:The court examined the VDIS 1997, particularly clause 64(2), and CBDT Circulars No.754 and No.755. It was established that the appellant was not entitled to the benefit of VDIS for the assessment year 1997-98 due to the survey conducted on 16th October 1996. However, the appellant was entitled to disclose undisclosed income for previous years and subsequent assessment years.The court held that the undisclosed stock, cash, and sundry debtors disclosed under VDIS for the years 1994-95 and 1995-96 should be presumed to continue for a reasonable period, including the assessment year 1997-98, unless proven otherwise by the Revenue. The Revenue failed to provide evidence that these assets were sold or exhausted.Regarding the reduction in stock value due to damaged goods, the court held that it was a question of fact and not a question of law. Therefore, the appellant's claim for a 5% reduction in stock value was not upheld in T.A No.35/2001.Conclusion:The court allowed the appeals, holding that the appellant was entitled to the benefit of increased stock, cash, and sundry debtors due to the voluntary disclosure under VDIS for previous years, which should be presumed to continue for subsequent years, including 1997-98. The claim for a reduction in stock value due to damaged goods was not upheld as it was a factual issue.