Money to Soren, JMM MPs in 1993 scandal is taxable: HC

The Delhi High Court has held that the money allegedly received by three former Jharkhand Mukti Morcha MPs and party chief Shibu Soren for voting in favour of the P V Narasimha Rao government in 1993 is liable to be taxed.

A bench of justices Sanjiv Khanna and V Kameswar Rao which has set aside the decision of the income tax appellate tribunal (ITAT) holding that the money received by the JMM MPs is not liable to be taxed.

The court pronounced the verdict on an appeal of the Income Tax department which challenged the tribunal's order saying that the amount paid to Soren and three others -- Suraj Mandal, Simon Marandi and Shailendra Mahto -- was bribe money which was
"undisclosed income" and thus taxable.

The former MPs during their trial under the Prevention of Corruption Act had admitted that they had received money from Congress in 1993 for their support to the confidence motion.

However, they were acquitted of the charge of accepting bribe after a Supreme Court verdict which held that the MPs' action enjoyed immunity under Article 105 of the Constitution.

Article 105 deals with powers and privileges of the Houses of Parliament and its members and provides that no MP shall be liable to any proceedings in any court in respect of anything said or any vote given by him in Parliament or any committee thereof.

The politicians approached the ITAT, Delhi against the order of the appellate commissioner of Income Tax on the assessment order of 1997 passed by assessment officer (AO) that they were liable to pay tax on the money they received.

The ITAT had held in favour of the politicians saying "the additions made did not represent undisclosed income and should not have been made in the block assessment orders".

In its judgement on the IT department appeal, filed through advocate Rohit Madan, the high court said it had to decide two questions -- whether ITAT fell into error in holding the amount is not undisclosed income and also whether the tribunal erred 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 answered both the questions in favour of the IT department saying, "We answer the substantial questions of law mentioned in the first paragraph of this judgment in favour of the Revenue and against the respondent-assessee."

The then JMM MPs had contended before the ITAT that the amount of Rs 1.76 crore termed as "undisclosed income" by the AO and which was deposited in their names in a Punjab National Bank branch here were donations received on behalf of the party.

The high court, however, held that according to the material which has come to light pursuant to the search conducted by the IT department, the amounts deposited belonged to the then JMM MPs and not their party.

"In the present case, we have noticed that during course of the search, as noticed in the block assessment orders, several material/evidence came to light which would show that amounts deposited or entries in the bank accounts belonged to the assessee and not to the party, JMM.

"Further, individual assessees had not filed returns of income for the relevant period, for which due date under Section 139(1)(Compulsory filing of return of income before due date) had long lapsed," the bench held.

The bench also noted in its 59-page judgement that "In the present case, as no return of income had been filed under section 139(1) and incriminating material was found during the search, as such the undisclosed entries would be undisclosed in the light of the statutory provisions."

"In view of the earlier discussion, it has to be held that in view of the amended provisions as well as unamended provisions, legal conclusions and finding of the Tribunal are incorrect," the court has also held.

While deciding the substantial questions of law in favour of IT department and against the assessees, the bench remanded the matter back to ITAT for decision on other issues and merit.

ITAT had not gone into the merits of the matter as it had felt that since the search and seizure of the accounts of the then four JMM MPs had not unearthed any incriminating material and on this ground the tribunal had upheld their plea.

The high court has, however, now remanded the matter back to ITAT to decide it on merits as the search and seizure, according to the bench, had unearthed incriminating material.

"To cut short any delay, parties are directed to appear before the Income Tax Appellate Tribunal on December 15, 2014, when a date of hearing will be fixed," the bench said.