9911796707
TMI Blog1973 (6) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 months the petitioner gave no reply to this notice but some developments took place during this interval which should be stated at this stage. When above notice, annexure "B", was issued by the Income-tax Officer on 3rd January, 1966, the Finance (No. 2) Act of 1965 had already come into force having received the President's assent on 11th September, 1965. Section 24 of this Act enabled every person, who had failed to furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Commissioner. The Income-tax Officer then took the matter in appeal before the Appellate Tribunal. After going through the evidence on record, the Tribunal held that the credits in question were not genuine. On behalf of the petitioner-assessee, however, a point of law was raised before the Tribunal contending that looking to the scheme of the Finance (No. 2) Act of 1965, the revenue having once accepted the position that the amount declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 recognise that it is not at all an easy matter to devise a solution which would at the same time be fair to people who have paid taxes honestly in the past and reasonable enough to encourage voluntary disclosures on an adequate scale on the part of those who wish now to be relieved of their past evasion. I have attempted to devise a solution bearing in mind all the complex economic, social and oral considerations that underlie the phenomenon of una ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 relevant material (including any asset seized under any other law for the time being in force) which is in the knowledge or possession of any other officer of Government before the said date and which has come to the knowledge or possession of the Income-tax Officer not later than fifteen days from the date of the declaration, such income can be shown to exist or its existence is considered so probable that a prudent man ought under the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 authorities, acting under section 24, were precluded from making inquiry regarding the source of disclosed income during the course of the proceedings undertaken under section 24, it would stand to reason that no such inquiry could be made even at a subsequent stage during the course of the assessment of somebody else's income, because any such subsequent inquiry was likely to result in a finding that the amount on which income-tax was previously charged in the han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 required to submit a return with regard to the income which is either not earned or not deemed to have been earned by him. It, therefore, follows that even the declarations under sub-section (2) of section 24 must relate to the income actually earned by him. If, therefore, a person makes a false declaration with regard to the income not earned by him, it is difficult to comprehend how the department can be prevented from proceeding against the person to whom the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 question whether the income really belongs to the declarant or someone else. The truth of the matter is that the fact that the source of the declared income shall not be inquired, was the main inducement to the delinquent assessees to respond to the scheme of the Act. The Act, therefore, advisably contemplates that no inquiry should be made either regarding the source of income or regarding the truth or otherwise of the claim to income, and subject to the provisions co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 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" which is contemplated by sub-section (4). Considering the scheme of section 24, we have no doubt in our mind that the detection which is stipulated by this sub-section is the detection of the declared amount as the income of the declarant himself and of none else. If the sub-section is read as contemplating the detection of the declared amount as the income of a non-declarant, who has nothing to do with the proceedings contemplated by section 24, the whole of sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 date." This proviso shws that if proceedings for re-opening the closed assessments of the declarants are pending, the declarant is not entitled to take advantage of section 24 with regard to the income covered by such proceedings. Sub-section (4) is merely an extension of the principle involved in this proviso, because the income, regarding which reassessment proceedings are undertaken, is obviously the income which is "detected". The deeming clause of sub-section (4) as def ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
