Can tax paid/investment in securities be refunded where declarations made u/s 3(1) Income Tax, Act 1961. - Income Tax - 1030/CBDT

INSTRUCTION NO. 1030/CBDT Dated : December 17, 1976 Section(s) Referred: 3(1) Statute: VD Act 1976 The last day for making declarations under the Voluntray Disclosure of Income and Wealth Act, 1976 was 31st December, 1975. Declarations received after that day were to be treated as invalid. Procedure for refund of the amount invested in securities/tax paid in respect of such invalid declaration was laid down in the Board's letter F. No. 283/16/75-IT*Inv.), dated the 20th March, 1976* and Instruction No. 960** [F. No. 283/20/76-IT(Inv.)] dated the 16th June, 1976 respectively. 2. The question whether tax paid/investment in securities can be refunded where declarations made u/s 3(1) of the Act in respect of voluntarily disclosed income were received by Commissioners on or before 31st December, 1975 but which could not have been made in view of the provisions of sub-section (2) of section 3 has been under consideration of the Board in consultation with the Department of Economic Affairs and the Ministry of Law, Justice and Company Affairs. The Ministry of Law, Justice and Company Affairs have opined that the crucial point to be seen in this regard is whether the bar created by section 10 would stand in the way of refund of the tax paid. Their advice is that the aforesaid bar would be applicable in case of a declaration made under sub-section (1) of Section 3. If a declaration is hit by the provisions of sub-section (2) of Section 3, it cannot be treated as a declaration made under sub-section (1) of Section 3. It would follow that the bar u/s 10 would not apply in such a case. The Ministry of Law, Justice and Company Affairs have separately advised the Department of Economic Affairs that where declarations were ab initio void, the Government can be legally called upon to return the amounts invested in securities. Accordingly; tax paid/amount invested in securities in respect of a declaration which is hit by the provisions of sub-section (2) of Section 3 may be refunded on receipt of a claim in this regard the procedure followed being similar to that adopted in respect of declarations received after 31st December, 1975. 3. For declarations u/s 14(1) in respect of income in search and seizure cases, no investment in the notified securities was required to be made. However, instances have come to the Board's notice where on account of an erroneous understanding of the provisions, investment in 5-3/4% Bonds, 1985 has been made in respect of declarations u/s 14(1). The Department of Economic Affairs to whom the matter was referred have decided in consultation with the Ministry of Law, Justice and Company Affairs that such erroneous investment in 5-3/4% Bonds, 1985 may be refunded after the concerned Commissioner of Income-tax certifies the admissibility thereof to the Reserve Bank of India. Accordingly, if a claim for refund of investment in securities in a case of the above type is received, the Commissioner should obtain an application, in duplicate, from the declarant specifying the particulars of the declaration made u/s 14(1) and the erroneous investment made in 5-3/4% Bonds, 1985 in respect thereof. On being satisfied that the claim is not fraudulent and/or the investment is not in pursuance of a declaration made u/s 3(1)/15 (1), a copy of the application should be forwarded with necessary recommendation to the concerned office of the Reserve Bank of India to enable the latter to take further necessary action. 4. In the press Notes circulated under the Board's F. No. 283/35/76-IT(Inv.), dated the 22nd April, 1976* it was advised that applications for investment in 5-3/4% Bonds, 1985 would thereafter be received through the concerned Commissioner of Income-tax and only at the Reserve Bank Offices at Ahmedabad, Bangalore, Bombay (Fort and Byculla), Calcutta, Hyderabad, Kanpur, Madras, Nagpur, Delhi and Patna. The Bonds are issued from the date on which the application for investment is tendered at the receiving office. Therefore, in order to avoid any complaint from a declarant about loss of interest, it is necessary that amount(s) received/recovered on this account are promptly deposited at the receiving office. 5. On promulgation of the Voluntary Disclosure of Income and Wealth Ordinance, 1975, the Board under their F. No. 414/78/75-IT (Inv.) dated the 11th October, 1975* had advised the Commissioners to maintain a register in respect of all the declarations received. It has come to the notice of the Board that in some of the charges, the prescribed register has not been written up fully. Immediate steps must be taken to complete these registers and maintain them upto-date.