TaxTMI 
TaxTMI 
2024 (7) TMI 1679
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....er IDS, 2016 amounting to Rs. 55,65,000 as unexplained cash credit u/s 68 of the Act. The action of the Id. CIT(A)/NFAC in confirming the action of ld. AO is illegal, unjustified, arbitrary and against the provisions of Income Declaration Scheme, 2016. Relief may please be granted by treating the interest income as explained. 2 In the facts and circumstances of the case and in law, the Id. CIT(A)/National Faceless Appeal Center (NFAC) has erred in confirming the action of the ld. AO in treating the interest income earned on Money Lending declared under IDS, 2016 amounting to Rs. 55,65,000 as unexplained cash credit u/s 68 of the Act, and invoking the provision of section 115BBE. The action of the Id. CIT(A)/NFAC in confirming the action of ld. AO is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by treating the interest income as explained and liable for tax at normal rates. 3 The assessee craves his right to add, amend or alter any of the grounds on or before the date of hearing." 3. Succinctly, the fact as culled out from the records is that assessee HUF M/s Shanti Kumar Sethi & Sons filed its returns of income....
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....e from the assessee regarding the income declared by the assessee under IDS, Scheme 2016 but inquiries were made to explain the source of interest income claimed to have been earned on such declaration to justify the cash deposit over and above the amount declared in the IDS. The assessee contended that once immunity is accepted by the Department, the natural corollary was that the names of the persons would not be asked from whom the interest is received till the amount is recovered from those persons. The assessee contended that question number 8 of CBDT Circular number 25 of 30th June, 2016 covers its case because the relevant answer by the CBDT confirms the grant of immunity in respect of the transaction of that nature and it would not be justified to exclude its transaction from the ambit of that clarification. He thus noted that as the assessee did not file any details regarding the identity of persons from whom the interest was claimed to have been earned post the IDS disclosure the ld. AO did not accept the reply to the show cause. Further the AO held that the case was not covered by question number 8 of CBDT Circular which applied to purchase of property and that question ....
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....he Central Government in the Official Gazette, a declaration in respect of any income chargeable to tax under the Income-tax Act for any assessment year prior to the assessment year beginning on the 1st day of April, 2017- (a) for which he has failed to furnish a return under section 139 of the Income-tax Act; (b) which he has failed to disclose in a return of income furnished by him under the Income-tax Act before the date of commencement of this Scheme; (c) which has escaped assessment by reason of the omission or failure on the part of such person to furnish a return under the Income-tax Act or to disclose fully and truly all material facts necessary for the assessment or otherwise Even if the delayed interest income pertained to years before AY 2017-18 also, no immunity can be granted as immunity under IDS is subject to disclosure and payment of taxes. Section 184 is reproduced hereunder: 184. (1) Notwithstanding anything contained in the Income-tax Act or in any Finance Act, the undisclosed income declared under section 183 within the time specified therein shall be chargeable to tax at the rate of thirty per cent. of such undisclosed income....
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....d penalty on amounts which it claimed, were invested by it as share applicant, (though the share applicants were other companies and entities) to the assessee in the present case, cannot by any rule or principle inure to the assessee's advantage. In similar circumstances, dealing with another scheme (the Kar Vivad Samadhan Scheme 1988, a previous tax amnesty scheme) this court had, in State, CBI v. Sashi Balarubramanian [2006] 157 Taxman 261/[2007] 289 ITR 8 held as follows: "an immunity is granted only in respect of offences purported to have been committed under direct tax enactment or indirect tax enactment, but by no stretch of imagination, the same would be granted in respect of offences under the Prevention of Corruption Act. A person may commit several offences under different Acts; immunity granted in relation to one Act would not mean that immunity granted would automatically extend to others. By way of example, we may notice that a person may be prosecuted for commission of an offence in relation to property under the Indian Penal Code as also under another Act, say for example, the Prevention of Corruption Act. Whereas charges under the Prevention of Corrupt....
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....irm would not include within its purview its partners. But, in a case of this nature where fraud is alleged, we cannot be oblivious of the fact that each firm acts through its partner. A firm is the conglomeration of its partners, and is not a juristic person. In the instant case, the purported disclosure made by the firm relates to the same amount which has been disclosed by the partner. Even the source of income was found to be the same. As the income of a firm visa- vis its partners have a direct co-relation, in our opinion, while construing a statute granting immunity, it should not be construed in such a manner so as to frustrate its object." 33. In an earlier decision, Tekchand v. Competent Authority [1993] 2 SCR 864 it was similarly held that immunity granted by a tax amnesty scheme in respect of liabilities under some enactments, did not afford protection against action under other enactments or laws: "13. So far as the contention based upon sections 11 and 16 of Voluntary Disclosure Act is concerned we have already pointed out, while setting out the said provisions that the immunity conferred thereunder is of a limited character and that it is not an abso....
