The Commissioner of Income Tax vs Smt. Munnakka Devi

R.K. Agrawal, J.—The Income Tax Appellate Tribunal has referred the following two questions of law u/s 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:

Having regard to the fact that the assessee herself took the plea in appeal for assessment year 1975-76 that the unexplained amounts within the meaning of Section 69A could be brought to tax in A.Y. 1976-77 only, was the Tribunal correct in its view that the unexplained amount could still not be considered in A.Y. 1976-77?

Scheme of Voluntary Disclosure being what it was and there being no alternative but to accept the wealth as disclosed other conditions having been fulfilled, was the Tribunal correct in its view that the department has deliberately held that ornaments in question represented assessee''s wealth on 31.3.1975 and having accepted the wealth tax for assessment year 1975-76 with valuation date on 31.3.1975, the I.T. Act, 1961 in A.Y. 1976-77 for taxing the unexplained possession of jewellery and each disclosed in October/November, 1975 u/s 15(1) of the Voluntary Disclosure of Income and Wealth Ordinance, 1975?

The reference relates to the Assessment Year 1976-77.

Briefly stated, the facts giving rise to the present reference are as follow:

The Income Tax Officer in his assessment order u/s 143(3)/148 noted that the return was filed in the status of individual'' in compliance with the notice issued u/s 148. It was pointed out that the assessee made a declaration of wealth under the Voluntary-Disclosure of Income and Wealth Ordinance, 1975 (hereinafter referred to as "the Ordinance") in the shape of gold ornaments and jewellery. In respect of the source of investment, the Officer took action u/s 148 for the assessment year 1975-76 since the acquisition of the asset had not been fully explained. The Income Tax Officer also mentioned that the assessment was framed by his predecessor treating part of the asset to the extent of Rs. 40,000/- as unexplained u/s 69. The assessee took up the matter before the Appellate Assistant Commissioner who set aside the assessment order with the direction that the disclosure of ornaments made in October, 1975 technically fell and was liable to tax for the assessment year 1976-77 and not in the assessment year 1975-76. The Income Tax Officer, therefore, took action u/s 148 in respect of the assessment year 1976-77 and a notice u/s 148 was served on the husband of the assessee. A return in compliance with the said notice and as mentioned above, was filed. The Income Tax Officer fixed up the case for hearing asking the assessee to produce evidence in support of the claim regarding the source of the investment. He issued summons u/s 131 to the assessee for compliance as there was non-compliance in the past. The assessee insisted to be examined at her residence as she is a purdanashin lady. Accordingly, the Inspector of Income Tax was directed to record her statement in the presence of her husband Shri Ayodhya Prasad. The Income Tax Officer considered the statement and came to the conclusion that the source of the ornaments disclosed under the Ordinance was not fully disclosed, which fact was also apparent as the assessee filed the affidavit before the predecessor Income Tax Officer that she received 50 tolas of gold ornaments from her parents and 102 tolas from her in-laws. The Income Tax Officer pointed out that the statement contradicted the affidavit filed by the assessee. The assessee also claimed that her father in law gifted adequate gold ornaments at the time of her marriage. Various submissions were made before him, but the Income Tax Officer found no evidence regarding the status of donors in the year of the marriage of the assessee. He, therefore, concluded that these ornaments were not in her possession since her marriage and they must have been acquired in the course of the business of her husband. He, however, considered the local customs and estimated the value of ornaments at Rs. 50,000/-, which might have been in possession of the assessee at the time of her marriage. The balance of Rs. 40,000/- of gold ornaments and cash of Rs. 15,000/- were treated as being unexplained u/s 69A. The assessment was completed accordingly. The assessee took up the matter before the Appellate Assistant Commissioner who considered the various submissions raised before him as well as the findings of the Income Tax Officer. He found no force in the contention of the assessee. The various contentions made by the assessee were recorded by the Appellate Assistant Commissioner in his appellate order. He was of the view that the Income Tax Officer''s observation that the source of ornaments disclosed by the assessee was unproved, was correct. On the reasons recorded by him, the Appellate Assistant Commissioner sustained additions of the above two items u/s 69A. The appeal of the assessee was dismissed. The assessee took up the matter before the Tribunal and reiterated the facts and the background of the case as mentioned in the order of assessment as well as in the order of the Appellate Assistant Commissioner. The Tribunal mentioned that the ornaments and income of Rs. 25,000/- were disclosed by the assessee and the above cash included a Fixed Deposit Receipt of Rs. 12,000/- and the remaining cash of Rs. 13,000/-. It was also mentioned that the Income Tax Officer also made assessment on a wealth of Rs. 1,05,000/- as on the valuation dated of 31.3.1975 for the assessment year 1975-76. Reproducing the assessment order dated 14.7.1977, the Tribunal observed that it failed to understand how the Wealth Tax Officer/Income Tax Officer could take a view after having held that the assessee was the owner of the ornaments worth Rs. 90,000/- and the cash of Rs. 15,000/- as on 31.3.1975 that they had been acquired out of the unexplained source in the assessment year 1976-77 for which the accounting year itself started on 1.4.1975 and ended on 31.3.1976. It also mentioned that the Wealth Tax Officer clearly held that the lady was in possession of ornaments and the above asset in the assessment year 1975-76 for which the valuation date was 31.3.1975 and, therefore, he could not again hold that the same ornaments and cash had been acquired by the assessee in the assessment year 1976-77. On that issue, the Tribunal found that the assessment for the assessment year 1976-77 cannot survive. The Tribunal did not deal with the reasons which led the Income Tax Officer to initiate proceedings for the assessment year 1976-77. The assessment was, therefore, annulled in its entirety.

