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2000 (1) TMI 1002 - ITAT MUMBAI

2000 (1) TMI 1002 - ITAT MUMBAI - [2001] 78 ITD 280 - IT Appeal No. 7787 (Mum.) of 1991 - Dated:- 28-1-2000 - Pradeep Parikh (Accountant Member) And D. Manmohan (Judicial Member) For the Appellant : Hiro Rai For the Respondent : H. V. Kalra, ORDER Pradeep Parikh (Accountant Member) The assessee is in appeal before us against the order of the learned Commissioner (Appeals) dated 2-9-1991 for assessment year 1987-88. The only ground raised in the appeal is against the addition of ₹ 2,75,000 .....

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atia 25,000 3. Smt. Shashi V. Bhatia 48,000 4. Smt. P.P. Bhatia 47,000 1,10,000 5,000 5. M/s. Acme Sales Corporation 2,00,000 6. Master Deepu Agarwal 75,000 7. Miss Namita Agarwal 1,40,000 8. Miss Puja Agarwal 55,000 Total 7,55,000 3. Out of the above, loans of ₹ 3,15,000 from persons mentioned at serial numbers 4 and 5 were treated as explained. The remaining loans of ₹ 4,40,000 were treated as unexplained. However, in case of late P.S. Bhatia, HUF, only the peak amount of ₹ 5 .....

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ct of Bhatia family and ₹ 2,70,000 in respect of Agarwal family. 4. In the first appeal, Commissioner (Appeals) deleted the addition of ₹ 1,45,000 in respect of Bhatia family. However, with respect to Agarwal family, after considering the various facts and circumstances of the case, Commissioner (Appeals) came to the conclusion that the creditors did not have any ostensible sources for advancing the loans to the assessee. Accordingly, he sustained the addition of ₹ 2,70,000 (th .....

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found cash deposits few days prior to the date of advances made to the assessee firm. The guardians of the children confirmed about advance made to the assessee. When asked to show the sources of the cash deposits, it was explained by the guardians that they represented repayment of previous loans. When asked to furnish the details of previous loans, it was stated by the guardians that since returns of the children had been filed under the Amnesty Scheme and the returns having been accepted, it .....

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e decision in Jamnaprasad Kanhaiyalal';s case (supra), treated the amount of ₹ 2,70,000 as assessee';s income from undisclosed sources. As a consequence, interest on these loans was also disallowed. Commissioner (Appeals) agreed with the findings of the Assessing Officer and the conclusion arrived at by him and thus confirmed the addition of ₹ 2,75,000 plus interest thereon. 6. Shri Hiro Rai, the learned Advocate, appeared for the assessee. After having narrated the facts in .....

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the sources of source. 7. Distinguishing the case of Jamnaprasad Kanhaiyalal, Shri Rai submitted that in that case the disclosure was in the name of the children of the partners of the assessee firm itself. On the other hand, in the present case, the amnesty returns were filed by outsiders with whom the assessee had no connection at all. It was further contended that in that case, the disclosure was under Voluntary Disclosure Scheme of 1965 wherein if a person made a declaration, the Commission .....

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9(SC) and Satish Tea Co. v. ITO (1994) 74 Taxman 324(Delhi Trib.). 8. The learned D.R';s stress was on the contention that the onus was on the assessee to prove the credit worthiness of the creditors even if they were outsiders. Hence, supporting the orders of the lower authorities, the sustenance of the addition was pleaded for. 9. We have carefully considered the rival contentions and the material on record. The short question before us is, whether on the facts and in the circumstances of .....

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f the five persons, who were all sons of a partner and brothers of other partners of the assessee-firm. It was explained on behalf of the assessee that the credits represented the amounts disclosed by the five persons under the Voluntary Disclosure Scheme under section 24 of the Finance (No. 2) Act of 1965. The respective age of the five persons in 1965 ranged from 5 years to 18 years. Partner of the assessee firm was examined on oath and would not satisfactorily explain the income allegedly ear .....

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the question of the nature and source of the amount so declared in a voluntary disclosure under section 24 of the Finance (No. 2) Act, 1965, and to say that it does not represent the income of the declarant. (b) Section 24(1) read with section 24(3) of the said Finance Act has an overriding effect over section 68 of the Act, and therefore, the ITO could not make any investigation as to the nature and source of the cash credits. (c) There cannot be double taxation of the same income, once in the .....

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or deemed to have been earned by him. It, therefore, followed that declaration under the scheme had to relate to income actually earned by him which was not to be investigated into and which the Commissioner was under an obligation to assess to tax. By the legal fiction referred to above, it followed that even though the income did not actually belong to the declarant it would be treated to be his income for payment of Income-tax under the scheme. Accordingly, the Supreme Court held that if a p .....

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his books, inspite of its having already been made the subject of a declaration by the creditor and then taxed under the scheme. The court held that there was no warrant for the submission that section 24 had an overriding effect over section 68 of the Act, in so far as the persons other than the declarants were concerned. 14. As regards the third contention, the Court observed that in a case of this description, there was no question of double taxation. The situation was of the assessee';s .....

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statute form, as was the scheme of 1965 in the context of which the case of Jamnaprasad Kanhaiyalal (supra) was decided. However, the Amnesty Scheme of 1985 was not in the statute form but was promulgated by press notes and circulars. If the scheme is in statute form, strict rules of interpretation should apply. However, the rule of strict interpretation cannot be applied to execute orders which do not have formal legislative approval. Nonetheless, certain principles and features may be common. .....

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me of some other person, the latter could be taxed on that income even if it was already taxed in the hands of the declarant. 17. This leads us to the second principle laid down by the Supreme Court, and that is, the declaration does not have an over-riding effect over section 68 of the Act. In other words, Assessing Officer can enquire into the genuineness of a credit appearing in the books even if the said credit is the subject of declaration under the Amnesty Scheme. In this regard also there .....

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to assess to tax. On the other hand, under the 1985 scheme, as per circular No. 441 dated 15-11-1985, the Assessing Officers could not make roving inquiries against the declarants. But certainly, as is evident from the reply to question No. 31 reproduced below, the Assessing Officer could enquire as to whether the income declared really belonged to the declarant or not. Question No. 31 : If an assessee has declared income, would he be required to give evidence of his having earned it and posses .....

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incomes of the minors had been declared under the Amnesty Scheme. Since the returns were filed under Amnesty Scheme and the returns having been so accepted, the parents refused to give further details. It was, therefore, held by the revenue authorities that the income declared did not belong to the declarants. So far so good. But the real question arises now. Can it be treated as the income of the assessee? 20. Under normal circumstances, it would have been treated as the income of the assessee .....

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Court also observed in no uncertain terms, in the case of Jamnaprasad Kanhaiyalal (supra) as follows : "The scheme of the Act makes it abundantly clear that it was to protect only those who preferred to disclose the income they themselves had earned in the last and which they had failed to disclose at the appropriate time. It is undoubtedly true that the Act was brought on the statute book to unearth the unaccounted money. But there is no warrant for the provision that by enacting the schem .....

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e above normal circumstance, in the present case, the assessee has no relationship at all, business or otherwise, with the Agarwal family. This is not to suggest that in all cases where the creditor and the assessee in whose books the credit appears are not related to each other, no addition can be made in the hands of the assessee at all. However, to make such an addition, besides giving a finding that the income does not belong to the creditor, an additional finding will have to be arrived at .....

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