TMI Blog1973 (6) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rs. 43,219. The facts of the case are that the assessee deals in precious stones like rubies, sapphires, etc., which are mainly sold to foreign countries. During the course of the assessment of the petitioner's income for the assessment year 1961-62 (S.Y. 2016) his accounts were scrutinised by the concerned Income-tax Officer with a view to see how his business was financed. During the said scrutiny it was noticed that the business was financed by money introduced in the form of hundi loans. It was further revealed that during the assessment year 1957-58, the petitioner, introduced the amount of Rs. 90,000 in the form of hundi loans from 20 Multani brokers of Bombay. These Multani brokers admitted that they had not advanced any amounts to the petitioner and that they were mostly name-lenders. The record of the case reveals that on 3rd January, 1966, the concerned Income-tax Officer informed the petitioner by his letter, annexure "B", that investigation of his case had revealed that he was borrowing hundi loans since long and, therefore, he should show cause why assessments of his income right from the assessment year 1957-58 should not be reopened. For more than three mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner is found at annexure "C". The petitioner contended by this reply that the amounts of hundis appearing in his books of account to the credit of various Multani brokers were really the deposits made by the above-named five declarants. The petitioner also contended in this reply that since these five declarants were not eager to disclose their names, the amounts were introduced in the form of hundis. A similar letter was addressed by the petitioner again on 24th March, 1966, as found at annexure "E". During the course of the inquiry which followed, the above-named five declarants gave their statements to the Income-tax Officer giving full support to the stand taken by the petitioner, as is clear from annexures "D-1", to "D-5", which are dated 24th March, 1966. Ultimately, the Income-tax Officer finalised the assessment by adding Rs. 90,000 being the principal amount of the hundi loans and Rs. 4,367 being the amount of interest, which was shown in the books of the petitioner as paid on the said hundi loans. This order of the Income-tax Officer is dated 7th March, 1967. The petitioner-assessee preferred an appeal against the same and succeeded before the Appellate Assistant C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained the object which guided the Government to sponsor the voluntary disclosure scheme in the following words : "I now come to my proposals in regard to unaccounted incomes and wealth which, as I have already mentioned, are a source of considerable mischief in the economy. The question of how to mitigate this evil is a baffling and difficult one. We have already taken a number of measures, apart from intensification of searches and the like, to encourage voluntary disclosures. Amounts so disclosed are being exempted from penalty. These measures have had some success in encouraging voluntary disclosures particularly from people who have comparatively small and medium incomes to disclose. Various suggestions have been made from time to time to encourage disclosures on a larger scale and to give an opportunity to those who wish to turn a new leaf to do so without undue harassment. I have every hope that with the reduction in tax rates that I have already proposed, the scope and incentive for tax evasion in future would be reduced. The present time, therefore, offers a good opportunity to enable people who have evaded tax in the past to come out and make a clean breast of it. I reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der sub-section (2) the Commissioner shall, if he is satisfied that the whole or any part of the amount of income declared therein has been detected or is deemed to have been detected by the Income-tax Officer prior to the date of the declaration, make an order in writing to that effect recording therein his reasons therefor and specifying the amount of such income [which he shall estimate to the best of his judgment on the basis of such statement, information, document or other relevant material (including any asset) as is referred to in clause (b)] and forward a copy thereof to the declarant : Provided that no order under this sub-section shall be made unless the declarant has been given an opportunity of being heard. (b) For the purposes of this section, income shall be deemed to have been detected by the Income-tax Officer if - (i) on the basis of any statement, information, document or other relevant material (including any asset seized under section 132 of the Income-tax Act, 1961 (XLIII of 1961)), which is in the knowledge or possession of the Income-tax Officer before the date of the declaration, or (ii) on the basis of any statement, information, document or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned in sub-section (9) or under the Wealth-tax Act, 1957. Rest of the sub-sections an not relevant for our purpose. A bare perusal of the scheme of section 24 shows that it protects the declarant from any of the consequences which would arise from the non-declaration of his income at a proper stage. Shri S. P. Mehta, the learned counsel for the applicant-assessee, heavily relied upon the object of the legislature in enacting the Act and contended that the main purpose for which this legislation was passed was not so much to collect taxes as to bring out unaccounted money with the help of which a parallel economy