JMM Bribery case - Amounts received taxable?
WAY back in 1993, four JMM MPs Shailendra Mahto, Simon Marandi, Shibu Soren and Suraj Mandal were charged with accepting bribes to support the Congress party in the vote of confidence in Parliament. The money allegedly received was deposited in Punjab National Bank. The Income Tax Authorities added these deposits to the income of the MPs as undisclosed income and assessed their income accordingly. The ‘assessees' claimed that the money belonged to their party JMM, but one of the MPs gave a Statement that that the amount deposited in the PNB in his name represents the amount of Rs.50lacs received by him for voting against No Confidence Motion against the then Central Government, which was physically handed over to him by Simon Marandi. The A.O. also noted that he has stated that other three persons namely Suraj Mandal, Simon Marandi and Shailendra Mahto also received almost the similar amounts which were deposited in PNB in their respective bank accounts. The A.O. heavily relied on the statement of Sri Shailendra Mahto in rejecting the claim of the assessee that the amount deposited in these bank accounts belongs to JMM.
The ITAT held that no addition is justified in the present case, either in respect of deposits in various bank accounts with PNB Noroji Nagar, New Delhi or various other additions made by the A.O., which are not relatable to any evidence found in course of search.
The Revenue appealed to the High Court and the Delhi High Court last week set aside the orders of the Tribunal.
The following two questions were before the High Court.
(i) Did the Tribunal fall into error in holding that the amount brought to tax by the AO is not undisclosed income?
(ii) Did the Tribunal fall into error in setting-aside the findings of lower authorities that the amounts deposited by the assessees with the bank were not taxable as income?
The High Court noted, “ The expression "undisclosed income" with effect from 1st July, 1995, would mean and include any false expenditure, deduction or allowance claimed under the Act but was found to be false, or any money, bullion, jewellery, valuable article or thing, that had not been or would not have been disclosed and also included any income based on entry in the books of accounts or other documents, which had not been disclosed or would not have been disclosed for the purposes of this Act. The crucial and singularly pre-eminent expression used in the said clause is "has not been or would not have been disclosed" for the purposes of this Act."
The High Court observed, "there is a fundamental fallacy in the reasoning given by the Tribunal to hold that no addition could have been made in the block assessment proceedings for want of undisclosed income. The Tribunal ignored the position that the four individual assessees had not filed returns of income and therefore, Section 158BB(1) clause(ca) of the Act would be attracted. The said clause has to be harmoniously read with Section 158B(b) of the Act. Further statements of the four individual assessees were recorded on 14th March,1996/19th March,1996, but they, i.e. the 'individual assessees' had claimed that the money lying in the SB A/cs or the FDRs belonged to JMM and did not belong to them. Thus, the factum that the details of SB A/cs and the FDRs were made available would not make any difference. The search undertaken had revealed several incriminating evidence/material relating to the opening and operation of bank accounts and on how the money was utilized, etc. These details were relevant to examine and consider the contention of the respondent individual assessee that the money did not belong to them but to the political party, JMM. It would be, therefore, incorrect or improper to state that the search did not reveal or unearth relevant material or evidence relating to undisclosed income."
The High Court answered the questions of Law in favour of the Revenue and against the respondent-assessees.