Vinod Bhandari Vs PCIT (ITAT Indore)
Conclusion: Where there were two funds one which was already taxed and other had not and there were remittances during the accounting year for a certain sum, the source of which was not indicated then the presumption was that the remittances should have been from the fund which had already suffered tax. Thus, assessee was entitled to the telescoping benefit of the income surrendered during the year to the cash deposited in the bank account as the surrendered income which was invested in hundis were received back in cash and were duly accounted in the books of accounts.
Held: Assessee was a doctor by profession. Survey proceedings u/s 133A was carried out at the premises of M/s B Hospital & Research Centre (BHRC). During the course of survey proceedings, incriminating material in the form of Hundis were found and impounded. Assessee in his individual capacity admitted the discrepancies of un secured loan given to various persons and surrendered additional income of Rs.7 crores for Financial Year 2011-12. Subsequently, assessee e-filed return of income for assessment year 2012-13 declaring income of Rs.7,01,74,054/- which was further revised declaring income of Rs.7,41,07,850/- AO observed that the original return was a belated return as provided u/s 139(4) and thus could not be revised. AO therefore treated the revised return filed as invalid return and assessment proceedings were carried out taking the basis of original return filed. AO also observed that there were huge cash deposits in the bank account of the assessee during the month of February and March. Assessee claimed that the surrendered income of Rs.7 crores which was invested in the form of hundi matured during the year and the money so received (Principal and Interest) was deposited in the bank account and the same were duly recorded in regular books. However AO in view of Vyapam scam which involved the allegation of bribe of illegal money for admission in medical colleges in Madhya Pradesh, took a view that assessee being unable to explain the source of cash deposited in bank account by not providing the information about the persons named in the hundi found during the course of survey, did not accept the source of cash explained by the assessee thus the alleged cash deposit of Rs.7,34,79,097/- was treated as unaccounted income earned from Vyapam scam and made addition thereof. Accordingly income assessed at Rs. 14,75,87,000/-. It was held that proceeding initiated against the assessee under the Vyapam case fall in financial year 2012-13 i.e. subsequent year whereas cash was deposited during Financial Year 2011-12. There was no evidence on the record to substantiate this fact that assessee received any unaccounted income in the form of bribe for admission in medical college during financial year 2011-12. AO merely on the basis of surmises and conjectures had taken this view. He ignored the fact that the assessee had surrendered Rs.7 crores as unaccounted income during the year. This unaccounted income in cash was used in earning interest income by way of giving short term advance on hundis. Only the name of person receiving the money, his signature, amount given as advance, rate of interest, date of entering into the hundi agreement and the maturity date of receiving the money were provided. When assessee showed the original hundi he received the principal and interest. Assessee had surrendered his income from other source as unexplained money which was not recorded in the books of accounts and the assessee failed to offer any explanation about the nature and source of acquisition of these unexplained money/income. The hundis were impounded during the course of survey which itself was sufficient evidence that unaccounted income has been invested. The unaccounted income had been offered to tax which was not in dispute. Also if there were two funds one which was already taxed and other had not and there were remittances during the accounting year for a certain sum, the source of which was not indicated then the presumption was that the remittances should have been from the fund which had already suffered tax. Thus, assessee was entitled to the telescoping benefit of the income surrendered during the year to the cash deposited in the bank account.
FULL TEXT OF THE ITAT JUDGEMENT
The above captioned appeals are filed at the instance of assessee pertaining to the Assessment Year 2012-13. ITA No.350/Ind/2017 is directed against the order of Ld. Pr. Commissioner of Income Tax-1 dated 30.03.2017 passed u/s 263 of the Act. ITA No.57/Ind/2017 is directed against the order of Ld. Commissioner of Income Tax-1, Indore dated 22.11.2018 which is arising out of the order u/s 143(3) r.w.s. 263 of the Act dated 27.12.2017 framed by DCIT-2(1), Indore. ITA No.66/Ind/2017 is directed against the order of Ld. Commissioner of Income Tax-III, Indore dated 23.11.2016 which is arising out of the order u/s 143(3) of the Act dated 24.03.2015 framed by ACIT-2(1), Indore.
