Case Law Details
ACIT Vs Jiyyana Venkatarayudu (HUF) (ITAT Visakhapatnam)
ITAT Vishakhapatnam held that non-payment of tax under the Income Declaration Scheme, 2016 against the income declared cannot change the character of the income declared under IDS, 2016.
Facts- The assessee has filed Form No.1 under Income Declaration Scheme, 2016 before the Pr. CIT-2 on 28/09/2016 by disclosing an amount of Rs. 2,15,48,400/- in the form of cash for the AY 2015-16. However, the assessee has failed to pay the taxes payable as per the provisions of the Income Declaration Scheme, 2016 [“IDS”].
During the assessment proceedings, AO invoked the provisions of section 197(b) of the IDS, 2016 and concluded that the income declared by the assessee shall be treated as income of the assessee in the year of declaration and brought the amount of Rs.2,15,48,400/- to tax U/s. 68 r.w.s 115BBE of the Act. Thereafter, AO also issued a show cause notice dated 02/12/2019 as to why the undisclosed income declared in IDS, 2016 should not be taxed and the assessment be completed U/s. 144 of the Act? Further, a notice U/s. 271 r.w.s 274 of the Act was also served on the assessee. Subsequently, a show cause notice was also issued to the assessee to show cause as to why a penalty U/s. 271F of the Act should not be levied for non-filing of the return of income before the due date as required U/s. 139(1) / 142(1) of the Act.
However, the assessee did not comply with the notices issued and therefore, AO completed the scrutiny assessment in the case of the assessee for the AY 2017-18 as best judgment assessment U/s. 144 of the Act and passed the assessment order.
On appeal, CIT(A)-NFAC allowed the appeal of the assessee. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that non-payment of tax under the IDS, 2016 against the income declared cannot change the character of the income declared under IDS, 2016 with respect to character of income assessable in the previous year in which such declaration was made under the Income Tax Act, 1961. Further, before the Ld. Revenue Authorities the assessee has submitted that the amount of Rs.2,15,48,400/-disclosed in Form No.1 filed under IDS, 2016 was nothing but the capital gains arising out of the agricultural land sold through M/s. Satya Sai Housing by the assessee family and other members in various capacities. These facts were not disputed by the Ld. Revenue Authorities. However, we find that the Ld. AO while framing the assessment has stated the same as undisclosed income U/s. 68 r.w.s 115BBE of the Act instead of taxing the same under capital gains. Merely because the assessee failed to discharge the tax liability under IDS-2016 as declared cannot change the character of the income under which it was declared under the IDS-2016. Further, IDS-2016 is also silent on the nature of income to be taxed in the event of failure by the declarant to pay the taxes. In these circumstances, we are of the considered view that the Ld. CIT(A)-NFAC has rightly directed the Ld. AO to re-compute the total income in the case of the assessee in the HUF status under the head capital gains and therefore the decision of the Ld. CIT(A)-NFAC does not suffer from any infirmity.
FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM
This appeal filed by the Revenue is against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“Ld. CIT(A)-NFAC”] in DIN & Order No. ITBA/NFAC/S/250/2023-24/1061500625(1), dated 26/02/2024 arising out of the order passed U/s. 144 of the Income Tax Act, 1961 [“the Act” ] for the AY 2017-18.
2. Briefly stated the facts of the case are that the assessee has filed Form No.1 under Income Declaration Scheme, 2016 before the Pr. CIT-2, Visakhapatnam on 28/09/2016 by disclosing an amount of Rs. 2,15,48,400/- in the form of cash for the AY 201516. However, the assessee has failed to pay the taxes payable as per the provisions of the Income Declaration Scheme, 2016 [“IDS”]. During the assessment proceedings, the Ld. AO invoked the provisions of section 197(b) of the IDS, 2016 and concluded that the income declared by the assessee shall be treated as income of the assessee in the year of declaration and brought the amount of Rs.2,15,48,400/- to tax U/s. 68 r.w.s 115BBE of the Act. Thereafter, the Ld. AO also issued a show cause notice dated 02/12/2019 as to why the undisclosed income declared in IDS, 2016 should not be taxed and the assessment be completed U/s. 144 of the Act? Further, a notice U/s. 271 r.w.s 274 of the Act was also served on the assessee. Subsequently, a show cause notice was also issued to the assessee to show cause as to why a penalty U/s. 271F of the Act should not be levied for non-filing of the return of income before the due date as required U/s. 139(1) / 142(1) of the Act. However, the assessee did not comply with the notices issued and therefore, the Ld. AO completed the scrutiny assessment in the case of the assessee for the AY 201718 as best judgment assessment U/s. 144 of the Act and passed the assessment order. Thus, the Ld. AO determined the assessed income of the assessee at Rs. 2,15,48,400/- which includes the addition U/s. 68 r.w.s 115BBE of the Act and passed the order U/s. 144 of the Act dated 06/12/2019. Aggrieved by the order of the Ld. AO, the assessee carried the matter in appeal before the Ld. CIT(A)-NFAC.
