9911796707
TMI Blog2023 (2) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... terwoven and the facts and circumstances of other cases are exactly identical except the difference in the amount. The ld. DR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 155/JPR/2022 is taken as a lead case. 4. Based on the above arguments we have also observed that ground no. 1 & 2 in ITA NO. 154 /JPR/2022 and ground no. 2 & 3 in ITA No. 155/JPR/2022 were common and ground no. 1 in ITA 155/JPR/2022 more thus, except these on the two grounds for both the appeals grounds are similar, facts are similar, arguments were similar and therefore, were heard together the parties and are disposed the case by taking lead case facts, grounds and arguments from the folder in ITA No. 155/JPR/2022. 5. Before moving towards the facts of the case we would like to mention that the assessee has assailed this appeal in ITA No. 155/JPR/2022 before us on the following grounds; "1. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in confirming the action of the ld. AO, in making additions of Rs. 4,55,639 towards alleged unexplained investment in jewellery. The action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act was issued to the assessee on 14-09-2017 which was duly served. In response to notice issued u/s 142(1) the assessee furnished his return of income on 31-10-2017 declaring total Income of Rs. 1,77,10,650/-. It includes the surrendered income of Rs. 89.05 lacs which had been accepted by the assessee during the course of search. Penalty proceedings u/s 271AAB(1)(a) of the Income-tax Act, 1961 is being initiated for undisclosed income which was unearthed during the course of search. In the assessment proceeding the learned assessing officer has added a sum of Rs. 5,52,241/- being the unexplained jewellery in addition to what has been disclosed and offered. The relevant computation is reproduced herein below: "5.5 During the course of search, silver articles were also found. Considering the status of the assessee silver utensils and silver jewellery weighing 10 kg. is considered is explained. Therefore, the remaining silver jewellery i.e. 19,500 gram is treated as unexplained. Found Treated as explained Remained unexplained value Gold 2947 gram 1450 gram 1497 gram Rs.3380226/- Stones Rs.1921250/- - Rs.19,21,250/- Rs. 19,21,250/- Silver 29500 gram 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price at Rs.43,910/- as per valuation report and as also considered by the AO. Since the AO has himself considered 10,000 gms as explained, therefore the undisclosed investment in silver items is considered at 17,300 gms at Rs.7,59,643/- as against Rs.8,56,245/- for 19,500 gms considered, as unexplained, by the AO. (vi) Further, the contention of the appellant that the silver items were found to be explained during the course of search is not found to be acceptable in view of the fact that during the course of assessment nor during the current appellate proceedings, the appellant has been able to furnish any evidence regarding the source of acquisition of the aforesaid jewellery. In fact, considering the status of the appellant, the AO has already considered silver items worth 10 Kg as explained. Further since the aforesaid circular of CBDT is silent on the issue of silver jewellery/utensils and valuable stones and in absence of any evidence for acquisition of the aforesaid silver items and colour stones and the fact that already 1450 gms of gold jewellery has been considered as reasonable possession in view of the CBDT Instruction No. 1916 dt. 11-05-1994, therefore I am of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership firm, short term capital gains etc. II. Search and seizure operation, under section 132(1), of the Income Tax Act, 1961 ("ITA") was carried out on 21.07.2016at the business and residential premises of the assessee.(AO Order Page 1) III. For the relevant previous year, assessee furnished his return of income on 31.10.2017, declaring total income of Rs. 1,77,10,650, out of which Rs. 89.50 lacs pertained to income surrendered during the course of search. Ground No. 2-3: Invoking provisions of Section 115BBE 1. ASSESSING OFFICER& COMMISSIONER OF INCOME TAX (APPEALS) 1.1. During the course of search assessee, on his own, offered Rs. 89,05,480 for tax, for the year at hand.Subsequently, in the assessment proceedings,ld. AO added Rs. 5,52,241, in the hands of the assessee, as unexplained jewellery (Silver Items). Ld. AO for the purpose of calculating tax, on the amount surrenderedby the assessee of Rs. 89,05,480, and also the additions made by him in his order of Rs. 5,52,241,applied rate of 77.25%, as prescribed u/s 115BBE of the ITA. 1.2. Thereafter, during the first appellate proceedings, elaborate submissions were made before ld. CIT(A) that ld. AO had erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion recorded by the ld.AO for the purpose of invocation of Section 69 on the assessee. Under such circumstances invoking Section 115BBE is not justified. A.4. In this regard, reliance is placed on the below mention judicial pronouncements of the Hon'ble ITAT, Jaipur Bench, the relevant extracts of which are set out hereunder for the sake of ready reference:- A.4.1. Sudesh Kumar Gupta [2020] 