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2000 DIGILAW 324 (CAL)

NANDLAL RANDER v. COMMISSIONER OF CUSTOMS

2000-07-07

GORACHAND DE, Y.R.MEENA

body2000
Y. R. MEENA, J. ( 1 ) THIS appeal is directed against the judgment of a learned single judge dated November 13, 1998. ( 2 ) THE main grievance in the appeal is that the learned single judge was wrongly directed to serve the notice on the appellant/petitioner, to determine his tax liabilities in respect of Rs. 1,36,42,000 while the amount of Rs. 1,36,42,000 has been disclosed under the Voluntary Disclosure of Income Scheme, 1997 (hereinafter referred to as "the Disclosure Scheme, 1997"), and further the learned single judge has erred in not directing the Commissioner of Customs to pay the tax of Rs. 43,38,156 to the Commissioner of Income-tax, Karnataka III, Bangalore, and the balance amount should be refunded to the appellant as the appellant has declared the amount of Rs. 1,36,42,000 under the Scheme, 1997. ( 3 ) THE petitioner is an assessee under the Assistant Commissioner of Income-tax, Circle 11 (1), Bangalore. On December 30, 1997, the petitioner filed a declaration in the prescribed form under Section 64 (1) read with Section 65 of the Finance Act, 1997, under the Disclosure Scheme, 1997. Under the Disdosure Scheme, 1997, the petitioner has declared his income of Rs. 1,36,42,000. That amount was lying with the Commissioner of Customs, Calcutta. Respondent No. 1 held an open auction sale in respect of diverse materials more particularly specified in the auction list catalogue. Mainly the auction was for mulberry raw silk weighing 9,648 kgs. ( 4 ) IN the auction sale one Shambhu Pandey has taken part and his bid was the highest. Therefore, the material was sold to Shambhu Pandey. Shambhu Pandey has deposited the amount of Rs. 1,36,42,000 for purchase of that silk. Thereafter one writ was filed challenging that auction sale and that sale proceedings were stayed by this court. Thereafter a request was made by the petitioner that if sale is not possible refund the amount of Rs. 1,36,42,000 which was deposited by Shambhu Pandey, the agent of the appellant. ( 5 ) WHEN the Customs Department was not prepared to hand over the silk nor ready to make the refund then a petition was filed for a direction to the respondents to refund the said amount to the petitioner. There was a dispute whether this amount of Rs. ( 5 ) WHEN the Customs Department was not prepared to hand over the silk nor ready to make the refund then a petition was filed for a direction to the respondents to refund the said amount to the petitioner. There was a dispute whether this amount of Rs. 1,36,42,000 belonged to the petitioner or the weavers in Bangalore for whom the silk was purchased or to Shambhu Pandey. A direction was given for inquiry and finding on the dispute of ownership of the amount. Ultimately, it was found that the money belonged to the petitioner and Shambhu Pandey was his agent. ( 6 ) MEANWHILE the warrant of authorisation under Sub-section (1) of Section 132a has been issued in respect of the assets in the form of the amount of Rs. 1,36,42,000 lying with the Commissioner of Customs. That authorisation was issued on April 7, 1997. ( 7 ) IN December, 1997, the petitioner has declared the amount lying with the Customs Department, under the Disclosure Scheme, 1997, offering that amount for tax. That declaration of the petitioner was rejected by the Assistant Commissioner of Income-tax, as the required tax has not been paid within the time allowed. ( 8 ) THE learned single judge in the impugned order directing the Customs Department to refund the money of the petitioner, however, that refund will be subject to final clearance from the Income-tax Department. ( 9 ) THE perusal of Writ Petition No. 305 of 1988 reveals that, inter alia, the petitioner has prayed before the learned single judge that when the petitioner has disclosed and declared the money being Rs. 1,36,42,000 under the Disclosure Scheme, 1997, and offered it for tax, respondent No. 4 should be directed to pay Rs. 43,38,156 on behalf of the petitioner, to discharge the tax liability and the balance amount should be refunded to the petitioner with interest without further delay. ( 10 ) THOUGH the learned single judge has directed the Commissioner of Customs to refund the amount but that is subject to the tax liability of