DCIT Vs M. R. Shah Logistics Pvt. Ltd. (Supreme Court of India)
Income Declaration Scheme (IDS), introduced by Chapter IX of the Finance Act, 2016. The objective of its provisions was to enable an assessee to declare her (or his) suppressed undisclosed income or properties acquired through such income. It is based on voluntary disclosure of untaxed income and the assessee’s acknowledging income tax liability. This disclosure is through a declaration (Section 183) to the Principal Commissioner of Income Tax within a time period, and deposit the prescribed amount towards income tax and other stipulated amounts, including penalty. Section 192 grants limited immunity to declarants, and states as follows:
“192. Notwithstanding anything contained in any other law for the time being in force, nothing contained in any declaration made under section 183 shall be admissible in evidence against the declarant for the purpose of any proceeding relating to imposition of penalty, other than the penalty leviable under section 185, or for the purposes of prosecution under the Income-tax Act or the Wealth-tax Act, 1957.”
As noticed previously the declarant was Garg Logistic Pvt Ltd and not the assessee. Facially, Section 192 affords immunity to the declarant: “…nothing contained in any declaration made under section 183 shall be admissible in evidence against the declarant for the purpose of any proceeding relating to imposition of penalty…” Therefore, the protection given, is to the declarant, and for a limited purpose. However, the High Court proceeded on the footing that such protection would bar the revenue from scrutinizing the assessee’s return, absolutely. Quite apart from the fact that the re-opening of assessment was not based on Garg Logistic’s declaration, the fact that such an entity owned up and paid tax and 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 vs. Sashi Balasubramanian & Ors10 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 Corruption Act may fail, no sanction having been accorded therefore, the charges under the Penal Code would not.”
In Tanna & Modi v Commissioner of Income Tax, Mumbai XXV & Ors11 also, this court held, similarly that immunity granted for one purpose, cannot be extended for another.
In an earlier decision, Tekchand & Ors. vs. Competent Authority12 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.
This court is, therefore, of the opinion that the High Court fell into error, in holding that the sequitur to a declaration under the IDS can lead to immunity (from taxation) in the hands of a non-declarant.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Special leave granted. With consent of counsel for parties, the appeal was heard finally. The Commissioner of Income tax (hereafter “the revenue”) appeals against a judgment of the Gujarat High Court1, which quashed a notice issued under Section 147/148, Income Tax Act (hereafter “the Act”) seeking to re-open the respondent’s assessment, for the assessment year (AO) 2010-11. The respondent is hereafter, referred to as “the assessee”.
2. The facts are that search proceedings were conducted- by the revenue, under the Act, at the office premises of one Shirish Chandrakant Shah on 09.04.2013 at Mumbai; during the course of the search, several materials- and documents, were seized. On analysis of such documents, the revenue was of opinion that Shirish Chandrakant Shah was providing accommodation entries, through various companies controlled and managed by him, and that the assessee was one of the beneficiaries of the business (of accommodation entries provided by Shri Shirish Shah) through bogus companies. This was based on the fact that many companies which invested amounts towards share capital on high premiums -in the assessee’s company were also controlled and managed by Shri Shirish Shah. The AO, on a consideration of these and other materials, was of opinion that the assessee was also a beneficiary of the accommodation entries provided by Shri Shirish Shah. On the basis of this opinion the impugned notice to re-assess the income of the assessee for AY 2010-2011, was issued on 31.3.2017.
3. The assessee is a private limited company and had filed return of income for the AY 2010-11 on 25.9.2010. The return was accepted under section 143(1) of the Act without scrutiny. On 31.3.2017, the impugned notice was issued. The AO also furnished reasons recorded by him for issuing notice of reassessment.
4. The “reasons to believe” which were the basis for re-opening the assessment, recorded that search proceedings were conducted in the M.R. Shah group and Champalal group of companies on 20.09.2016 and that during the course of previous searches in the case of Shirish Chandrakant Shah, an accommodation entry provider in Mumbai, it was observed that huge amounts of unaccounted moneys of promoters/directors were introduced in closely held companies of the assessee’s group. The reasons to believe also stated that the chairman of M.R. Shah Group was asked about the application money received by the assessee, during the statement- recorded under Section 132(4) of the Act, on 18.11.2016; in the course of that statement, he disclosed that M/s. Garg Logistics Pvt. Ltd. had declared ₹ 6.36 crores as undisclosed cash utilized for investment in the share capital of the assessee, M.R. Shah Logistics Pvt. Ltd. through various companies. The assessee company’s chairman voluntarily disclosed the statements made by Garg Logistics under Section 132 of the Act, about the declaration by Garg Logistics P Ltd, under the Income Declaration Scheme (IDS).
5. The AO, in the reasons to believe, compared the investments made by Pravin Chandra Aggarwal, i.e. the assessee company’s Chairman with form no.2 of the assessee company and the records of the Registrar of Companies and prepared a chart, which is reproduced in a chart below
“On comparison of such data following discrepancies are noted;