3. On appeal, after considering the submissions of the assessee and on perusal of the material available on record the Ld. CIT(A)-NFAC allowed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A)-NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds of appeal:
“1. The order of the Ld. CIT(A) is erroneous both on facts and in law.
2. The Ld. CIT(A) erred in directing the AO to recompute the total income under the head ‘capital gain’ merely by accepting the contentions of the assessee that the amount disclosed in IDS is nothing but capital gains arising out of agricultural land sold through M/s. Sri Satya Sai Housing.
3. The Ld. CIT(A) ought to have considered that as per section 187(3) of IDS, 2016 if the declarant fails to pay the tax, surcharge and penalty in respect of declaration made under section 183 on or before the date specified under sub-section (1), the declaration filed shall be deemed never to have been made under the scheme.
4. The Ld. CIT(A) ought to have considered that as per section 197(b) of IDS, 2016 where any declaration has been made under section 183 but no tax, surcharge and penalty referred to in section 184 and section 185 has been paid within the time specified under section 187, the undisclosed income shall be chargeable to tax under the income tax Act in the previous year in which such declaration is made.
5. The Ld. CIT(A) erred in not appreciating the fact that if the declaration was invalid, no benefit regarding the head of income as claimed by the assessee as per the declaration can be allowed while invoking the provisions of section 197(b) which mandates charging of undisclosed income to tax in the year of declaration.
6. The Ld. CIT(A) reliance on the Hon’ble Tribunal’s decision in the case of Sri Jiyyana Venkatarayudu for the AY 201718 was not accepted by the Department on merits.
7. The appellant craves leave to add or delete or amend or substitute any ground of appeal before and / or at the time of hearing of appeal.”
4. At the outset, the Ld. Departmental Representative [“Ld. DR”] heavily relied on the order of the Ld. AO and argued in support of the same. The Ld. DR further submitted that the Ld. CIT(A) ought to have considered that as per section 187(3) of IDS, 2016 if the declarant fails to pay the tax, surcharge and penalty in respect of declaration made under section 183 on or before the date specified under sub-section (1), the declaration filed shall be deemed never to have been made under the scheme. The Ld. DR further submitted that as per section 197(b) of IDS, 2016 where any declaration has been made under section 183 but no tax, surcharge and penalty referred to in section 184 and section 185 has been paid within the time specified under section 187, the undisclosed income shall be chargeable to tax under the income tax Act in the previous year in which such declaration is made. The Ld. DR further submitted that if the declaration was invalid, no benefit regarding the head of income as claimed by the assessee as per the declaration can be allowed while invoking the provisions of section 197(b) of the Act. The ld. DR vehemently argued that considering the facts and circumstances of the case, the Ld. AO has rightly observed that in case of failure to pay the resultant taxes on the undisclosed income admitted under IDS, 2016, such undisclosed income shall be chargeable to tax under the Act in the previous year in which such declaration was made. Therefore, the Ld. DR pleaded to set-aside the order of the Ld. CIT(A)-NFAC and prayed to uphold the decision of the Ld. AO.
