UMA CHAUHAN V. COMMISSIONER OF INCOME TAX

ITA/3/2012

AI Insights

The case involves two appeals by Uma Chauhan, the proprietor of M/s Heena Knitwears, against the Commissioner of Income Tax concerning the assessment years 1994-95 and 1995-96. The primary legal contention was whether the appellant was entitled to immunity under the Voluntary Disclosure of Income Scheme (VDIS), 1997, despite having received notices under Section 148 of the Income Tax Act, 1961, for the said assessment years. The Income Tax Appellate Tribunal had previously set aside the orders of the CIT(Appeals), which had accepted the appellant's VDIS declaration, leading to the current appeals. The High Court found that the certificate issued under VDIS had not been cancelled and thus the appellant was entitled to the benefits under the scheme.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 756374 (HC-HIMACHAL_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 15-09-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, Finance Act, 1997
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VANDANA KUTHIALA; DIWAN SINGH NEGI
• Assessee Lawyers: VISHAL MOHAN; PRAVEEN SHARMA; RAJEEV KUMAR
• Keywords: Ex parte assessment; Income Declaration; VDIS; Voluntary Disclosure of Income Scheme; Immunity from tax
• Section: 147; 144; 64(2); 68(2); 260-A

Judgement Text

"IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA ITA No. 03 of 2012 a/w ITA No. 04 of 2012 Decided on : 15.09.2023 ITA No. 03 of 2012 Uma Chauhan, Proprietor of M/s Heena Knitwears …....Appellant. Versus Commissioner of Income Tax …….. Respondent. ITA No. 04 of 2012 Uma Chauhan, Proprietor of M/s Heena Knitwears …....Appellant. Versus Commissioner of Income Tax …….. Respondent. Coram The Hon’ble Mr. Justice M.S. Ramachandra Rao, Chief Justice. The Hon’ble Mr. Justice Ajay Mohan Goel, Judge. Whether approved for reporting?1 For the appellant(s) : Mr. Vishal Mohan, Senior Advocate with M/s Praveen Sharma and Rajeev Kumar, Advocates. For the respondent(s) : M/s Vandana Kuthiala and Diwan Singh Negi, Advocates. 1 Whether reporters of the local papers may be allowed to see the judgment? 2 M.S. Ramachandra Rao, Chief Justice (Oral) These two appeals, filed under Section 260-A of the Income Tax Act, 1961 ( for short ‘the Act’) had been admitted on 14.03.2012 to consider the following questions of law:- ITA No. 03 of 2012:- i) Whether in law, the learned Income Tax Appellate Tribunal was justified in holding the declaration made by the appellant under VDIS as not legally sustainable, though the certificate issued by the learned CIT(A) has not been withdrawn till date and set off all the taxes paid in respect of the same has also not been granted? ii) Whether in law, the learned Income Tax Appellate Tribunal was justified in holding that the issue of issuance of notice under Section 147 of the Income Tax Act, 1961 was not longer res-integra? iii) Whether in law, the assessment so framed and the estimation of profits within the meaning of Section 144 of the Income Tax Act as estimated by the learned Tribunal and sustained is legally correct or not? ITA No. 04 of 2012 i) Whether in law, the learned Income Tax Appellate Tribunal was justified in holding the declaration made by the appellant under VDIS as not legally sustainable, though the certificate issued by the learned CIT(A) has not been withdrawn till date and set off all the taxes paid in respect of the same has also not been granted? 3 ii) Whether in law, the learned Income Tax Appellate Tribunal was justified in holding that the issue of issuance of notice under Section 147 of the Income Tax Act, 1961 was not longer res-integra? iii) Whether in law, the assessment so framed and the estimation of profits within the meaning of Section 144 of the Income Tax Act as estimated by the learned Tribunal and sustained is legally correct or not? The Background facts 2) The background facts are that the appellant/Assessee was running a business under the name and style of M/s Heena Knitwears with its premises at Kachighati, Shimla. 3) For the assessment year 1994-95 and 1995-96, she did not file her regular return of income. 4) Notices were issued to her on 03.09.1996 and 08.08.1996 respectively under Section 148 of the Income Tax Act, 1961 for the said assessment years, which were received by the Assessee on 11.09.1996 and 22.08.1996 respectively. 5) No return was furnished by the Assessee in spite of the receipt of the said notices. 