TMI Blog1974 (3) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Act, 1961, herein called "the 1961 Act", while petitioners Nos. 1 and 2 are being assessed in the status of individuals. The Income-tax Officer has been impleaded as respondent No. 1, while the Additional Commissioner of Income-tax is respondent No. 2. The Commissioner of Income-tax is respondent No. 3 and the Chairman, Central Board of Direct Taxes, is respondent No. 4. During the assessment year, ending on March 31, 1967, the petitioners filed returns of their income under section 139 of the 1961 Act. The Income-tax Officer, respondent No. 1, completed the assessments under section 143 of the 1961 Act and while framing the assessment of petitioner No. 3 added back a sum of Rs. 30,000 as income from undisclosed sources. This sum related to three credits standing in the firm's books in the names of Narinder Kumar Jain, son of Rattan Lal, petitioner No. 1 (Rs. 10,000), Smt. Dil Behari Jain, wife of Rattan Lal (Rs. 15,000), and Smt. Chandravati Jain, wife of Khazanchi La], petitioner No. 2 (Rs. 5,000), as loans advanced to the firm. On being asked, the petitioners explained that these amounts belonged to the aforesaid three creditors or depositors, which had been duly de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was an order based on appreciation of evidence and was final. The determination made by him was a finding of fact, to reopen which this court will not exercise its jurisdiction under article 226 of the Constitution. Secondly, that the petitioners had an alternative remedy open to them by going in appeal to the Appellate Assistant Commissioner against the order of the Income-tax Officer and thereafter before the Tribunal. The petitioners could then in an appropriate case ask for a reference to this court. The petitioners had bypassed the said statutory remedies available to them and had approached this court by first going in revision before the Commissioner which they should not be allowed to do. Both the contentions of the learned counsel, however, are not tenable. In the first place, it is not a question of reopening a finding of fact recorded by the Income-tax Officer. The questions involved are whether the finding of the Income-tax Officer is supported by any evidence and whether a declaration made and tax paid by a declarant under the voluntary disclosure scheme as envisaged in the Finance Act can be questioned to ascertain the nature and source of the sum so declared by the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the person who had made the declaration under section 24 of the Finance Act, cannot enter into an investigation to determine the nature and source of the said sum in the hands of such person and come to a finding that the sum so declared as his, was actually not his. The Income-tax Officer in the present case having reopened and questioned the veracity of the declarations made by the depositors under the Finance Act and having treated the said voluntarily disclosed amounts as the income of the assessee-firm, respondent No. 3 was acting beyond jurisdiction and the petitioners in the circumstances were entitled to the reliefs which they had prayed for in the present petition. Mr. Dhebar, on the other hand, contended that the voluntary disclosure scheme gave a limited immunity to the declarant and the benefits which it gave to him were restricted to him alone. The income-tax authorities were, therefore, entitled to determine whether the amount disclosed was or was not the income of the declarant, while dealing with the case of another assessee under section 68 of the 1961 Act. The legal fiction created by section 24 of the Finance Act was restricted to the voluntary disclosure s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the income was earned and the amount pertaining to each such year, and whether the amount declared is represented by cash (including bank deposits), bullion, investment in shares, debts due from other person, commodity or any other assets and the name in which it is held and location thereof. Sub-section (3) creates a legal fiction by providing that income-tax shall be charged on the amount of the voluntarily disclosed income at certain specified rates "as if such amount were the total income of the declarant". Under sub-section (4) the Commissioner is required, within 30 days, if satisfied that the whole or any part of the amount of income declared has been detected or deemed to have been detected by the Income-tax Officer prior to the date of declaration, to make an order in writing to that effect and forward a copy thereof to the declarant. Any person who objects to such an order may, within 30 days, apply to the Board under sub-section (5) requesting for appropriate relief in the matter. The Board may pass such orders under sub-section (6) as it thinks fit. Sub-section (7) provides that the Commissioner shall forward the declaration to the Income-tax Officer together with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uditor-General of India or the Board to audit income-tax receipts or refunds. Sub-section (13) deals with rectification of any mistake apparent from the record of any proceeding. Sub-section (14) requires the income-tax under the said section to be deposited to the credit of the Central Government. The Commissioner on an application by the declarant is required under sub-section (15) to grant a certificate to him setting forth the particulars of the voluntarily disclosed income and the amount of income-tax paid and the date of payment. Sub-section (16)(b) provides that all other words and expressions used in section 24, but not defined and defined in the 1961 Act shall have the meanings respectively assigned to them in the said Act. Thus, where any person makes a declaration in respect of the amount representing income chargeable to tax under the 1922 Act or the 1961 Act for any assessment year commencing on or before April 1, 1964, which has neither been disclosed nor detected earlier, he shall be charged income-tax in accordance with sub-section (3) in respect of the amount so declared. By the help of a legal fiction introduced in sub-section (3), by the use of the