We have heard Sri Shambhu Chopra, learned Standing Counsel for the Revenue.

The learned Counsel submitted that the assessee had disclosed her wealth under the Ordinance, which was in the shape of gold ornaments and jewellery. The disclosure so made was accepted under the aforesaid Ordinance as under the provision of the Ordinance, there was no option but to accept the declaration so made by the declarant. The Income Tax Officer took proceedings u/s 148 of the Act for the assessment year 1975-76 seeking to tax the investment made in the wealth so disclosed by the assessee. He assessed a sum of Rs. 40,000/- u/s 69A towards the unexplained investment in the wealth declared by the assessee. The matter was taken up by the assessee in appeal before the Appellate Assistant Commissioner who had set aside the assessment order with the direction that the disclosure of ornaments made in October, 1975 technically fell and was liable to tax for the assessment year 1976-77 and not in the assessment year 1975-76. Pursuant to the direction given by the Appellate Assistant Commissioner, proceedings for reassessment u/s 148 was taken for the assessment year 1976-77 and unexplained investment in the wealth so declared by the assessee has been brought to tax by invoking the provision of Section 69A of the Act. The Tribunal had wrongly deleted the addition on the ground that the wealth declared was for the assessment year 1975-76 and the investment made therein cannot be subject to tax in the assessment year 1976-77. In support of his aforesaid pleas, he has relied upon the following decisions:

(i) Commissioner of Income Tax Vs. Buildwell Assam (P.) Ltd.,

(ii) Commissioner of Income Tax v. Fundilal Rikhabchand (1994) 208 ITR 348

We have given our anxious consideration to the various pleased raised by the learned Standing Counsel and find that it is not in dispute that in the appeal preferred by the assessee for the assessment year 1975-76 a direction was given by the Appellate Assistant Commissioner that the disclosure of ornaments made in October, 1975 technically fell and was liable to tax for the assessment year 1976-77 and not in the assessment year 1975-76. The proceeding u/s 148 of the Act have been initiated pursuant to the directions given by the Appellate Assistant Commissioner. It is not in dispute that the respondent assessee had disclosed her wealth in October, 1975 under the provisions of the Ordinance wherein the Wealth Tax Officer had no other option but to accept the declaration so made. u/s 69A of the Act, the investment made in acquisition of jewellery or other valuable article is to be brought to tax in the financial year in which the assessee is found to be the owner of such jewellery or other valuable article where the explanation offered by the assessee is not found to be satisfactory. For ready reference, Section 69A of the Act is reproduced below:

69A. Unexplained money, etc. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Income Tax Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.

From a reading of the aforesaid provision, it would be seen that Section 69A is attracted in the following circumstances:

(i) The assessee is found to be the owner of any money, bullion, jewellery or other valuable article in any financial year;

(ii) Such money, bullion, jewellery or other valuable article is not recorded in the books of account, if any, maintained by him for any source of income;

(iii) The assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or

(iv) The explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory;

(v) Then, the money and the value of the bullion, jewellery or other valuable article is deemed to be the income of the assessee for such financial year.

In the present case, we find that the assessee had, for the first time, disclosed her wealth in October, 1975 which fell in the assessment year 1976-77, the financial year being 1975-76. The explanation offered by the assessee in respect of the source of acquisition of her wealth has been disbelieved by the Assessing Officer. Thus, the provision of Section 69A of the Act was fully attracted and the investment so made is to be deemed to be the income of the assessee of that financial year, i.e., 1975-76, corresponding to the assessment year 1976-77.