6. On the other hand, the Ld. Authorized Representative [“Ld. AR”] submitted that the assessee has filed a declaration under IDS-2016 on 28/09/2016 and in Annexure to Form-1 “Statement of undisclosed income” the assessee has declared an amount of Rs. 2,15,48,500/- as income from capital gains arising out of the agricultural land sold through M/s. Sri Satya Sai Housing by the assessee assessee family and other members. Further, the assessee could not pay the taxes as admitted for various reasons. The ld. AR further submitted that the amount declared in IDS, 2016 shall be eligible to tax under the Income Tax Act, 1961 in the previous year in which such declaration is made. The Ld. AR further submitted that the IDS, 2016 is silent on the nature of the income declared in the IDS, 2016 which could partake the character of undisclosed income U/s. 68 of the Act. He therefore submitted that considering all these facts and circumstances as well as the submissions of the assessee and also relying on the Tribunal’s decision in the assessee’s own case in individual status in ITA No. 138/Viz/2022, dated 10/08/2023, the Ld. CIT(A)-NFAC has rightly directed the Ld. AO to recompute the total income in the case of the assessee in the HUF status under the head capital gains and therefore the decision of the Ld. CIT(A)-NFAC need not be disturbed. The Ld. AR strongly relied on the decision of this Bench in the case of the assessee in individual status in ITA No. 138/Viz/2022.
7. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. As per section 197(b) of IDS, 2016 where the assessee fails to pay the tax as per the income declared under IDS, 2016 the undisclosed income shall be chargeable to tax in the previous year in which such declaration is made. We find force in the argument made by the Ld. AR that non-payment of tax under the IDS, 2016 against the income declared cannot change the character of the income declared under IDS, 2016 with respect to character of income assessable in the previous year in which such declaration was made under the Income Tax Act, 1961. Further, before the Ld. Revenue Authorities the assessee has submitted that the amount of Rs.2,15,48,400/-disclosed in Form No.1 filed under IDS, 2016 was nothing but the capital gains arising out of the agricultural land sold through M/s. Satya Sai Housing by the assessee family and other members in various capacities. These facts were not disputed by the Ld. Revenue Authorities. However, we find that the Ld. AO while framing the assessment has stated the same as undisclosed income U/s. 68 r.w.s 115BBE of the Act instead of taxing the same under capital gains. Merely because the assessee failed to discharge the tax liability under IDS-2016 as declared cannot change the character of the income under which it was declared under the IDS-2016. Further, IDS-2016 is also silent on the nature of income to be taxed in the event of failure by the declarant to pay the taxes. In these circumstances, we are of the considered view that the Ld. CIT(A)-NFAC has rightly directed the Ld. AO to re-compute the total income in the case of the assessee in the HUF status under the head capital gains and therefore the decision of the Ld. CIT(A)-NFAC does not suffer from any infirmity. Further we have also observed that while reaching to a conclusion, the Ld. CIT(A)-NFAC has also rightly relied upon the decision of this Bench in the assessee’s own case in individual status in ITA No. 138/Viz/2022, dated 10/08/2023. For the sake of brevity, the observations of the Ld. CIT(A)-NFAC are extracted herein under:
“7. I have considered the assessment order, statement of facts submitted by the appellant along with Form 35 and the material on record. On perusal of the assessment order, it is seen that AO has made an addition of Rs. 2,15,48,400/- on account of income from unexplained sources U/s. 68 r.w.s 115BBE of the Act.
7.1. Further, in the case of Sri Jiyyana Venkatarayudu in his individual status (PAN: AXPPJ2351K), that Hon’ble ITAT, Visakhapatnam in ITA No. 138/Viz/2022 dated 10/908/2023 also has passed the order in favour of the appellant directed to AO that the income to be taxed as capital gains in the hands of the assessee with the status of individual stating that “merely because the assessee failed to discharge the tax liability under IDS-2016 as declared cannot change the character of the income under which it was declared under the IDS-2016”. Income compliance of the same an appeal effect has also been by the AO. Hence, following the judicial discipline of Hon’ble ITAT in individual status, the AO is directed hereby to re-compute the total income in the case of the appellant ie., Sri Jiyyana Venkatarayudu in the HUF status (AAHHJ3600A) under the head capital gains accordingly.”
7. Therefore, considering the facts and circumstances of the case as well as the decision of this Bench in the case of the assessee in individual status in ITA No. 138/Viz/2022 (supra), we have no hesitation to come to a conclusion that the decision of the Ld. CIT(A)-NFAC does not call for any interference and hence we uphold the order of the Ld. CIT(A)-NFAC. Accordingly, the grounds raised by the Revenue are hereby dismissed.
8. In the result, appeal of the Revenue is dismissed.
Pronounced in the open Court on 09th October, 2024.
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