words, "as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is made under sub-section (1), then notwithstanding anything contained in the 1922 Act or the 1961 Act, income-tax has to be charged thereon in accordance with sub-section (3) as if it were the total income of the declarant himself. Without investigating into the nature and source of the amount the Income-tax Officer under sub-section (7) is required to determine the sum payable by the declarant in accordance with sub-section (3). By the fiction introduced in sub-section (3) the amount declared becomes the total income of the declarant. The aim of section 24 of the Finance Act as was explained by the Finance Minister in his speech while introducing the budget for the year 1965-66 was "to mitigate the evil of the mischief in the economy created by unaccounted income and wealth". It is for this reason that investigation into the truth of the declaration was specifically ruled out. Whatever was declared was to be treated as the total income of the declarant. The object of bringing out on the surface the hidden and unaccounted money was achieved by enabling a declaration to be made with respect to it. It is, therefore, not possible for the revenue to go into the question of the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieved by enacting that the income-tax paid as a result of the declaration shall not be refunded in any circumstances. If Mr. Dhebar's contention is accepted, this very amount which has irrevocably become under the Finance Act the income of the declarant will be subjected to income-tax by the Income-tax Officer under section 68 of the 1961 Act as the income also of the assessee in whose books it may be found to have been credited. Apart from nullifying the fiction created by sub-section (3) as aforesaid, it would result in double taxation on the same income, and that too not only in one year, but year after year. For, the Income-tax Officer dealing with the declarant would be able to pin him down to his declaration, which is irrevocable and continue to charge Income-tax on the income of the amount declared by him under the Finance Act year after year. The Income-tax Officer dealing with the assessee in whose books the said amount stands credited will, by virtue of section 68 of the 1961 Act, be able to charge the same amount to Income-tax as his income. This will create an anomalous situation which neither the Finance Act nor the 1922 Act or the 1961 Act contemplates. There was noth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rant is not sufficient. It has, on the other hand, to be accepted as a satisfactory explanation. Section 24 of the Finance Act is even otherwise an overriding provision and section 68 of the 1961 Act has to yield place to it. Sub-section (1) of section 24 of the Finance Act specifically lays down that where any declaration in respect of the amount representing income-chargeable to tax is made, the said amount is to be charged to tax in accordance with sub-section (3) "notwithstanding anything contained in the" 1922 Act or the 1961 Act. The provisions of section 24 by this non obstante clause have thus specifically been made to override the provisions of the 1922 Act and the 1961 Act. The amount which becomes the total income of the declarant under the Finance Act cannot, therefore, be included in the total income of any other assessee by invoking section 68 of the 1961 Act. Section 68 is a part of the general law of income-tax, while section 24 of the Finance Act is a special provision which specifically deals with the undisclosed amount. A special provision according to the settled principles of interpretation has to be given effect to while the general provision would be appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he "total income" of the declarant as if it was the income referred to in section 5 computed in the manner laid down in the 1961 Act and has to be charged to income-tax as such. Mr. Dhebar contended that the definition of total income as contained in section 2(45) of the 1961 Act has to be read subject to the opening words in section 2 reading "unless the context otherwise requires". According to him, the context here is different, because under the 1961 Act total income has to be computed in the manner laid down in that Act, whereas under the Finance Act the amount declared has to be taken as the total income without going into the manner in which it has been computed. The contention of Mr. Dhebar is not wellfounded. The use of the words "as if it were the total income of the declarant" introduced in sub-section (3) a "legal fiction" implying that an imaginary state of affairs is to be treated as real. Whatever, therefore, be the manner of computing the amount declared, it has by the said legal fiction to be treated as the total income as defined in section 2(45). There is nothing else in sub-section (3) or any other provisions in the Finance Act from which it could be said that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... measure specifically designed to ignore the misdeeds of the past. Once the hidden amount came out to the surface, the declarant, whoever he may be, was to be treated as its owner and was expected to keep to the right path thereafter. The law therefore, specifically created a fiction for the purpose of treating the declared amount to be the income of the declarant. With respect, we must say, that the fiction contained in sub-section (3) and the non obstante clause in sub-section (1) of section 24 appears to have escaped the notice of the learned judges of the Gujarat High Court in the said case. As was observed in Vestey's (Lord) Executors v. Inland Revenue Commissionet's, "tax advoidance is an evil, but it would be the beginning of much greater evil if the courts were to overstretch the language of the statute in order to subject to taxation people of whom they disapproved". The well-settled rule of interpretation of fiscal statute is that : "If the person sought to be taxed comes within the letter of the law, he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax cannot bring the subject wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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