117 taxmann.com 178 (Jaipur - Trib.) "...In the instant case, as we have noted above, the return of income so filed has been accepted by the Assessing officer without making any adjustment/variation to the income so offered by the assessee and the assessment has been completed u/s. 143(3) of the Act. Further, there is nothing on record which shows that the Assessing officer has called for any Explanation of the assessee regarding the nature and source of such investment during the course of assessment proceedings and any formation of opinion and recording of satisfaction by the Assessing officer which is required before invoking the provisions of section 69 of the Act. Though the Assessing officer has issued a show-cause as to why penalty proceedings u/s. 271(1)(c) may not be initiated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t come within the purview of section 154 of the Act...." [Emphasis Supplied] Thus, having not invoked Section 69 or not recorded any satisfaction in this regard, lower authorities was not justified in invoking the provisions of Section 115BBE. B. Where any non-income is converted by AO to income, as per Section 68 to 69B then only Section 115BBE can be made applicable. In the present case, assessee himself offered amount for taxation, which was even accepted as it is by the AO. B.1. Furthermore, provisions of Section 68 to Section 69D can only be invoked in cases where an assessee is unable to explain the source of a particular receipt, money, investment, expenditure, etc or part thereof to the satisfaction of the Assessing Officer. These provisions have no application in case where an amount already disclosed by the assessee as his income, while filing the Return of Income on which no further addition has been made by the ld. AO, during the course of assessment proceedings. B.2. Sections 68 and 69A create certain deeming fictions, whereby certain amounts which are not considered as income by the assessee, are deemed to be income of the assessee. A deeming fiction of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome under Section 68, Section 69, Section 69A, Section 69B, Section 69C or Section 69D, at the rate of 30% (plus surcharge and cess), without allowing any deduction for any expenditure or allowance. C.2. Thereafter, the provisions of sub-section (1) of Section 115BBE were substituted by Taxation Laws (Second Amendment) Act, 2016, w.e.f 1.04.2017 i.e. AY 2017-18 ("Amendment -115BBE"). Although, Taxation Laws (Second Amendment) Act, 2016 received the assent of the President of India only on 15.12.2016.Search on the assessee was carried out on 21.07.2016. C.3. Chronology of various events, as discussed hereinbefore, is as under :- Particulars Date 115BBE Introduced for the first time in the Income Tax Act. Rate of Tax 30% 01.04.2013 Search conducted on the assessee 21.07.2016 Amendment -115BBE introduced in Lok Sabha 28.11.2016 Amendment -115BBE passed by Lok Sabha 29.11.2016 Amendment -115BBE received President assent 15.12.2016 C.4. Thus, the law, applied by the ld. AO did not see the light of the day, when the search was conducted on him. The said law for the first time was introduced on 28.11.2016, i.e. after a gap of about 4 months of the taxing event having t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slation. C.8.1. Hon'bleApex Court, in the said case was considering the time period, (within the relevant previous year) of applicability of the new inserted proviso to Section 113 levying surcharge over and above the tax rate of 30% in case of block assessments; C.8.2. Proviso was introduced vide Finance Act, 2002, with effect from 1.06.2003. Thus, the law stoodenacted as on 1.04.2003 and, accordingly, as per normal principles should have applied on all searches carried out during Financial Year 2002-03 (AY 2003-04). C.8.3. Hon'ble Apex Court was pleased to hold that amendment would apply prospectively and would be applicable on searches conducted after 1.06.2002. C.8.4. The facts of the issue involved in the present appeal are identical. Therefore the issue is squarely covered by the judgement of Hon'ble Supreme Court in Vatika Township (P) Ltd (Supra). Accordingly, the amended provision of Section 115 BBE should apply on incomes accruing after the law having received assent of the President. C.9. In the case of Govind Das(1976) 1 SCC 906 (SC), following observation was made by the Hon'ble Supreme Court while holding Section 171(6) of the Income Tax Act to be prospectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e express words of the law in question, (which as a matter of course must be the first to be given effect to), but because the law which was intended to be given retrospective effect to as a clarificatory amendment, is in its true nature one that expands the scope of the section it seeks to clarify, and resultantly introduces new principles, upon which liabilities might arise. Such amendments though framed as clarificatory, are in fact transformative substantive amendments, and incapable of being given retrospective effect. An important question, which arises in this context, is whether a "clarificatory" amendment remains true to its nature when it purports to annul, or has the undeniable effect of annulling, an interpretation