the petitioner on that amount. That should be discharged first. The matter regarding whether the petitioner is entitled for the benefit of income disclosed under the Disclosure Scheme, 1997, or not was left open, though the ground has been raised in the petition. That should be discharged first. The matter regarding whether the petitioner is entitled for the benefit of income disclosed under the Disclosure Scheme, 1997, or not was left open, though the ground has been raised in the petition. ( 11 ) IN this background of the case, we have to consider whether any prejudice is caused to the appellant/petitioner by the impugned order and judgment of a learned single judge dated November 13, 1998. ( 12 ) LEARNED counsel for the appellant submits that the assessee disclosed Rs. 1,36,42,000 in December, 1997. The declaration form was rejected as the appellant could not pay the tax on the amount. In fact, the entire amount was lying with the Commissioner of Customs. Therefore, the tax amount could not be paid. There was no fault on the part of the petitioner/appellant. Therefore, the benefit of the Disclosure Scheme, 1997, should be extended to the appellant/petitioner. He further submitted that once the amount of Rs. 1,36,42,000 was disclosed under the Disclosure Scheme, 1997, there was no need to give direction for notice to assess the tax liability. ( 13 ) LEARNED counsel for the respondent submits that when an authorisation under Section 132a of the Act of 1961 has been issued in respect of the amount of the petitioner lying with the Customs Department, thereafter in respect of that amount no disclosure can be made under the Disclosure Scheme, 1997. Therefore, before us the limited question is whether the appellant/petitioner is entitled for the benefit of the Disclosure Scheme, 1997, in respect of the amount Rs. 1,36,42,000 which was lying with respondent No. 1, the Commissioner of Customs. ( 14 ) THE admitted facts are that the warrant of authorisation under Sub-section (1) of Section 132a of the Income-tax Act, 1961, was issued in April, 1997, in respect of the assets taken into custody by the Commissioner of Customs, Calcutta. The amount was deposited by Shambhu Pandey, an authorised agent of the petitioner. The petitioner has disclosed this amount under the Disclosure Scheme, 1997, Sub-section (1) of Section 64 of the Finance Act, 1997, in the month of December, 1997, that is after the warrant of authorisation issued by the Department under Section 132a of the Act of 1961. The amount was deposited by Shambhu Pandey, an authorised agent of the petitioner. The petitioner has disclosed this amount under the Disclosure Scheme, 1997, Sub-section (1) of Section 64 of the Finance Act, 1997, in the month of December, 1997, that is after the warrant of authorisation issued by the Department under Section 132a of the Act of 1961. ( 15 ) CLAUSE (ii) of Sub-section (2) of Section 64 of the Finance Act, 1997, which forms part of the Disclosure Scheme, 1997, provides that nothing contained in Sub-section (1) shall apply in relation to the income, in respect of the previous year in which a search under Section 132 of the Income-tax Act was initiated or a requisition under Section 132a of the Income-tax Act was made, which clearly shows that when there was a warrant of authorisation in respect of the assets or amount or income that asset or income cannot be disclosed under the Disclosure Scheme, 1997. ( 16 ) LEARNED counsel for the petitioner/appellant further submits that the warrant of authorisation was issued in the name of Shambhu Pandey and Shambhu Pandey was not the owner of the amount deposited and there was no authorisation in the name of the petitioner/appellant. The petitioner/appellant is at liberty to disclose the amount, which was lying with the Customs Department, under the Disclosure Scheme, 1997. ( 17 ) SECTION 132a of the Act of 1961 is part of Chapter XIII of the Income-tax Act. The Chapter deals with the powers of the income-tax authorities regarding discovery and production of evidence, etc. ( 18 ) SECTION 131 provides and empowers the income-tax authorities with the power vested in the court under the Code of Civil Procedure, 1908, such as for discovery and inspection, enforcing the attendance of any person, for examination, to compel the production of books of account or any other documents and issue commission also. ( 