6) Thereafter, the concerned Assessment Officer framed ex parte assessment under Section 144 of the Act and called for the information regarding total sales/ turnover made by the Assessee from the Excise and Taxation Department, Shimla and estimated the sales turnover. 4 7) For the year 1994-95, the estimated sales turnover was Rs.1,03,05,611/- and for the year 1995-96, it was Rs. 1.30 Crores. This was done on 30.03.1999. 8) In the meantime, vide the Finance Act, 1997, the Union of India introduced the Voluntary Disclosure of Income Scheme, 1997. 9) Under Section 64 of the Finance Act, the persons (i) who had failed to furnish return of income under Section 139 of the Act or (ii) who had failed to disclose in a return of income, certain income chargeable to tax under the Income Tax Act or which had escaped assessment, were given an opportunity of full disclosure; and on the said income declaration, the said provision fixed certain charges of taxes be levied. 10) Taking advantage of the same, the applicant filed an application on 31.12.1997, in respect of four assessment years i.e. 1994-95, 1995-96, 1996-97 and 1997-98. 11) Thereafter, a certificate was issued to her under Section 68(2) of the Finance Act, 1997. 12) By virtue thereof, in view of Section 68(1) of the Finance Act, the amount of voluntarily disclosed income cannot be included in the total income of the declarant for any assessment year under the Act, and therefore, the Assessee would get immunity from any further process for not disclosing the income or not filing the return at the relevant time. 5 13) Taking advantage of this certificate, the Assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT (Appeals)] for both assessment years 1994-95 and 1995-96 and the CIT(Appeals) passed the order on 10.03.2000 recording that declaration of the Assessee under the VDIS, 1997 was accepted by the Income Tax Commissioner, Shimla, that a certificate No. 838 under Section 68(2) of VDIS, 1997, dt. 31.03.1998 was also issued to the Assessee, and therefore, in view of the disclosure by the Assessee under the VDIS, 1997, the action of the Assessing Officer in assessing the income of the Assessee at higher rate, cannot be sustained and has to be deleted. 14) These orders were challenged by the Department before the Income Tax Appellate Tribunal, Chandigarh Bench in ITAs No. 567 and 568/Chandi/2000. 15) Before the Tribunal, a doubt was raised as to whether the VDIS 1997 was available for the Assessee for the year 1995-96. In addition, it was also contended by the Department relying on Section 64(2) of the VDIS, 1997 that once the Assessee had been given a notice under Section 148 of the Income Tax Act, she was not entitled to any relief under the VDIS, 1997. 16) In view of these contentions, therefore, the Tribunal set aside the orders passed by the CIT(Appeals) and remanded the matter back to the CIT(Appeals) for fresh consideration after affording reasonable opportunity of hearing to the Assessee. 6 17) When the matter went back to the CIT(Appeals), it was decided ex parte on 02.02.2005. 18) The Assessee questioned it before the CIT(Appeals) again, which remanded the matter back for fresh consideration in order to give an opportunity to the Assessee for being heard. 19) After this remand, CIT (Appeals) had passed fresh orders dismissing the appeals, stating as under:- “6. I have gone through the facts of the case and submission filed by the appellant. The appellant is in second round of litigation before the undersigned. The cases cited are distinguishable on facts. The appellant vide letter dated 23/8/2010 was asked to furnish the photo-copy of the VDIS issued by the CIT, Shimla as claimed by her in support of her claim. The appellant vide letter dated 22/11/2010 submitted that she applied to the CIT. Shimla for the copy of the certificate who vide letter dated 9/9/2010 intimated that the records relating to VDIS, 1997 has been destroyed in fire in Feb., 2001. The appellant has not been able to adduce supporting evidence for her claim from her own records if any such certificate was issued by the CIT, Shimla The appellant in this case has claimed immunity under VDIS. The same was not granted by the Department since the declaration was filed after issue of notices u/s 148 of the Act. The appellant did not co-operate with the department in spite of having been provided two innings of litigation Immunity under VDIS is not applicable to the appellant since notices u/s 148 had already been sent to her and u/s 64(2) of Finance Act, 1997, she was debarred from making a declaration under VDIS. Therefore, 7 immunity under VDIS is not available to the appellant. No return was furnished by the appellant either suo-moto or in response to notice issued u/s 148 till the framing of assessment on 31/3/1999. 