TMI Blog2006 (1) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome, the assessee pointed out that it made disclosure under section 65 of the VDIS, 1997 before the CIT for a sum of Rs. 150 lakhs in respect of various income relating to the assessment years 1989-90 to 1996-97. This declaration was filed before the CIT on 21-7-1997. The CIT has duly accepted the declaration vide Certificate No. CIT-I-VDIS-97/6605 and has issued the Certificate dated 24-7-1997 and, therefore, the Assessing Officer excluded the sum of Rs. 1,50,00,000 from the total undisclosed income and determined the net undisclosed income at Us. 43,42,629 in the following manner:- "10.0 On considering all the different seized material and the working given by the assessee-company in respect of the disclosure under VDIS '97, in view of the discussion in para-8 above, I find that the correct amount of the gross application on the basis of working submitted based on different annexures, 'Statements and assets up to the period 31-3-1996 works out to Rs. 267.67 lakhs, which is duly shown in the working of VDIS '97 and the notes to the declaration made by the Assessee Company under VDIS '97. Out of the above total application of Rs. 267.67 lakhs the assessee has disclosed income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared by the assessee under the VDIS was wrongly allowed as the sum was subject-matter of search under section 132 of the Act. The reliance was placed on the decisions of Hon'ble Madras High Court in the case of CIT v. Peirce Leslie Co. Ltd. [1997] 227 ITR 759. 4. The ld. AR, before us, contended that there were no search in the case of assessee, there was survey under section 133A only in the case of assessee. The assessment order passed under section 158BD read with section 158BC of the Act, the assessee has disclosed the income under VDIS, 1997 in pursuance of the clarification made by the CBDT to the ASSOCHAM at the meeting of the representative of the ASSOCHAM, Shri A.K. Batyal, Member (Investigation) and Shri V. Pasupathy, Member (Law), CBDT held on 23-7-1997 at New Delhi in respect of question No.6. During the course of said meeting, it had been categorically stated that disclosure can be made in the cases where no direct search is initiated under section 132 of the Act. Our attention was invited to such question and answer. Our attention was also drawn to CBDT's Circular No. 755, dated 25-7-1997 specifically to question No. 36, which is reproduced as under:- "Q.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n whose case action under section 132 or under section 132A of the Act is not taken, but an order under section 158BD is passed. It cannot be regarded a person who had been subject to proceedings under section 132 or section 132A. Section 158BD states that to those proceedings, the provisions of this Chapter that Chapter XIV-B shall apply, but does not state that the provisions relating to Chapter XIII-C i.e. search and seizure provisions will apply. The Certificate issued under VDIS is still effective. The Assessing Officer does not have any jurisdiction to disturb the valid Certificate issued by the CIT. By an order under section 154, the Assessing Officer has tried to enter in to the shoes of the CIT. Referring to the decision of Hon'ble Madras High Court as relied by the Assessing Officer it was contended that this decision was not applicable. In that, case, for quantification of the capital gain on depreciable assets, the Assessing Officer in the original assessment order had allowed the benefit of substitution of market price of the assets as at January 1994 which the law did not permit and, therefore, High Courts decision on this point was against the taxpayer. So, the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance was placed on the order of the Assessing Officer, especially to the Circular No.755 issued by the CBDT dated 25-7-1997, question No. 29 of this Circular states as under:- "Q.No. 29: A search under section 132 of the Income-tax Act bars a person from making a disclosure in respect of the previous year in which the search took place and also for any earlier previous year. In case, a search warrant is issued in the name of one person, can others who also reside at the same premises and whose statements may have been recorded during the course of the search, make a disclosure of their income? Answer: Yes, but not in respect of income, assets, etc., seized during the course of the search or discovered as a result of the search." 8. Reliance was placed on the decision of Hon'ble Madras High Court as relied on by the Assessing Officer. 9. We have carefully considered the rival submissions, gone through the order of the Authorities below. We have also looked into the case law relied on before us. We find that in this case, there was no search and seizure taken place in the case of the assessee. The action under section 132 or 132A of the Act was taken in the case of the Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious years. This implies restriction in the case of a person in whose case search proceedings are initiated under section 132 by issue of search warrant. Keeping this in view, can disclosure be made for the earlier years, in a case which is inter-connected with some search proceedings, but where no direct search is initiated or no search warrant is issued under section 132? Ans: Yes, there would be no bar for disclosure in such cases where no direct search is initiated under section 132." 11. The said question-answer clearly permits that the disclosure can be made in cases where no direct search is initiated under section 132. This is a undisputed fact that in the case of assessee, no search was initiated under section 132 of the Act. The assessee has disclosed the income under the VDIS, 1997 which was duly accepted by the CIT and the Certificate issued by CIT is in force. The Certificate issued under the VDIS has not been withdrawn by the Commissioner of Income-tax. In our opinion, the Assessing Officer is not competent to make any comment on the illegality of the disclosure made under the VDIS specially when the disclosure has been duly accepted by the Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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