was being run. According to him, therefore, the legislature wanted to encourage people to make as much disclosure as possible of the unaccounted income lying concealed. Legislature, contended Shri Mehta, did not mind whether the disclosures made under the Act were true or false and it was for that reason that the Act provided a speedy assessment during the course of which no inquiry about the source of income and like questions was contemplated and assessment was completed on the basis of the income disclosed. Shri Mehta further contended that, if the assessing autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal and canvassed by the department results in double taxation of the same amount, and loss of protection given to it by the Act and, therefore, this court should desist from accepting any interpretation which is conducive to such results. We are not impressed by any of these contentions of Shri Mehta. The scheme of the Act makes it abundantly clear that it was to protect only those who preferred to disclose the income which they themselves had earned in the past and which they had failed to disclose at a proper time. It is undoubtedly true that the Act was brought on the statute book with a view to unearth unaccounted money, but there is no warrant for the proposition that by enacting the same, the legislature intended to permit, or connive at frauds sought to be committed by making benami declarations. Sub-section (1) of section 24 makes it clear that the declarations, which are expected to be made under sub-section (2), are with regard to the income which was chargeable to tax either under the Indian Income-tax Act of 1922 or under the Income-tax Act of 1961, but which was not disclosed at the proper time. Neither under the Act of 1922 nor under the Act of 1961 a person is req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly with reference to the declarants, but who have responded to the scheme of the Act and not with reference to those who have not cared so to respond, This will be evident from the provisions contained in sections 9 and 11 of the Act. If that is so, the department cannot be prevented from performing its lawful duties to bring the escaped income of the non-declarants to assessment by re-opening their closed assessments according to law. It should also be noted that the acceptance of tax by the department on the amount declared under sub-section (2) of section 24 does not involve any admission of the revenue that the declared amount was in fact earned by the declarent as his income. The scheme of section 24 shows that no authority acting under the Act is expected to enter into an inquiry to find out whether the declared amount represented the income of the declarant or any other person. The inquiry, if any, is contemplated only by sub-section (6) of the section. But that inquiry is not compulsory and is limited only to find out whether the declared amount has been already detected, or is deemed to have been detected. This, as pointed out hereafter, is not an inquiry involving the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) of sub-section (4) which explains the expression "deemed to have been detected by the Income-tax Officer" and contended that when the declarations were filed by the above-named five persons, the Income-tax Officer was the same, who had issued show-cause notice, annexure B" of 3rd January, 1966, for re-opening the assessments of the petitioner's income for the assessment year 1957-58. The declarations were filed by the five persons under sub-section (2) of section 24 subsequent to this notice. Under the circumstances, the Income-tax Officer had sufficient materials before him to know that the declarations were filed with a view to cover up the allegations made in the notice and to explain hundi loans which stood in the bogus names of 20 Multani brokers in the account books of the petitioner. It was tubmitted that in spite of these facts, the Commissioner did not" detect "the declared income and allow it to be assessed as the income of five declarants. The contention was that it is not now open to the Income-tax Officer to do what was not done previously under sub-section (4). We find that this contention is based on a total misapprehension of the connotation of "detection" wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing, namely, whether before the date of the declaration made under section 24, the declared amount was found out to be the income of the declarant. Thus, during the course of that inquiry the Commissioner has no power to inquire whether the declared amount was the income of the declarant or of some body else. We find that section 24 itself provides some indications which show that detection contemplated by sub-section (4) is the detection of the amount as the income of the person who has made the declaration under sub-section (2) and of none else. The first indication is provided by the proviso which is attached to sub-section (1) and which is in the following terms : "Provided that nothing in this section shall apply to the amount representing income assessable for any assessment year for which a notice under section 22 or section 34 of the Indian Income-tax Act, 1922 (XI of 1922), or section 139 or section 148 of the Income-tax Act, 1961 (XLIII of 1961), has been served upon such person and the date for furnishing the return, whether fixed originally or on extension, falls beyond the 19th day of August, 1965, and the return has not been furnished on or before the said da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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