2. As the issues raised in these appeals are common and relates to same assessee these were heard together and are being disposed off by way of this consolidated order for sake of convenience and brevity.
3. Brief facts as culled out from the records are that the assessee is a Doctor by profession and earns income from Remuneration, House property, Share of profit and income from other sources. Survey proceedings u/s 133A of the Act was carried out at the premises of M/s Bhandari Hospital & Research Centre (In short BHRC) on 24.09.2011. During the course of survey proceedings certain discrepancies were noticed. Incriminating material in the form of Hundis were found and impounded. The assessee in his individual capacity admitted the discrepancies of un secured loan given to various persons and surrendered additional income of Rs.7 crores for Financial Year 2011-12 relevant to Assessment Year 2012-13. Subsequently assessee e-filed return of income for Assessment Year 2012-13 on 28.03.2013 declaring income of Rs.7,01,74,054/- which was further revised on 18.07.2013 declaring income of Rs.7,41,07,850/- The case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Act were duly served upon the assessee.
4. During the course of assessment proceedings Ld. A.O observed that the original return is a belated return as provided u/s 139(4) of the Act and thus cannot be revised. Ld. A.O therefore treated the revised return filed on 18.07.2013 as invalid return and assessment proceedings were carried out taking the basis of original return filed on 28.03.2013. In the original return filed the assessee claimed deduction of interest expenditure u/s 57 at Rs. 93,56,983/- and in the revised return it was claimed at Rs.54,23,189/-. Since the Ld. A.O treated the revised return as invalid the alleged difference of interest expenditure of Rs. 39,33,844/- (Rs.93,56,983/- (-) Rs.54,23,189/-) was disallowed. Ld. A.O also observed that there were huge cash deposits in the bank account of the assessee during the month of February and March. Assessee claimed that the surrendered income of Rs.7 crores which was invested in the form of hundi matured during the year and the money so received (Principal and Interest) was deposited in the bank account and the same were duly recorded in regular books. However Ld. A.O in view of Vyapam scam which involved the allegation of bribe of illegal money for admission in medical colleges in Madhya Pradesh, took a view that the assessee being unable to explain the source of cash deposited in bank account by not providing the information about the persons named in the hundi found during the course of survey, did not accept the source of cash explained by the assessee thus the alleged cash deposit of Rs.7,34,79,097/- was treated as unaccounted income earned from Vyapam scam and made addition thereof. Accordingly income assessed at Rs. 14,75,87,000/-. Against the addition made by the Ld. A.O assessee filed appeal before Ld. CIT(A) who did not give any relief to the assessee against which the assessee is in appeal before the Tribunal vide ITA No.66/Ind/2017 which will be dealt by us in the subsequent paras.
5. Subsequent to the assessment order for Assessment Year 2012-13 framed u/s 143(3) of the Act on 24.03.2015, Ld. Pr. CIT-1 assuming jurisdiction u/s 263 of the Act issued show cause notice after being satisfied that the assessment framed u/s 143(3) of the Act dated 24.03.2015 is erroneous and prejudicial to the interest of revenue. Ld. PCIT-1 after considering the submission made by the assessee directed the Ld. A.O to pass a fresh assessment after making proper enquiries and investigation as directed in the order u/s 263 of the Act. Against the order u/s 263 assessee is in appeal before the Tribunal by way of filing ITA No. 350/Ind/2017.
6. As regards ITA No.57/Ind/2017 the same is arising out of the assessment order u/s 143(3) r.w.s. 263 of the Act wherein the Ld. A.0 did not made any new addition and same income of Rs. 14,75,87,000/- assessed as was assessed u/s 143(3) of the Act. Against this order also assessee went before Ld. CIT(A) but could not succeed and now the assessee is in appeal before the Tribunal vide ITA No.57/Ind/2017. The fate of this appeal will depend on the outcome of our decision to be taken in the case of ITA No.350/Ind/2017.
