Andhra HC (Pre-Telangana)
Radio Instruments Associates (P) Ltd. vs Commissioner Of Income-Tax on 3 September, 1986
Equivalent citations: [1987]166ITR718(AP)
Author: B.P. Jeevan Reddy
Bench: B.P. Jeevan Reddy
JUDGMENT Anjaneyulu, J.
1. The Income-tax Appellate Tribunal referred the following question of law to this court under section 256 (2) of the Income-tax Act, 1961 ("the Act" for short) :
"Whether, on the facts and in the circumstances of the case, a declaration filed under the Voluntary Disclosure of Income and Wealth Ordinance of 1975, would save the assessee from addition of Rs. 1,02,000 as income from undisclosed sources under section 68 of the Income-tax Act, 1961?"
2. The assessee is a private limited company and the assessment year concerned is 1973-74. The assessee manufacturers radios, transistors, tape recorders and components used in radios and television sets. It has its heads office at Hyderabad and a branch at Delhi. For the assessment year 1973-74, the assessee filed a return declaring a loss of Rs. 3,491 for the accounting year ending March 31, 1973. During the scrutiny of the accounts, the Income-tax Authorities noticed that the assessee had an account in its books for one Standard Radio Corporation, Delhi, which contained a number of transactions and at the end of the accounting year, the account showed a credit balance of Rs. 1,51,235.94. The Income-tax Officer referred the account copy for verification at Delhi and was informed that in the account books of the Standard Radio Corporation, Delhi, the corresponding debit balance was only Rs. 49,552.44. The assessee was then asked to explain the difference between the balances in the two accounts. The explanation offered was that the Delhi branch of the assessee had sold certain stocks on suspense account and from out of the sale proceeds of such stocks made payments to the aforesaid Standard Radio Corporation, without recording the same in the books of account. It was, therefore, explained that the balance in the account of the Standard Radio Corporation, Delhi, was ascertained after giving credit for the payments made by the Delhi branch which are not supported by corresponding entries in the assessee's books. At the same time, the assessee accepted that there is no information regarding the persons to whom the goods were sold on suspense account at Delhi, the amounts realised on such sales and the utilisation of such sale proceeds for the purpose of discharging the debts due.
3. In the books of account of the assessee, there was a suspense account to which credits were made from time to time. It was found that these credits were made whenever the assessee fell short of cash. The sum totals of the credits appearing in the suspense account was Rs. 1,02,000. The assessee tried to connect the credits in the suspense account with the sale proceeds of goods by the Delhi branch. At the same time, there is no information forthcoming as to the persons who paid the cash found credited to the suspense account in the assessee's books. While the accounts were under scrutiny and the assessment proceedings were pending, the Voluntary Disclosure of Income and Wealth Ordinance of 1975 was promulgated to enable assessee to disclose income and wealth not otherwise declared in the returns filed by them. The assessee had apparently taken advantage of the aforesaid Ordinance and filed a declaration before the Commissioner of Income-tax of the assessment years 1973-74. In the voluntary disclosure made for 1973-74, the assessee declared unaccounted income of Rs. 7,000 and for 1974-75 the income declared was Rs. 15,000. So far as the sum of Rs. 7,000 for 1973-74 is concerned, it was explained that it represented the difference between Rs. 1,02,000 representing the sale proceeds of the goods sold at Delhi less the corresponding value of the stocks reckoned at Rs. 95,000. The difference between the two was admitted as unaccounted income and the assessee paid tax on the voluntary disclosure.
4. In the assessment made for the year 1973-74, the Income-tax Officer referred to the aggregate credits of Rs. 1,02,000 in the suspense account between April 1, 1972, and March 31, 1973 and held that they constituted income from undisclosed sources assessable under section 68 of the Act. The assessee appealed against the assessment to the Appellate Assistant Commissioner of Income-tax and also to the Income-tax Appellate Tribunal unsuccessfully. Before the Income-tax Appellate Tribunal, the assessee urged that inasmuch as the voluntary disclosure of Rs. 7,000 was made for the assessment year 1973-74 which was reckoned with reference to the credits of Rs. 1,02,000, there was no justification for the assessment of Rs. 1,02,000 under the head "Other sources".