Further, we find that re-assessment proceeding u/s 148 of the Act for the assessment year 1976-77 had been initiated to give effect to the findings and directions given by the Appellate Assistant Commissioner in the appeal preferred by the assessee for the assessment year 1975-76. The same is saved by the provisions of Section 150(1) of the Act. The view of the Tribunal that as the Wealth Tax Officer had accepted the declaration of wealth made by the assessee for the assessment year 1975-76, it would be deemed that the wealth was in existence on the valuation date, i.e., 31.3.1975, which fell in the assessment year 1975-76, is wholly misplaced. The two proceedings, namely, under the Wealth Tax Act, 1957 and under the Income Tax Act are separate proceeding. The acceptance of the declaration under the Ordinance will not affect the provisions of Section 69A of the Act, as no such declaration was made by the assessee under the Ordinance in respect of her income.

In the case of Buildwell Assam (P) Ltd. (supra), the Gauhati High Court has held as under:

When the order of assessment is set aside, the original order, at least in so far as the matters considered, decided and set aside by the AAC no longer remain in force, as it renders the matters decided in the original order non est. What remain alive and active are the directions and matters considered and decided by the appellate authority. The juristic justification of the doctrine of fusion or merger is based on the principle that there cannot be, at one and the same time, more than one operative order governing the matter. The order of a subordinate authority, if subjected to consideration and decision by a superior authority, vanishes in the eye of law and stands superseded. The identity of the order of the lower authority merges with the order of the superior one. Where an order of the ITO is carried in appeal and the appellate authority disposes of the appeal after a contested hearing, the order finally disposing of the matter is the final order, in so far as it concerns the matters considered and decided in the appellate order.

In the case of Fundilal Rikhabchand (supra), the Rajasthan High Court has held as under:

The provisions of Section 251(1)(a) confers jurisdiction on the Appellate Assistant Commissioner to confirm reduce, enhance or annul the assessment or he may set aside the assessment and refer the case back to the Income Tax Officer for making a fresh assessment in accordance with the directions given by the Appellate Assistant Commissioner and after making such further enquiry as he may consider necessary and the Income Tax Officer shall thereupon proceed to make such fresh assessment and determine where necessary, the amount of tax payable on the basis of such fresh assessment. From a perusal of the provisions of Section 251(1)(a), it is evident that, if the assessment order is annulled, then the Income Tax Officer has no jurisdiction to proceed further for making an assessment, but, where it has only been set aside, then a fresh assessment has to be made in accordance with the directions given by the appellate authority. The Income Tax Officer is bound by the directions given by the appellate authority. The new source of income, while making an assessment as per the remand order of the appellate authority, cannot be made. The assessee also cannot be allowed to agitate new points or grounds which were not dealt with by the appellate authority in his order and the concluded matter cannot be reagitated or redetermined afresh. In respect of a particular source of income, if the matter has been remanded and directions have been given to make a fresh assessment as in the present case, then subject to the directions which have been given by the Appellate Assistant Commissioner, the Income Tax Officer has the same power in the fresh assessment, as he originally had in making an assessment u/s 143 of the Income Tax Act, 1961, in respect of that point. If the Appellate Assistant Commissioner sent the matter back to the Income Tax Officer without any restrictions, then no directions can be presumed or inferred on the powers of the Income Tax Officer when he proceeds to make the fresh assessment in substitution of the order which has been set aside. If the directions have been given, then the basic principles of administration of justice demand that the Income Tax Officer is bound by the directions of his higher authorities and he cannot travel beyond that. If any other interpretation is taken, it would be not only denial of justice, but destructive of the administration of justice resulting in indiscipline. The Appellate Assistant Commissioner may indicate in the order, the various points or the matters on which the enquiry is to be made. If such directions are given, then they have to be strictly followed and the Income Tax Officer has to conduct the enquiry in accordance with the directions given and cannot ignore those directions. The only exception is when the law is amended retrospectively and it is only in that case, ignoring the directions of the appellate authority, that effect to the retrospective amendment by the Legislature has to be given.

There cannot be any dispute regarding the principles laid down therein. However, in the present case, we find that, from the statement of the case sent by the Tribunal, it has been mentioned that a specific direction was given by the Appellate Assistant Commissioner that the disclosure of ornaments made in October, 1975 technically fell and was liable to tax for the assessment year 1976-77 and not in the assessment year 1975-76. Thus, the Income Tax Officer was fully justified in bringing to tax the income relating to acquisition of disclosed ornaments and other wealth in the assessment year 1976-77.

We accordingly answer both the questions in the negative, i.e., in favour of the Revenue and against the assessee. There shall be no order as to costs.