7. Now we first take up ITA No.350/Ind/2017 wherein the assessee has raised various grounds but the substantial issue is challenging the order issued u/s 263 of the Act passed by Ld. PCIT1 contending that Ld. PCIT exceeded his jurisdiction by wrongly invoking the provisions of 263 of the Act and the impugned order is bad in law and void initio. Following grounds of appeal have been raised: –
THE ORDER U/S 263 DATED 30.3.2017 IS ILLEGAL, VOID AND WITHOUT JURISDICTION:
1.1 That on the facts and circumstances of the case and in law, the order dated 30.3.2017 passed by the Commissioner of Income-tax (CIT), u/s 263 of the Income-tax Act, 1961 (‘the Act’) setting aside the assessment framed u/s 143(3) of the Act as erroneous and prejudicial to the interest of the revenue is without jurisdiction, bad in law and void ab-initio.
1.2 That the AO having already added the surrendered income of 7 crore there cannot be any prejudice attributed u/s 263 and thus the order of assessment dated 24.3.2015 cannot be regarded as prejudicial to the interest of revenue merely because ld. CIT held that the AO should have acted as a police officer and not as a taxing authority and should have tried to probe the source of already taxed income.
1.3 That ld. CIT also failed to appreciate that, u/ s 263 of the Act, an order of assessment cannot be set-aside to AO to simply to make further enquiries on already taxed income and thereafter pass fresh order of assessment. Therefore, and as such, impugned order and directions issued u/s 263 are untenable, contrary to law unsustainable.
2.NO JUSTIFICATION EITHER IN LAW OR ON FACTS FOR THE CIT TO INVOKE HIS POWERS U/S 263 ON THE ALREADY TAXED INCOME.
2.1 The powers under section 263 cannot be invoked to ask the AO to tarnish the image of the assessee and thus the following directions made by the CIT in his order deserve to be quashed
i) The AO has accepted surrender of Rs. 7 crore as income from other sources without examining the real source of such income. No conclusive inquiry regarding the source of such income was made.
ii) The AO was required to examine the impounded material properly to assess the correct income of the assessee but the AO has not done the
iii) The AO has not examined the source of Rs. 7 crore surrendered with the Vypam case as to whether this is income generated by contravening the established law.
iv) The AO should have asked the involved agencies such as Police, ED etc the information to establish the correct source of income.
3.NO JUSTIFICATION FOR THE CIT TO ATTRIBUTE NON-INITIATION OF ( PENALTY ON Rs. 39,33,844 AS AN ERROR.
3.1 That the assessment order clearly points out the fact that the disallowance of Rs. 39,33,844 was intimated by the assessee himself and was not discovered by the AO thus the Ld. CIT failed to appreciate that there was no occasion for the AO to initiate penalty.
4.NO JUSTIFICATION EITHER IN LAW OR IN FACTS IN EXERCISING JURISIDCTION U/ S 263 IN RESPECT OF THE FOLLOWING ITEMS SINCE THERE WAS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER AND THE ORDER IN RESPECT OF THESE ITEMS WAS PASSED AFTER DUE AND SUFFICIENT ENQUIRY AND THE SAME WAS ALREDAY TAXED :-
4.1 No justification to regard increase in income of Rs. 41,07,848 shown in the return as causing any prejudice to the Income-tax department.
4.2 No justification to ask the AO to make independent verification of certificate of done uls80G(S)(vi) and LIC receipt as these were duly and sufficiently verified by the AO and even the CIT could not point out any error in the documents filed.
4.3 No justification to ask the AO to make enquiry regarding year-wise investment made in movable and immovable properties which was already done by the AO.