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.... 984 of 2019 dated 23/09/2020. In view of the aforesaid discussion, both grounds no. 1 and 2 are dismissed." 5. As the assessee did not find any favour from the order of the ld. CIT(A), the assessee has preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. To support the various grounds so raised by the assessee the ld. AR of the assessee, has filed the written submissions and the same is reproduced herein below: GIST OF SUBMISSIONS Ground No. 1: Treating interest deposit of Rs. 56,50,000 as unexplained u/s 68. Ground No. 2: Invoking the provisions of Section 115BBE. BACKGROUND FACTS The Assessee HUF declared a sum of Rs. 6,02,00,000 under Income Declaration Scheme "(IDS)", 2016. The Assessee had filed Form No.1 under IDS with the following narration: Market Lending along with interest Rs. 6,02,00,000. The Assessee had paid tax @45% on the above income declared under IDS. The declaration was accepted by the Department. The Assessee deposited the said cash in its bank account on the following dates, (the chart of which is appearing at AO page 2): S. No. Date of Deposit Amount Deposite....
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....odus Operandi of Market Lending was also explained. It was also explained that the interest income was not the past income, but was current income earned after 01-04-2016 i.e. post IDS. [Para 2 page 5 of CIT(A)] 1.2 It was explained that this interest income was earned post IDS from the same parties to whom money was lent on interest. It was further explained that Q. No 8 of FAQs issued by CBDT granted immunity from disclosing the names of counter parties. It was explained that seeking details of such persons would render the said immunity granted vide Q. No 8 as meaningless and would frustrate the very objective of IDS. In the peculiar facts of the present case, the interest income earned, till money is finally recovered, after a short period from the said borrowers, is not a new immunity but extension of IDS immunity. [Para 6 page 5 of CIT(A)] 1.3 The human probability test was in favor of the Assessee as nobody would believe that post IDS, the Assessee waived interest. [Para 9 and 10 page 6 1.4 It was also submitted that the explanation offered deserves acceptance and reliance was placed on the judgment of Hon'ble Supreme Court in the case of Sreelekha....
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....d discrepancies with data submitted to registrar of companies as discussed in above para. In other words, the assessee has not been able to establish that the income admitted under IDS 2016 by Garg Logistics Pvt.. Ltd. went in the books of investor companies. It is worth to highlight that Investor companies are independent paper companies and they have provided entries independently and not through Garg Logistics Pvt. Ltd. 2.3 Thus the claim of the assessee company that Cash declared by Garg Logistics was utilized to make investment in assessee company through paper companies remains unexplained........" The Hon'ble Supreme Court at para 34 of the order has held as under: - "This court is, therefore, of the opinion that the High Court fell into error, in holding the sequitur to a declaration under the Income Declaration Scheme can lead to immunity (from taxation) in the hands of a non-declarant." It is submitted that the Assessee himself is declarant under IDS, 2016 and he himself is seeking immunity from disclosing the names of those persons to whom, he had advanced his unaccounted money on interest. Thus, a declarant seeking immunity is dif....
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....retation, the rule of purposive construction should be applied.' 3.4 Tekchand v. Competent Authority [1993] 2 SCR 864: - This judgement is also with reference to seeking immunity under Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA). The Hon'ble Court held that Voluntary Disclosure Act, 1976 provided for immunity under Income Tax and cannot be extended to any other law. 4. Without prejudice to above, it is submitted that Section 68 requires the explanation to be offered about the "Nature" and "Source thereof". In the instant case, proper explanation is offered regarding the nature. It was explained that the nature of receipt is interest. The said explanation was corroborated by the disclosure made in IDS which had following narration Market Lending along with interest Rs. 6,02,00,000. In respect of source also, the explanation given was that the source of interest was the borrowers to whom unaccounted money was lent on interest. The said explanation was also corroborated by the declaration so made under IDS. The interest income, otherwise also, stands explained because, corresponding capit....
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....se the asset for a particular date and the assets disclosed being interest bearing advances given against security of hundi, undated cheque and property documents as on 31.03.2016 the interest earned thereon till the recovery of the said amount cannot be considered as unexplained money. The case of the assessee is covered by the CBDT circular and the immunity granted in the scheme to the assessee for not disclosing that details of the persons to whom the advances were given. The ld. AO till those advances realised cannot considered that disclosed sources as undisclosed income of the assessee and if it allowed then the purpose of the IDS will be frustrated and that cannot be intention of the legislature. Thus, ld. AR of the assessee submitted that test of human probability goes in favor of the assessee. The ld. AR of the assessee also submitted that there cannot be so intention of the assessee when there are paying tax @ 45 % why left that amount as on 31.03.2016 but since the advances disclosed were interest bearing the assessee fairly based on the set of facts also disclosed the income of the interest unearned by the assessee for which the disclosure is made. It is not disputed th....
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....m. Thus, considering the human probability as decided by the apex court in the case of Durga Prasad More the income is correctly taxed as unexplained. Even the ld. CIT(A) in detailed order confirmed the view of the ld. AO. He has also discussed various case laws as to why the benefit claimed by the assessee cannot be given under the IDS, 2016 as the assessee failed to give the source of the cash deposited into the bank account in addition to the amount disclosed in the IDS scheme, 2016. Based on these arguments the ld. DR supported the order of the lower authority. 8. We have heard the rival contentions and perused the material placed on record. The apple of discord in this case is that whether the interest income received by the assessee after disclosure of the assets in the income declaration scheme till it gets realised, whether that interest income is to be considered as explained source of income or that of the undisclosed income of the assessee as it is evident and undisputed that the assessee has disclosed assets in the form of "Market lending inclusive of interest, against security of hundi, undated cheque and property document as on 31.03.2016." The purpose of the schem....