TMI Blog1983 (5) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... wn were truly stated. In the course of the assessment proceedings, the petitioner filed an affidavit on February 18, 1972, stating, inter alia, that prior to its sale, he was living in the house for more than two years. The ITO, by his assessment order dated March 6, 1972, completed the assessment. No tax on capital gains was levied on account of the aforesaid statement by virtue of s. 54 of the I.T. Act, 1961 (herein " the Act "). In August, 1972, there was a search under s. 132 of the Act of several personal premises and of the companies with which the petitioner was associated. One Shri S. D. Kapila, ITO, visited the Punjabi Bagh premises and recorded the statement of the petitioner on August 18, 1972, U/s. 132(4) of the Act. He stated that he had begun construction some three or four years back. From that statement it further appeared that the house was incomplete and uninhabitable and that the petitioner did not live in the aforesaid premises for a period of two years and that the flat purchased by him was also not occupied by him, but he gave it to his son, Harpal Singh, for his residence. Then, on September 19, 25, 1972, the ITO issued a notice under s. 148 of the Act re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuary 6, 1977, may be treated as return made in response to notice u/s. 148. The ITO described it as a return voluntarily filed. Notice u/s. 148(2) was issued and complied with. Thereafter, the assessment was made and tax imposed on June 30, 1978. The said order also shows that penalty proceedings u/s. 273A had already been initiated. With that round of proceedings over, the petitioner withdrew his Writ Petition No. 51/73, on February 17, 1982. During the pendency of the present writ petition, the petitioner was advised to apply for composition before the Commissioner Who agreed to compound the offence upon payment of Rs. 1,39,575. The petitioner sent a representation on October 6, 1982, to the Chairman, CBDT, for the withdrawal of the complaint and reducing the amount of composition. This representation is said to be pending with the Chairman. I have heard both the petitioner and the Revenue. The Act is one of the most complicated pieces of legislation on our statute book and continues to be subjected to annual complications. It severely hits the earnings and savings. To claim an exemption from tax, be it u/s. 54 or otherwise, even wrongly or for want of proper appreciation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d mainly for the purpose of a residence for self or parents in a period of two years immediately preceding the date of sale, and (b) the assessee, (i) purchased within one year, or (ii) constructed within two years, a house for his own residence. Shri Wazir Singh contends that the petitioner got exemption because he lied in respect of both the conditions. If be had not done so, the assessing officer would not have allowed him to escape assessment on capital gains. In respect of condition (a), he submitted that the petitioner did not reside in the house for a minimum period of two years. The petitioner has himself later on admitted that he lived in the house for less than two years. He eventually gave up the claim. Yet he filed the return and the statement of no tax and filed an affidavit which was false. In the statement, accompanying the first return, what the petitioner had stated, in respect of capital gains of the Punjabi Bagh House was that it was a " self-occupied residential house sold on 15-1-1971 " and " capital gain utilised for purchase of a residential flat at Asha Deep on 18-1-1972". These facts by themselves do not seem to entitle the petitioner to any exemption under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which extends up to and terminates with the date of the transfer. This case was followed in CIT v. R.Mala [1982] 135 ITR 302 (Mad). No doubt, if this verb is to be classified, according to grammar, then, it would fall into the category of past continuous tense. But past continuous here only means that whenever used in the preceding two years, the house should have been used as a residence ; that is, the house must have been used by the assessee or a parent of his mainly for the purpose of his own or parent's own residence during the period of two years immediately preceding the date sale: CIT v. Tikyomal Jasanmal [1971] 82 ITR 95 (Guj). The word " mainly " makes it abundantly clear that it can be used even for other purposes, and that will certainly break the continuity of residential use. I am afraid, I am not, with great respect, inclined to fall in line with the Madras decisions. It is construction in favour of the Revenue arrived at by stretching the plain meaning. To my mind, the word " in " read with " mainly " can never mean continuously " for not less than ", even if followed by " was being used ". I have support for my disagreement though indirectly, in a letter of the CBD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is relatives and friends may be there for a few months with his permission. Unless he has let out the same for rent or has allowed it to be used for any commercial purpose, it cannot be said that he has not exclusively used it for residential purpose. Granting that in order to earn an exemption the house should be used by none other than the assessee, it is not yet possible to point an accusing finger to anything stated in the statement accompanying the first return which would be considered false. The petitioner had simply stated that the capital gains were utilised for purchase of a flat and that he had truly done. He did not say that the house was used for any purpose whatsoever. The previous statements are alleged to be false on the basis of the subsequent statement made by the petitioner under sub-s. (4) of s. 132 of the Act and the inspection made by Shri Kapila. Relying upon some observations in Rajinder Nath v. M. L. Khosla, ITO [1982] 134 ITR 397 (Delhi), Shri Singh further submitted that the return filed on January 6, 1977, provided additional evidence to substantiate the complaint. That apart, the falsity of the statement will be proved by leading cogent evidence befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption if the facts stated were incomplete. Moreover, proceedings before an ITO cannot be said to start until there is some inquiry into the income of the assessee. A statement made in a return of income is not, therefore, evidence given in a proceeding before an ITO. An assessee cannot, consequently, be convicted of an offence under s. 193, IPC, in respect of a false statement made in the verification clause in a return of income: Hazari Lal v. Emperor [1937] 5 ITR 610 (Nag). No exemption was in fact allowed to him on the facts stated by him, in the statement. It was, it seems, after he filed the affidavit. In the affidavit, the petitioner said that he lived in the house for two and more years. This statement is said to be false because in the statement under s. 132(4) of the Act, he admitted that he lived there only for a shorter period. This statement can be used in evidence in any proceeding under the Act. I see no reason why it cannot be used for the purposes under s. 193, IPC. But a subsequent contradictory statement will not make an earlier one a false one, unless the two statements are so wholly irreconcilable that one of them must necessarily be false. Shri Wazir Singh u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as served and on the same day a second return was filed by the assessee in response to notice u/s. 148. Lord Denning in Selvarajan v. Race Relations Board [1976] 1 All ER 12 at 19 (CA), said: " The fundamental rule is that, if a person may be subjected to pains or penalties, or be exposed to prosecution or proceedings, or deprived of remedies or redress, or in some such way adversely affected by the investigation and report, then he should be told the case made against him and be afforded a fair opportunity of answering it. " (emphasis mine). In the circumstances of the case, the action of the Revenue is violative of the principles of natural justice, and the complaint is bad in law, even if the false affidavit attracts ss. 193 and 196, IPC. The last of the arguments of Shri Bishamber Lal is that after the assessment made under the voluntary disclosure of Income and Wealth Ordinance/Act, it will be an abuse of the process of the court to continue with the prosecution launched against the petitioner. He invited my attention to s. 11 of the said Act which provides that nothing contained in any declaration made under sub-s. (1) of s. 3 shall be admissible in evidence against the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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