THAT EXTENSIVE INFORMATION WAS SOUGHT BY THE AO AND WHICH WAS DULY PRODUCED AND EXAMINED BY THE AO WHICH COVER ALL ASPECTS WHICH HAVE NOW BEEN AGAIN SET-ASIDE FOR REEXAMINATION BY THE CIT UIS 263. THUS THE PRESENT ORDER UIS 263 IS ONLY AN ATTEMPT TO MAKE FISHING AND ROVING ENQUIRIES INTO ALL ASPECTS WHICH HAVE ALL BEEN PREVIOUSLY EXAMINED BY THE AO. THE ORDER U/ S 263 IS THEREFORE ILLEGAL, VOID AND WITHOUT JURISDICTION.
8. Ld. PCIT after pursuing the assessment records and the assessment order framed u/s 143(3) dated 24.03.2015 invoked the provisions of Section 263 of the Act which is meant for revision of orders which are considered as erroneous and prejudicial to the revenue. Following show cause notice was issued to the assessee on 15.3.2017.
“A. The AO has added interest. income of Rs. 39,33,844/ — based on its acceptance of the assessee in the non-est return. However no penalty u/s 271(1)(C) for inaccurate particulars of income filed in original income was initiated.
B. The AO, has not obtained the break-up of income of Rs. 41,07,848/ – (excluding 7 Crores surrendered), while in earlier Year income was only 6,37,300/- .The AO has also accepted surrender of Rs.7 crores represented by Hundis as ‘income from other sources’ without examining the real sources of said income. The AO herself has mentioned in page 5 that assessee is involved in Vyapam case and sources of these funds should have been examined.
C. The AO has mentioned that impounded material I was verified on test check basis which is not proper as it has be complete check in respect of impounded material. The AO has not mentioned as to’ from which books of account said verification was carried out.
D. The AO, has not examined the link of Sources of Rs. 7 Crores surrendered with the Vyapam case as per which money Was illegally Obtained for admissions etc in the medical college controlled by assessee. In that case it will be income generated by the assessee by contravening the established law.
E. The AO has not collected information from various agencies involved in investigation of Vyapam case i.e. Police Enforcement Directorate and other law enforcement agencies to determine correct income of the assessee.
F. In respect of claim of deduction under chapter VIA, no. LlC receipt of Rs. 49,062/ – is on record and for claim of 80G of Rs.26 Lakhs as donation to SAIMS and SAIMST, the certificate given by the competent authority is only up to 31.03.2011. Proper investigation was not made before allowing the said deduction and claim allowed contrary to law.
G. The enquiry regarding year wise investment made in movable and immovable property and accretion in wealth was not made”.
9. On receiving the show cause notice assessee made detailed written submissions which read as follows:-
With reference to the show cause notice issued to us, as a general submission against all of your observations, we would like to bring to your attention that the explanation (2) to sub-section 1 of section 263 has been inserted w.e.f I/ 6/ 2015 and is thus applicable to assessment orders passed after I/ 6/ 2015. Consequently, the discretionary powers bestowed on you by virtue of sub-clause (a) of Explanation (2) are not applicable to the Assessment order passed in our case which was passed in January 2015 and which is subject matter, of your referred notice. Also the explanation inserted is not retrospective in nature as has been clarified / held in the following order of the Supreme court.
The Supreme Court in CIT v. Vatika Township P. Ltd (2014) 367 ITR 466 observed: ” The fundamental rule is that no statute shall be construed to have a retrospective operation unless such a construction appears very dearly in the terms of the Act, or arises by necessary and distinct implication’. It has been consistently held that a provision must be read subject to the rule that in the absence of an express provision or clear implication, the Legislature does not intend to attribute to the amending provision, a greater retrospectivity than is expressly mentioned’. It is settled law that a taxing provision imposing liability is governed by the normal presumption that it is not retrospective as held in 5.5. Gadgil v. Lal And Co. (1964) 531TR 231 (SC).
