P.K. Bansal, A.M.
1. This batch of five appeals by the Revenue against separate orders of CIT(A) for asst. yr. 1992-93 in respect of different assessees of the same group involving common facts were heard together and are being disposed of by this consolidated order, for the sake of convenience.
2. Brief facts of the case are that the AO noted that in all these five cases the assessees have received NRI foreign remittance and, therefore, assessments were reopened under Section 148 on 29th Aug., 1996. The assessees filed reply on 15th May, 1997, stating that the returns already filed may be deemed to have been filed in response to notice under Section 148. In the meantime, the assessees filed declarations under VDIS showing the amounts received through NRI foreign remittance to be the income. The chart showing details is as under:
Date of filing original
notice under s. 148
declaration under VDIS
CIT, as per Section 68 of VDIS, issued certificates in all the cases accepting the declarations filed stating therein the amount of tax paid. AO did not accept the declarations and took the view that the assessees have not filed any return in response to notice under Section
148. He observed that as per VDIS, returns should have been filed before 1st July, 1997. Mere filing of letter will not tantamount that the assessees have filed returns before 1st April, 1997. Ultimately, AO completed assessments in all these cases by making additions in respect of NRI remittances on the basis of which assessments were reopened and which were declared in declarations under VDIS and also for low household withdrawals.
3. Before learned CIT(A), the assessees challenged the reopening as well as the additions made on account of credit and also the addition on account of low household expenses. CIT(A) on going through the VDIS and arguments of the assessee, relying on the decisions Tiwari Kanhaiya Lal and Ors. v. CIT and Ors. (1985) 154 ITR 109 (Raj) and Iqbal Singh Atwal v. CIT (1984) 147 ITR 599 (Cal) annulled the assessments framed under Section 148 holding that the income on the basis of which proceedings under Section 148 were initiated had already been disclosed under VDIS and such disclosure was accepted by the competent authority CIT and, therefore, AO was not justified in making reassessments.
4. Before us, learned Departmental Representative drawing our attention to ground No. 1 submitted that CIT(A) has erred in annulling the assessments. Assessments should not have been annulled because AO had reasons to believe while reopening, there was escapement and, therefore, the assessees have disclosed the same very income in declarations filed under VDIS. Filing of declarations proves that there were reasons to believe and the action initiated under Section 148 was valid. CIT(A) should not have annulled the assessments. He drew our attention to the provisions of Section 68 of VDIS and submitted that income declared by the assessees has to be excluded from total income assessable but the section nowhere states that the AO cannot frame assessment. Thus, whole of the assessment cannot be annulled.
4.1. Learned authorised representative, on the other hand, submitted that CIT(A) has rightly annulled the assessments. No doubt, the income which has been declared under VDIS has to be excluded but AO cannot reopen a concluded matter, as done in these cases. While framing original assessments, the issue relating to household drawings was concluded but AO has made the additions on this account. Reliance in this regard is placed on the decision in the case of CIT v. Sun Engineering Works (P) Ltd. (1992) 198 ITR 297 (SC). In the case of Vipan Khanna v. CIT (2002) 255 ITR 220 (P&H), it is held that even after the amendment made w.e.f. 1st April, 1989, in Section 147, finding of the apex Court still holds good and thus reopening made on the basis of concluded issue will be invalid.
5. We have heard the rival submissions, perused the orders of Tax authorities and gone through the material available on record as well as the relevant provisions of VDIS 1997. We find that the assesses can derive the following benefits from a disclosure made under Section 64(1) of VDIS :
(1) The amount of the voluntarily disclosed income shall not be included in the total income of the declarant for any assessment year under the IT Act on fulfilment of the conditions enumerated in Clauses (i) and (iii) of Section 68(1).
(2) Nothing contained in any declaration under Section 64(1) shall be admissible in evidence against the declarant for the purpose of any proceeding relating to imposition of penalty or for the purposes of prosecution under the IT Act or the WT Act or the Foreign Exchange Regulation Act, 1973, or the Companies Act, 1956 (s. 71).
(3) All particulars contained in a declaration under Section 64(1) shall be treated as confidential as provided in Section 72(1)
(4) Exemption from wealth-tax is granted in respect of assets specified in a declaration made under Section 64(1) upto and including asst. yr. 1997-98, as per the provisions of Section 73.
