income-tax Officer Vs. Branch Manager, State Bank of - Court Judgment

SooperKanoon Citationsooperkanoon.com/71664
CourtIncome Tax Appellate Tribunal ITAT Patna
Decided OnJul-26-2001
JudgeB Sharma, R Yadav
Reported in(2002)255ITR126(Pat.)
Appellantincome-tax Officer
RespondentBranch Manager, State Bank of
Excerpt:
1. shri sohanlal agarwal and smt. sharmila devi of dharan, nepal, opened a joint account in the state bank of india, jogbani branch, jogbani, and deposited a sum of rs. 1,25,000 in the said account during the financial year 1992-93 relevant to the assessment year 1993-94. the branch manager of the said bank passed on this information to the assessing officer when called upon to do so, under the provisions of sub-section (6) of section 133 of the income-tax act, 1961 (in short the "act"). form no. qa22(1) was not filed by the depositors at the time of making the deposit in the aforesaid branch as contemplated by vol. i of the foreign exchange control manual, 1987. the assessing officer formed an opinion that the deposit was made out of earnings on indian soil and assessed the said income.....
Judgment:
1. Shri Sohanlal Agarwal and Smt. Sharmila Devi of Dharan, Nepal, opened a joint account in the State Bank of India, Jogbani Branch, Jogbani, and deposited a sum of Rs. 1,25,000 in the said account during the financial year 1992-93 relevant to the assessment year 1993-94. The branch manager of the said bank passed on this information to the Assessing Officer when called upon to do so, under the provisions of Sub-section (6) of Section 133 of the Income-tax Act, 1961 (in short the "Act"). Form No. QA22(1) was not filed by the depositors at the time of making the deposit in the aforesaid branch as contemplated by vol. I of the Foreign Exchange Control Manual, 1987. The Assessing Officer formed an opinion that the deposit was made out of earnings on Indian soil and assessed the said income under Section 144 of the said Act, treating the branch manager as an agent of the depositors under the provisions of Sub-section (1) of Section 163 of the said Act.

Hence, furnishing of information, in the absence of filing of the income-tax return, was treated as concealment of income as contemplated by the provisions of Section 271(1)(c) of the Act and a penalty of Rs. 40,262 was imposed vide order dated March 25, 1996. On appeal, the Commissioner of Income-tax (Appeals) set aside the penalty vide his order dated December 19, 1996. This led the Revenue to prefer second appeal to this Tribunal under the provisions of Section 253 of the said Act claiming that the order of the Commissioner of Income-tax (Appeals) is not sustainable under the provisions of the Act.

2. When the appeal came up for hearing Shri S. Ghosh, the departmental representative, advanced arguments on behalf of the Revenue. Shri T.B.S. Jain, advocate, raised his submissions on behalf of the agent.

We have given our careful consideration to the arguments advanced at the bar and cautiously perused the records. Our findings on the issues are as follows.

3. The first and foremost contention raised by the Revenue has been that a sum of Rs. 1,25,000 deposited by Shri Sohanlal Agarwal and Smt.

Sharmila Devi jointly cannot be taxed here in India. The thrust of the submission was that this amount can only be taxed in Nepal in view of the provisions of article 21 of the Double Taxation Avoidance Agreement (DTAA). We had an opportunity to construe the provisions of the DTAA in I. T. A. No. 650/Pat of 1996 decided on July 9, 2001, wherein we found an opinion that two modes of assessments are contemplated, one by the provisions of Section 69 of the said Act and the other under the provisions of article 21 of the DTAA and unexplained investment may be treated to be the income of the assessee under the provisions of Section 69 of the said Act, which mode is based on legal fiction while the mode provided by article 21 of the DTAA rests on the factual proposition. Hence the two modes of assessments are not reconciliable.

In such a situation, the provisions of Sub-section (2) of Section 90 of the said Act talks of the applicability of the provisions which are more beneficial to the assessee. Hence, the balance is tilted in favour of the applicability of article 21 of the DTAA than to the provisions of Section 69 of the Act. It was decided by us that the deposit in the Indian Bank made by the Nepali citizens cannot be taxed in India. This decision vitiates the assessments made in India concerning the deposits made in Indian banks by Nepali citizens.

4. When the assessments under the provisions of Section 69 of the Act does not stand, the order imposing the penalty under Section 271(1)(c) of the Act goes to dooms. Consequently, we are of the opinion that the penalty order passed by the Assessing Officer cannot be sustained. The Commissioner of Income-tax (Appeals) was justified in deleting the penalty. Resultantly, the appeal of the Revenue is declined.