TaxTMI 
TaxTMI 
2013 (11) TMI 16
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....0 as payments to artists, technicians, manager, etc., are on the basis of mere suspicions, surmises and conjectures and, therefore, the findings of the Appellate Tribunal are unsustainable ?" Broadly, the facts of the case indicate that search operations were carried out at the office-cum-residence of the assessee at Bombay on December 6, 1995, and December 7, 1995. A search was also carried out at his premises in Hyderabad from December 7, 1995 to January 20, 1996. During the search operations, the Revenue seized records in the form of loose slips as well as computerized accounts relevant for the previous years 1993-94, 1994-95 and partly for the year 1995-96. In addition, some cash was also seized. On an examination of the seized material, the Assessing Officer concluded that the assessee had some undisclosed income which was required to be assessed under Chapter XIV-B of the Act as introduced by the Finance Act, 1995. Accordingly, a notice under section 158BC(a) of the Act was issued to the assessee requiring him to file a return for the block period 1986-87 to 1996-97. The assessee filed the block return in which he admitted an income of Rs. 45,48,600. After reconci....
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....laim deductions on the deemed income. It seems that the proviso was introduced to prevent this and ensure that such deductions "shall not be allowed". The question is whether a deduction "shall not be allowed" in respect of only future claims or even in respect of existing or closed claims. In other words, what is required to be ascertained is whether the proviso is declaratory or clarificatory of the law and, therefore, retrospective in operation or whether it creates a new obligation on an assessee and is, therefore, prospective in operation. That is the substantial question of law framed for our consideration. During the course of submissions, it was not disputed that the substantive provision of section 69C of the Act is a declaratory or clarificatory provision. Indeed, this question did not arise, and it is for this reason that no such dispute was raised. However, we may only note that in Yadu Hari Dalmia v. CIT [1980] 126 ITR 48 (Delhi), it was held by the Delhi High Court that section 69C of the Act is a clarificatory provision and embodies a rule of evidence. It was, therefore, given retrospective operation. It may be added, en passant, that in relation to section 69C....
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....umalai Chemicals Ltd. v. Union of India [2011] 183 Comp Cas 380 (SC) ; [2011] 6 SCC 739 in the following words (page 389 of 183 Comp Cas) : "Substantive law refers to body of rules that creates, defines and regulates rights and liabilities. Right conferred on a party to prefer an appeal against an order is a substantive right conferred by a statute which remains unaffected by subsequent changes in law, unless modified expressly or by necessary implication. Procedural law establishes a mechanism for determining those rights and liabilities and machinery for enforcing them. Right of appeal being a substantive right always acts prospectively. It is trite law that every statute is prospective unless it is expressly or by necessary implication made to have retrospective operation . . . Procedural law is retrospective meaning thereby that it will apply even to acts or transactions under the repealed Act." Declaratory or clarificatory statutes are sometimes referred to as curative statutes and they are retrospective in operation. Such statutes are intended to remove an existing ambiguity in the interpretation or understanding of the Act. Some relevant decisions concerning such statu....
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....bsp; ".......... seeks to clarify the law so as to remove doubts leading to the courts giving conflicting decisions, and in several cases directing the Revenue to refund the entire amount of income-tax paid by the assessee where the Revenue was not in a position to frame a fresh assessment. Being clarificatory in nature it must be held to be retrospective, in the facts and circumstances of the case. It is well settled that the Legislature may pass a declaratory Act to set aside what the Legislature deems to have been a judicial error in the interpretation of statute. It only seeks to clear a meaning of a provision of the principal Act and make explicit that which was already implicit." 14.4 CIT v. Podar Cement Pvt. Ltd. [1997] 226 ITR 625 (SC) wherein the Supreme Court quoted with approval the following passage from Justice G. P. Singh's (sixth edition 1996) Principles of Statutory Interpretation under the heading "Declaratory statutes" (page 652) : "In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarifica....