given by the courts to the term sought to be clarified. In other words, does the rule against clarificatory amendments laying down new principles of law extend to situations where law had been judicially interpreted and the legislature seeks to overcome it by declaring that the law in question was never meant to have the import given to it by the Court? The general position of the courts in this regard is where the purpose of a special interpretive statute is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ize the assessee, if additions referred to in Section 68 to 69A are made. Penal statutes which create offences or which have the effect of increasing penalties for existing offences will only be prospective by reason of the constitutional restriction imposed by ARTICLE 20 of the CONSTITUTION OF INDIA. Therefore, if an Act creates a new offence, it will bring into its fold only those offenders who commit all ingredients of the office after the Act comes into operations. This rule of construction against retroactivity of penal laws is not restricted to criminal offences punished with imprisonment, but also applies to laws which provide for other penal consequences, such as fines and penalties. C.16. Attention is also drawn towards the decision of Full Bench of Hon'ble Patna High Court in the case of Loknath Goenka [2019] 417 ITR 521 (Patna) (FB) C.16.1. Hon'ble High Court held the tax is charged on the point of time of accrual of income; C.16.2. In the case before Hon'ble High Court, the substantial question of law for decision was whetherlaw relating to clubbing of minor son's share of income under Section 64(1)(iii)which was introduced by Taxation Law (Amendment) Act, 1975,w. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich affects accrued rights or imposes obligations or castes new duties or attaches a new disability is to be treated as prospective Thus, act of the assessee, of surrendering certain amount, u/s 132(4), on 21.07.2016, cannot be penalized with a higher rate of tax, of 77.25% as against 30%, by way of an amendment brought about in the Statute Book subsequently. D. Intention of the amendment to Section 115BBE was to cover cases of concealment of income, pursuant to demonetization, which was not the case of the assessee. D.1. The Taxation Law (Second Amendment) Act, 2016got the assent of the President on 15.12.2016, just after Demonetization on08.11.2016, wherein bank notes of existing series of denomination of the value of five hundred rupees and one thousand rupees then issued by the Reserve Bank of India ceased to be legal tender, from the said date. D.2. In the Statement of Objects and Reasons accompanying the Taxation Laws (Second Amendment) Bill, 2016, the Government stated as follows: "Evasion of taxes deprives the nation of critical resources which could enable the Government to undertake anti-poverty and development programmes. It also puts a disproportionate burden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 115BBE would be applicable. It is submitted that for applicability of Section 68 to 69D, there is a clear requirement of satisfaction having been recorded by the Assessing Officer. Thus, for invocation of Section 68 to 69D satisfaction has to be recorded by the Assessing Officer and in his opinion the said income should be added under such sections. However, in the present case, no such satisfaction, at all, has been recorded by the ld. AO. Ld. AO without discussing anything in the order and without invoking Section 68 to 69D has applied Section 115 BBE, which is incorrect as per the relevant scheme. 2.3. Ld. CIT(A) at Page 13 of her order has relied upon the decision of Hon'ble ITAT, Jaipur Bench in the case of Sanjay Bairathi Gems Ltd, ITA No. 157/JP/2017, for the proposition that the amendment brought about in Section 115BBE is effective from 1.04.2017 and will accordingly apply to AY 2017-18 onwards. 2.3.i The decision as relied upon by ld. CIT(A) pertains to AY 2013-14, whereas, the relevant case at hand pertains to AY 2017-18. 2.3.ii Neither the issue of whether such amendment can be applied retrospectively, when having been introduced in December 2016, was argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, during the course of search (AO Order page 8). Such amount was thus surrendered by the assessee during search itself. 1.4. Silver Items were found to be explained, during the course of search itself by the Departmental officers on the field. The same is evident from the SEIZURE MEMO (PB : 6) prepared, during the course of search by the Departmental Officers, which specifies the jewellery amounting to Rs. 56.05 lakhs seized from the residential premises of the assessee. Such seized jewellery doesn't contain the Silver Items, found during search. 1.5. However, the ld. AO disregarding the working of the Departmental Officers on the field, during search, considered Silver Items of 29.50 kgs to have been found, as against silver utensils of 27.30 kgs actually found. 1.6. Further, ld AO without any basis considered silver items of 19.50 kgs to be unexplained which was completely not in consonance with the working of Department at the time of search and on the basis of which surrender was made by the assessee, which was even accepted by the Departmental Officers on the field. Ld. AO only found 10 Kgs of Silver items to be explained. 