3. Sir the assessee had filed the revised return suo moto on 18/ 10/2013 before the issue of notice u/s 143(2) (Dt. 14/08/ 2013).Therefore there is no question of penalty U/ s 271(1)(c) in the above case for furnishing inaccurate particulars of income filed in original return of income.
Assessee had already paid the applicable taxes on the above before filing the revised return. Therefore it cannot also be said that there was anything prejudicial to the interest of the Revenue.
Further mere non initiation of penalty u/s 271(1)(c) cannot be considered a good ground for invoking section 263 Master Vijay Oswal ITO [2003] 87 ITO 95 (Rajkot)(Trib).
4. Total income of the assessee was Rs. 7,41,07,848 including surrender income. It is incorrect to say that the AD has not obtained the break-up of income of 41,07,848/ – (excluding 7 crores surrendered)
1. AO had obtained
a. Copies of return of income with detailed computation of income
b. Capltal account, Statement of affairs with (submission dt. 27/08/2013)
c. Revised return of income “with complete breakup of Rs. 7,41,07,848/- (Submission dated 08/ 08/ 2014)
2. AO had enquired the following vide his (Notice dt.14/ 02/ 2014 and reply dt. 24th Feb 2014)
a. Details of sources of income
b. Details of expenses above Rs. 5,000/ –
c. Details of declared incomes during survey
d. Evidences of Deductions claimed under chapter VI-A
3. Again obtained the following with submission dt. 8th august 2014
a. Copy of Housing loan certificate (Which means she had verified income from house property)
b. Certificate of approval u/s 80G of the institutions to whom donations were made, which- means she had verified the deductions claimed.-
c. Details of disallowance of excess interest u/s 57
d. Details of amounts appearing in 26AS Statement
4. Further the A.0 had – in its show cause notice dt. 18/03/2015 also mentioned interest amount of Rs. 3479097/- in addition to Rs.7.00 Crores surrendered during the Survey.
From all the above it is clear that the A.D had obtained the details of all the heads of the assessment proceedings. It may kindly be noted that the amount of 41,07,848/ – was higher than previous year and tax has already been paid on the above.
5. There was nothing in the impound material related to the assessee other than the documents on the basis of which surrender of Rs.7.00 cores was made. So mere mention of test check by the AD. that impounded material does not render the order as erroneous and prejudicial to the interest of the revenue since the AO had already made unjust and high pitched order in the favour of revenue by adding the same income twice.
The AO has verified the transactions from the following books
a. Cash book and other books of the assessee submitted for verification on 16/03/2015
b. Capital account and Statement of affairs of the assessee
c. Copies of the computation of incomes, Capital accounts of the firms where the assessee is partner.
Therefore it is dear that from the books of account the AO means the books of the assessee only. From the above it is clear that both the reasons in clause C are not correct. Nothing has been brought which can prove that the order was erroneous and prejudicial to the interest of revenue without bringing anything tangible evidence.
6. The above is grossly incorrect since the AO had tried here hard to link the above income with Vyapam case which is already mentioned in here She issued the show notice dated 18/ 03/ 2015 and despite of our clarifications she linked the above amounts with the Vypam and added to the income of assessee despite of assessee having paid the tax on the above in his return of income. We had clarified with submissions given during the course of hearing. It is not clear what has not been examined here, when she already has added the above amount and also initiated penalty on the above.
7. The above is grossly incorrect with the same argument as against the Though the A. O. is not expected to. or required to collect information from various agencies involved in the investigation since she was aware that nothing had been proved against the assessee in court of law and not even charge sheet was filed against the assessee till the date of passing the order by her. Assessee was mere suspect and nothing had been proved in the court of law against the assessee till the date of order.
Regarding Dr. Bhandari’s linkage with Vyapam case the following are the related facts of the case as per FIR’s/ Challans filed before the relevant authorities.