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....ission in the section and which proviso is required to be read into the section to give the section a reasonable interpretation, it could be read as retrospective in operation, particularly to give effect to the section as a whole. Accordingly, this court, in Allied Motors P. Ltd. held that the first proviso (to section 43B of the Income-tax Act) was curative in nature, hence, retrospective in operation with effect from 1st April, 1988." The principles that emerge from the aforesaid decisions indicate as follows : (i) A statute is prima facie prospective in operation, but it may be given retrospective operation expressly or by necessary implication. (ii) If a statute affects a substantive right or a vested right or creates a new obligation, it is prospective in nature. However, a statute affecting a procedural right is retrospective in operation. (iii) A declaratory or a clarificatory or a curative law removes doubts on the interpretation of a statute or corrects its erroneous interpretation. Such a statute is retrospective in nature. Similarly, if an explanatory law is clarificatory in nature or clears an existing ambiguity, it is also retrospective in nature. (iv) ....
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....ssessee to justify the expenditure and thereafter claim a deduction thereon. However, with the insertion of the proviso, that window has been closed and even if an explanation for the expenditure is forthcoming, it will not benefit the assessee and the expenditure would nevertheless be taxable as a part of the total income. To this extent, the existing right of the assessee to explain and justify the expenditure has been taken away with the insertion of the proviso and has made the assessee open to a liability. In view of this, in our opinion, the proviso does not have retrospective operation inasmuch as it changes the existing legal position and creates a new obligation on the assessee. There is also nothing in the language of the proviso that compels us to give it retrospective effect. In support of his contention that the proviso to section 69C of the Act does not have a retrospective operation, learned counsel for the assessee relied on Krishna Textiles v. CIT [2009] 310 ITR 227 (Guj). It is true that the decision mentions that the proviso does not have retrospective operation, but that is only in passing and without any discussion on the subject. In any event, we are in agr....
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....will, accordingly, apply in relation to the assessment year 19992000 and subsequent years." This document too may not have any binding effect per se, but again this document suggests that the introduction of the proviso to section 69C of the Act would affect the existing rights of an assessee and might place a financial burden on the assessee requiring payment of tax with retrospective effect. It is to avoid this situation that the Central Board of Direct Taxes made it clear that the provision would have prospective effect. Assuming the Central Board of Direct Taxes Circular has no binding effect, yet where the Revenue itself decides to interpret the law in favour of a citizen, there is no reason why the court should interpret it to the detriment of the citizen and impose on him a financial burden which even the Revenue is not keen to impose. Under these circumstances, it appears to us that even if we are wrong in holding that the proviso to section 69C of the Act does not have retrospective operation, the Central Board of Direct Taxes has, in any case, limited its operation prospectively with effect from the assessment year 1999-2000 onwards. Therefore, whichever way the ....
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....e projected expenses scribbled on a loose sheet of paper and could not be conclusive proof of actual expenditure. Again, the Assessing Officer did not believe the explanation since some of the expenses shown on the seized document could not be deferred such as hotel expenses, etc., and, therefore the Assessing Officer disallowed an amount of Rs. 7,10,000 Rs. 1,94,700 = Rs. 5,15,300 being unexplained expenditure. The Tribunal also did not accept the explanation of the assessee in this regard and upheld the conclusions arrived at by the Assessing Officer. The third addition pertains to an amount of Rs. 18,95,000. As per the seized documents, the assessee made certain payments of Rs. 28,60,000 out of which an amount of Rs. 9,65,000 was reflected in the books of account of the assessee. The difference of Rs. 18,95,000 was added as unexplained expenditure incurred by the assessee. In this regard also, the explanation of the assessee was that payments were made to artists, technicians, manager, etc., in connection with the film being produced by him and according to the assessee the payments disclosed in the seized documents reflected only preliminary estimates. Some payments we....
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....o his detriment. Secondly, it was submitted that the statement was in any event retracted by the assessee. In support of these submissions, reliance was placed on Kailashben Manharlal Chokshi v. CIT [2010] 328 ITR 411 (Guj) and CIT v. S. Khader Khan Son [2008] 300 ITR 157 (Mad). In this context, learned counsel also referred to a circular issued by the Central Board of Direct Taxes on March 10, 2003, to the following effect : "Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search and seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search and seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Departm....