6.1 The appellant's objection regarding non-service of notice was found to be without any basis in view of the following facts borne out from the assessment records: - i) A.Y. 1994-95: Notice u/s 148 was issued on 3/9/1996 and served on 11/9/1996. ii) A.Y. 1995-95: Notice u/s 148 was issued on 8/8/1996 and served on 22/8/1996. iii) Statutory notices were also served through affixture on 17/3/199 for A. Y. 1994-95 and 1995-96. Therefore, the assessments have been completed after issue and service of notice as per the record. Moreover, the appellant has even failed to produce the VDIS certificate issued if any by the Department to prove her case. Legally also the appellant was barred from VDIS declaration as discussed supra. 6.2 The reliance on sales-tax assessment for net profit rate is also in order since the appellant did not co-operate with the Department either in the first or in the second round of assessment. Till date no VDIS certificate has been produced by the appellant to prove her case. Moreover, VDIS claim of the appellant was never accepted by the Department since it was made after the issue of notice u/s 148 of the I.T. Act, 1961. Therefore, I seen no reason to interfere with the assessment made by the ld. A.O.” (emphasis supplied) 20) Thus, the CIT(Appeals) for the first time proceeded on the basis that the Assessee did not produce the VIDS Certificate issued to her on 31.03.1998; that 8 records relating to VIDS has been destroyed in a fire in February, 2001; and that the appellant claimed immunity under VDIS, and the same had not been granted by the Department since the declaration was not filed after issuance of notices under Section 148 of the Income Tax Act. It was held that immunity under VDIS is not applicable to the Assessee since notices under Section 148 of the Act had already been sent to her and under Section 64(2) of the Finance Act, 1997, and so she was debarred from making a declaration under VDIS, and therefore, immunity under VDIS was not available to the Assessee. 21) Challenging the same, the instant appeals have been filed by the Assessee. 22) We have perused the record and noted the contentions of the parties and also inquired from the learned Counsel for the Department about the issuance of the certificate under Section 68(2) of the VDIS, 1997 to the Assessee. 23) It was informed to us that such a certificate was issued, but thereafter though steps had also been initiated for cancellation of the same, there is no evidence that the said certificate issued to the Assessee had been cancelled by the Department since no record of that fact is available. 24) That the VDIS certificate dt. 31.03.1998 under Section 68(2) of VDIS, 1997 had been issued to the Assessee is recorded in the order dt. 10.03.2000 passed by the CIT(Appeals) and also in the subsequent order passed by ITAT on 17.08.2004.Therefore, the issuance of the said certificate to the Assessee cannot be doubted. 9 25) If the said certificate had been issued and has not been cancelled by a process known to law, the benefit thereunder cannot be denied to the Assessee. 26) Admittedly, the Department itself had issued the notices under Section 148 of the Act to the Assessee and had also granted a VDIS certificate dt. 31.03.1998 to the Assessee in spite of the same. 27) It cannot therefore accuse the Assessee of any fraud in the matter by pleading ignorance at the time of issuance of the VDIS certificate on 31.03.1998 about the issuance of the notices under Section 148 of the Act. 28) Since the said certificate is admittedly issued and has not been cancelled in accordance with law, the Assessee cannot be denied the benefit of immunity conferred by the said circular. 29) Accordingly, questions (i), (ii), (iii) are answered in the negative in favour of the Assessee and against the Department and the appeals are allowed. 30) Pending miscellaneous application(s), if any, also stand disposed of accordingly. No costs. (M.S. Ramachandra Rao) Chief Justice (Ajay Mohan Goel) September 15, 2023 Judge (narender) "