The Commissioner of Income Tax and The Income Tax Officer vs Sri Chandrashekar

N.K. Patil, J.—This appeal by the Revenue is arising out of the impugned order dated 21st February 2005 passed in ITA No. 446/Bang/2003 by the Income Tax Appellate Tribunal, Bangalore, for considerations of the following substantial questions of law:

(i) Whether the Tribunal was correct in holding that the information provided in the declaration under the VDIS Scheme cannot be utilized for reopening of assessment u/s 147 of the Act since it was confidential and therefore, assessment has to be deleted.

(ii) Whether the Assessing Officer was correct in holding that the VDIS declaration had not been complied by the assessee in accordance with the provisions of the scheme and therefore, the scheme was not applicable and there was no prohibition from utilizing the information under the scheme for the purpose of reopening of assessment and bringing the same to tax in accordance with the provisions of the Act.

The facts in brief are, the assessee is being assessed as an individual and he has not filed any return of income for the assessment year 1995-96. The assessee made a declaration under Voluntary Declaration of Income Scheme 1997 (''VDI'' Scheme for short) on 29.12.1997. According to the said Scheme, the assessee was bound to pay the taxes as per declaration on the same date and if he fails to do so he was given extension under the provisions of the said scheme by payment of interest for a period of three months which was expire don 29.9.1998. The assessee had paid the taxes with interest on 31.3.1998 and declaration made by him was treated as ''never to have been filed under the Scheme''. The Assessing Officer found that the income liable to tax had escaped assessment and therefore, he has issued notice u/s 148 of the Act, to which, assessee has given reply. The Assessing Officer on verification of the entire material available on file has proceeded to bring to tax the investment declared under the VDIS in the immovable property for the assessment year 1995-96 and consequently, a sum of Rs. 7,47,500/- was brought to tax by an order of assessment dated 23.2.2002. Assailing the correctness of the said order, the assessee had filed an appeal before the First Appellate Authority the Commissioner of Income TAX (Appeals) IV, Bangalore, in appeal ITA No. 27/R-7/CIT(A)/IV/2002-03. The First Appellate Authority, after hearing both sides and after considering the order passed by the Assessing Officer, has dismissed the said appeal and confirmed the order of the Assessing Officer. Being aggrieved by the order of the First Appellate Authority and the Assessing Officer, the assessee has filed an appeal before the Income Tax Appellate Tribunal, Bangalore Bench-B. Bangalore, (''Tribunal'' for short) in ITA No. 446/BANG/2003 for the Assessment Year 1995-96. The said matter came up for consideration before the Tribunal. The Tribunal, in turn, after going through the order passed by the authorities below and following the order passed in ITA No. 447/Bang/2003, has allowed the said appeal, without assigning any valid reasons, without recording any finding and without appreciating the oral and documentary evidence available on file. Being aggrieved by the said order passed by the Tribunal, the appellants herein have presented this appeal, raising the aforesaid substantial questions of law along with other reliefs.

We have heard the learned Counsel for the appellants and learned Counsel for the respondent at considerable length of time.

Learned Counsel for the appellants at the outset submitted that, the Tribunal has committed an error and material irregularity in passing the impugned order, without going through the order passed by the Assessing Officer which was confirmed by the First Appellate Authority and without assigning any valid reasons. Therefore, he submitted that the order impugned is liable to be set aside.

As against this, learned Counsel for respondent inter-allia, contended and substantiated the order passed by the Tribunal and submitted that, the Tribunal after due consideration of the relevant materials available on file has passed the said order and therefore, interference by this Court does not call for. Further, he submitted that, appellants have not made out any good grounds to consider the substantial questions of law raised in this appeal.

After having heard the learned Counsel for both the parties and after careful perusal of the orders passed by all the three authorities, it emerges that, the Assessing Officer has erred in passing the said order and the First Appellate Authority has also erred in confirming the same. Further it emerges that, the Tribunal has erred in allowing the appeal contrary to the material available on record. It is significant to note that, all the authorities have not recorded any finding of fact or assigned any valid reasons to pass such orders and they have decided the matter contrary to the relevant provisions of the VDIS scheme, particularly, with reference to Clause-68 read with Section 147. Therefore, in view of not conducting proper enquiry by all the authorities, we are of the considered view that, the impugned order passed by the Assessing Officer and confirmed by the First Appellate Authority and the order passed by the Tribunal cannot be sustained and they are liable to be set aside and the matter requires reconsideration by the Assessing Officer.

Therefore, without going into the further merits and demerits of this case, the instant appeal filed by the appellants is allowed in part.

The impugned order dated 21.2.2005 passed by the Tribunal in ITA No. 446/Bang/2003; the order dated 28.2.2003 passed by the First Appellate Authority-Commissioner of Income Tax (Appeals) IV, Bangalore, in ITA No. 27/R-7/CIT(A)IV/2002-03 and the Assessment order dated 22.3.2002 passed by the Assessing Officer, vide Annexures-A, B and C respectively, are hereby set aside and matter stands remitted back to the Assessing Officer, for reconsideration afresh and to pass appropriate orders, in strict compliance of the relevant provisions of VDIS 1997, particularly, with reference to Clause 68 read with Section 147 of the Act and dispose of the same, after affording reasonable opportunity of hearing to the respective parties, either personally or through their counsel, as expeditiously as possible.

In view of remanding the matter to the Assessing Officer, it is not necessary to answer the substantial questions of law raised by appellants in this appeal.