1.7. Accordingly, ld. AO, for no cogent reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcular to be explained. Even similar ratio has been laid down by Hon'ble Rajasthan High Court in the case of Satya Narain Patni [2014] 46 taxmann.com 440in which the Hon'ble Court has accepted that owing to different circumstances Jewellery of even of higher quantity can be considered to have been explained. 3.3.iv Assessee, Shri Sandeep Sethi lived in his Residential premises with his mother, his wife and two children. (PB : 2) 3.3.v Assessee belonged to an affluent Jain family. He has been married since 14 years. Considering his mother to be of the age of 70 years the assessee can be expected to have higher amount of silver items, gifted on various social occasions, including birth of his two children. This was also stated by the assessee, during search, which was accepted by the Departmental Officers on the field. In view of the above, silver items against which additions have been made by the ld. AO and sustained by ld. CIT(A) should be considered as explained and additions Rs. 4,55,639 should be deleted." 10. The assessee also filed another written submissions in this regard which is reproduced as under:- "1. It is reiterated that, since search in the case of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad retrospectively where the applicable date is clear and, further, there is nothing to suggest retrospectively. Further, extraordinary and supervening circumstance of the Demonetization Scheme, 2016, brought out by the Government of India in November,2016, explains the urgency in bringing an amendment mid-year. Further, the tax rate being in respect of incomes which are imputed with reference to a transaction/s, it is possible to administer the same, another aspect of the matter that stands considered by us. That is, a tax rate for transactions made up to 14/12/2016, and another for those thereafter. Subsequent mention of the applicability of the amended provisions of ss.271AAB and 271AAC with reference to the date on which the Presidential assent to the Act is received, further corroborates this view, which is based on the clear language of the Amending Act, as well as the principle that a substantive amendment is to be generally prospective. We draw support from the decision in Vatika Township Pvt. Ltd.(supra), reiterating the settled law of the rule against retrospectively. The tax rate applicable to the impugned income would, therefore, be at 30%, i.e., the rate specified in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being the charging section does not support the contentions of the assessee so raised. Therefore, the relevant provision of section 4 is reiterated here in below: Charge of income-tax. 4. (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income-tax) of, this Act in respect of the total income of the previous year of every person : Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. (2) In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act. The rate applied it should be one rate for whole year and there cannot be two rates for one previous year and based on that he submitted that the judgement relied upon by the ld. AR of the assessee is distinguished. The ld. DR also filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt) Act, 2016 came into existence on 15.12.2016. Section 115 BBE has been amended by para-2 of the said Act. Sub-section (1) of section 115 BBE was substituted with new sub-section (1) with effect from 1 day of April, 2017 and rate of 60% was introduced for some specific transactions. It is a settled law that substantive provisions of the Act comes into force from the first day of the assessment year, which is 01.04.2017 in the present case. Thus, the amended provisions are applicable from AY 2017-18 onwards. The Hon'ble Supreme Court in the case of Karimtharuvi Tea Estate Ltd v State of Kerala in 60 ITR 262 had held relying upon its own judgement in the case of CIT v Isthmian Steamship Lines, 20 ITR 572 that though the subject of the charge is the income of the previous year, the law to be applied is that in the force in the assessment year, unless otherwise stated or implied (emphasis supplied). The copy of this judgement has already been submitted during the course of the arguments. 3. If the finding of the Hon'ble Co-ordinate Bench is accepted, then there will be two rates in force in AY 2017-18 for the similar nature of transaction. This will be only on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by substituting the Schedule through the Kerala Finance Act, 1987 which came into effect from 01.07.1987. Collection of tax at revised rates was resisted by certain planters. who contended that since the Amendment Act, 1987 became effective from 01.07.1987, the levy was really effective from the next financial year, i.e.. 01.04.1988. Dismissing the writ petition of the petitioners, the Hon'ble Kerala High Court held that: "........It is open to the Legislature to completely alter the tax liability by the imposition of a different tariff in the course of the year. The Finance Act of any year is to be applied for the assessment of