5. The Tribunal rejected the assessee's contention and held that there was no connecting link between the alleged unaccounted sales and cash credits of Rs. 1,02,000 entered in the suspense account periodically during the accounting year corresponding to the assessment year 1973-74. The assessee's application for reference under section 256 (1) of the Act having been rejected by the Tribunal, the assessee moved this court under sec 256 (2) of the Act and obtained a direction to the Tribunal to refer the case. That is how the present reference is laid before us.
6. We have already stated the facts to the extent they are relevant. The short ground upon which the assessee claims non-assessability of Rs. 1,02,000 as income from undisclosed source is that an income of Rs. 7,000 with reference to the aforementioned sum of Rs. 1,02,000 was offered in the voluntary disclosure made which was accepted by the Commissioner of Income-tax. It is urged that consequently it is not open to the tax authorities to make an assessment of the sum of Rs. 1,02,000. It is said that the Commissioner accepted the disclosure and hence the assessment of the sum of Rs. 1,02,000 would be contrary to the provisions of the Voluntary Disclosure of Income and Wealth Ordinance.
7. We have heard learned counsel for the assessee, Mr. Ranganatham, who placed the necessary particulars before us. He has pointed out that the voluntary disclosure return filed before the Commissioner was accompanied by a memo wherein the figures as they were initially declared in the income-tax return and revised figures taken for the purpose of voluntary disclosure were specified. It is stated that the assessee had categorically brought to the notice of the Commissioner that the voluntary disclosure of Rs. 7,000 made for the assessment year 1973-74 is referable to the unaccounted sales of Rs. 1,02,000 which were found credited in the suspense account.
8. We are not satisfied that the connecting link is established by the assessee between the sums periodically credits in the suspense account and the alleged unaccounted sales. No endeavor has been made, as already pointed out above, to connect the credits appearing in the suspense account with the sale proceeds of goods sold at Delhi or any other placed. Except the oral assertion of the assessee that the sum of Rs. 1,02,000 credited to the suspense account in periodical instalments represented the unaccounted sales, there is absolutely no evidence connecting the same.
9. In the aforesaid circumstances, the tax authorities were justified in coming to the conclusion that the sum of Rs. 1,02,000 represented income from undisclosed sources falling to be assessed under section 68 of the Act. We also also point out that the filing of voluntary disclosure before the Commissioner of Income-tax does not have the automatic consequence of the assessee's explanation being accepted. It may be true, as claimed by learned counsel for the assessee, that the voluntary disclosure filed by the assessee was accompanied by a statement connecting the sum of Rs., 1,02,000. Under the Ordinance, the Commissioner was not required to make an enquiry into the correctness or otherwise of the voluntary disclosure made by an assessee. All that the Commissioner does is to receive the voluntary disclosure, accept the tax payment made and leave it to the assessee to claim all consequential benefits flowing from such voluntary disclosure. It is, therefore, necessary that the assessee should establish the nexus between the voluntary disclosure and the assessment proceedings before the tax authorities. Unless this burden is discharged, it cannot be said that the mere filing of voluntary disclosure automatically absolved the assessee from discharging the obligation that its otherwise cast on him to point out by some evidence the nexus between the voluntary disclosure and the matter under enquiry before the assessing authorities. Admittedly, this has not been done in the present case.
10. In the circumstance, the Tribunal was justified in upholding the assessment of Rs. 1,02,000 as income from undisclosed sources under section 68 of the Act notwithstanding the fact that the assessee paid some paltry taxes on the voluntary disclosure mode for the assessment years 1973-74 and 1974-75.
11. Having regard to the above, we would answer the question referred to us in the negative, i.e., in favour of the Revenue and against the assessee. No costs.