However, voluntary disclosed income shall not affect the finality of completed assessments, in view of Section 69. Further, any tax paid in pursuance of a declaration made under Section 64(1) shall not be refundable under any circumstances. Reference to Section 68 of VDIS may be made as under :
"68. Voluntarily disclosed income not to be included in the total income -
(1) The amount of the voluntarily disclosed income shall not be included in the total income of the declarant for any assessment year under the IT Act, if the following conditions are fulfilled, namely :
(i) the declarant credits such amount in the books of account, if any, maintained by him for any source of income or in any other record, and intimates the credit so made to the AO; and
(ii) the income-tax in respect of the voluntarily disclosed income is paid by the declarant within the time specified in Section 66 or Section 67.
(2) The CIT shall, on an application made by the declarant, grant a certificate to him setting forth the particulars of the voluntarily disclosed income and the amount of income-tax paid in respect of the same."
From perusal of the above, it is clear that CIT has to grant a certificate in respect of income declared by the assessees under VDIS. In this case, CIT has issued the certificates accepting the income declared by the assessees under VDIS. Once CIT has accepted and issued the certificates under Section 68, AO cannot question the validity of the declaration made by the assessees. Even AO cannot add such income in assessments framed. We do agree with learned Departmental Representative that the assessments cannot be annulled, in view of the provisions under Section 68 of VDIS. Section 68 only provides for consequence of the income declared under VDIS that the income so declared has to be excluded from total income of the declarant for any assessment year under IT Act. Accordingly, we set aside the orders of CIT(A) and direct the AO to exclude the income declared under VDIS from total income assessed in reassessments.
5.1. Now coming to the additions made in respect of low withdrawals, we find that in original assessments framed no addition had been made on account of low household drawings and whatever drawings were shown were duly accepted. Thus, the issue relating to household withdrawals has become final. We do agree that the concluded issue cannot be reopened under Section 147 because this section does not empower the AO to review already concluded issue. Hon'ble Punjab & Haryana High Court in the case of Vipan Khanna (supra), has considered the amended provisions of Section 147 of the IT Act in the cases where the original assessments have been completed under Section 143(1) or processed under Section 143(1)(a) and took the view that Section 147 does not give the jurisdiction to the AO to reopen the concluded proceedings even after the amended section after 1st April, 1989. The pertinent findings of the Hon'ble High Court are reproduced as under:
At p. 233 it was held :
"The petitioner has rightly relied on the decision of the Supreme Court in the case of CIT v. Sun Engg. Works (P) Ltd. (1992) 198 ITR 297 (SC) to contend that the jurisdiction of the ITO in proceedings under Section 147 of the Act is confined only to such income which has escaped tax or has been underassessed and does not extend to revising, reopening or reconsidering the whole assessment. In the present case the impugned letter 30th July, 1998, requiring the petitioner to furnish information on issues in respect of which there is no allegation of any escapement or underassessment of income either in the reasons recorded or during the course of proceedings under Section 147 of the Act is tantamount to reviewing the whole assessment. This could not be done....."
Again at p. 234 it was held :
"Thus, we are of the considered view that as per the law laid down by the apex Court in the case of CIT v. Sun Engg. Works (P) Ltd. (1992) 198 ITR 297 (SC), when proceedings under Section 147 of the Act are initiated, the proceedings are open only qua items of underassessment. The finality of the assessment proceedings on other issues remains undisturbed. According to us it makes no difference whether the assessment proceedings have become final on account of framing of assessment under Section 143(3) of the Act or on account of non-issue of notice under Section 143(2) of the Act within the stipulated period. The amendments made in Section 143 and Section 147 of the Act w.e.f. 1st April, 1989, do not in any manner negate this proposition of law as enunciated by the Supreme Court in the case of CIT v. Sun Engg. Works (P) Ltd. (supra)."
In view of the aforesaid decision of the jurisdictional High Court, we are of the view that in cases where assessment proceedings had come to an end and the matter has become final, subsequently, if this assessment is reopened AO has the jurisdiction only for the escaped assessment on the basis of the reasons to believe recorded and any other escaped income which may come to his knowledge during the course of proceedings under Section 147. Cases where AO does not have any material which may tantamount not to be escaped assessment of the income, are outside the purview of Section 147. AO does not have any jurisdiction to review, reconsider, and recompute the income of the assessee where the proceedings have become final, in the absence of any material came to his knowledge during the course of the proceedings under Section 147. Therefore, respectfully following the aforesaid decision, we are of the view that the AO did not have any jurisdiction in the present case for making additions on account of low drawings. Thus, we cannot sustain the additions made by the AO in the reopened assessments made on account of low drawings in the case of all the assessees.
6. Thus, the appeals of the Revenue are partly allowed.