that year. In the present case, the Finance Act relevant for the assessment year 1987-88 is the Finance Act, 1987 Substituting the Schedule as for the assessment year 1987-88, the tax liability is competently altered, as it is a case of 'imposition of a different tariff in the course of the year' [Emphasis supplied]. As noted earlier, that was what was clearly proclaimed as the intention of the Government. It is that intention that is specifically postulated in the preamble to the Act. There could, therefore, be no scope for doubt that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce language of the statute is clear and unambiguous. However, if the appellant has any grievance regarding the date of provision coming into force, the Hon'ble Tribunal is not the right forum to address such grievance when the Legislature has clearly mandated that provisions will be effective from AY 2017-18. If the appellant thinks that move of the Legislature anyway affected its rights, then he could have filed writ petition. The appellate proceedings before the Hon'ble Tribunal is not the right forum to address the issue raised by the appellant." 13. We have considered the rival contentions, perused the material available on record and also gone through the findings of the lower authorities recorded in their respective orders. We have also gone through the various judicial ruling placed before us by both the parties to drive home to their contentions. 13.1 As regards the addition of Rs. 4,55,639/- sustained by the ld. CIT(A) he has recorded his detailed finding and the same is reproduced here in below: "(vi) Further, the contention of the appellant that the silver items were found to be explained during the course of search is not found to be acceptable in view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on about the reasonableness of the holding of the silver items by the family considering the family status there is no separate disclosure by the assessee. Even the search team has considering the explanation of the has limited the question relating then jewellery and accepted the explanation of the assessee in question no. 15. The same is reiterated here in below: 13.5 Considering the fact that once the department officer during the search has considered this silver items as explained and the ld. AO without bringing any contrary finding merely based on the same fact that was before the search team cannot make a separate addition. We find force in the arguments of the ld. AR that once the search team has accepted that silver items were considered as explained and the same is explicitly evident from the question 15 ignoring that primary acceptance by the revenue at the time of search there is no reason by the ld. AO and ld. CIT(A) and in making and sustaining the addition and based on that primary finding the addition of Rs. 4,55,639/- sustained by the ld. CIT(A) is vacated and the ground no. 1 raised by the assessee is allowed. 14. The next issue before us raised by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date- (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; 14.2 As it is evidence from the above provision of law that section 271AAB was in operation till the bill receives the assent of the president and the ld. AO knowingly invoked the provision of section 271AAB and not provision of section 115BBE. The levy of the tax without giving an opportunity to the assessee is against the principles of nature justice. Not only that once the ld. AO choose to levy the penalty he cannot go beyond what he has proposed in the order. Therefore, the levy of tax u/s. 115BBE beyond the scope of the order when the ld. AO has already initiated penalty u/s. 271AAB provision of section 11BBE is not applicable and that the same is also against the press release of the CBDT. The relevant press release issued by the CBDT is extracted here in below: New Delhi, 16th December, 2016 Press Release Sub: Notification of The Taxation Laws (Second Amendm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and taxes are paid. Otherwise a penalty @60% of income shall be levied. The Scheme, Rules and Notifications are available on the official website of the Department www.incometaxindia.gov.in. Any queries/clarifications relating to the Scheme may be emailed at [email protected]" [Meenakshi J. Goswami Commissioner of Income Tax [Media and Technical Policy] Official Spokesperson, CBDT. 14.3 We carefully considered the submission of the ld. AR and DR and at length arguments of both the parties and also gone through the press release issued by the CBDT dated 16.12.2016 explaining the purpose of increasing in rate the press release clearly isolates the case of non-declaration of undisclosed cash or deposit in accounts under the PMGKY2016. We have also gone through the amendment made in section 271AAB vide The Taxation Laws (Second Amendment) Act, 2016. The same is also extracted here in below: 14.4 On cogent reading of the amendment in both the sections of 115BBE and 271AAB with that of the press release, it is evidently clear that the intention of legislature is to segregate the taxation of income declared in search with that of the other amount found and disclosed by asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