18 ) SECTION 131 provides and empowers the income-tax authorities with the power vested in the court under the Code of Civil Procedure, 1908, such as for discovery and inspection, enforcing the attendance of any person, for examination, to compel the production of books of account or any other documents and issue commission also. ( 19 ) SECTION 132 provides for search and seizure if the Director-General or Director or Chief Commissioner or any authority authorised in this behalf by the Board and if either of them have any information that any income or property has not been disclosed for the purpose of the Indian Income-tax Act, 1922, or the Act of 1961, the aforesaid authorities can authorise the Deputy Commissioner or Assistant Director or Assistant Commissioner or Income-tax Officer to enter and search any building, place, vessel, vehicle or aircraft, where he has reason to suspect that such books of account or any document or any money, bullion, jewellery or other valuable articles or things, relating to the undisclosed income, is kept. ( 20 ) THE authorised officer can break open the lock of any door, box, locker, safe, almirah where the keys thereof are not available. That officer can also search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, and the authorised officer if he has reason to suspect that such person has any such books of account, other documents, money, bullion, jewellery etc. , which relates to the income escaping assessment that can be seized during the search and made a note or an inventory of such items. ( 21 ) THE provisions of Section 132a, inter alia, provide for requisition of books of account or assets, etc. , which relates to the income escaping assessment that can be seized during the search and made a note or an inventory of such items. ( 21 ) THE provisions of Section 132a, inter alia, provide for requisition of books of account or assets, etc. , where the Director-General or Director or the Chief Commissioner or Commissioner, in consequence of information in his possession, has reason to believe that any assets represent either wholly or partly income or property which has not been, or would not have been disclosed for the purposes of the Indian Income-tax Act, 1922, or the Act of 1961, by any person from whose possession or control such assets have been taken into custody by any officer or authority under any law for the time being in force, then the Director-General or Director or the Chief Commissioner may authorise any Deputy Director, Deputy Commissioner, Assistant Director, Assistant Commissioner or Income-tax Officer, who can require the officer or authority to deliver such books of account or assets or any document to the requisitioning officer. ( 22 ) WARRANT of authorisation under Sub-section (1) of Section 132a of the Act of 1961 has been issued by the Director of Income-tax on April 7, 1997, authorising Mr. B. K. Bala, Mr. R. N. Parbat, Mr. U. Basu, Mr. A. K. Roy and Mr. Indranil Roy, to require the Commissioner of Customs, Calcutta, to deliver the assets/amount deposited by Shambhu Pandey to the authorised officer, authorised in warrant of authorisation under Section 132a of the Act of 1961. ( 23 ) LEARNED counsel for the appellant submits that it is true that the amount in question was deposited by Shambhu Pandey but that amount belonged to the appellant and when the authorisation is in the name of Shambhu Pandey that authorisation cannot be used against the appellant for the purpose of benefit of the Disclosure Scheme, 1997. ( 24 ) THERE is no dispute on the facts that the amount of Rs. 1,36,42,000 was deposited by Shambhu Pandey with the Commissioner of Customs, Calcutta, and on that date the Department was not certain that the amount of Rs. 1,36,42,000 belonged to Shambhu Pandey or to the appellant but on the record the amount has been deposited by Shambhu Pandey, in whose favour the auction sale was declared final. 1,36,42,000 was deposited by Shambhu Pandey with the Commissioner of Customs, Calcutta, and on that date the Department was not certain that the amount of Rs. 1,36,42,000 belonged to Shambhu Pandey or to the appellant but on the record the amount has been deposited by Shambhu Pandey, in whose favour the auction sale was declared final. ( 25 ) THE provisions of sections 62 to 78 of the Finance Act, 1997, deal with the Voluntary Disclosure of Income Scheme, 1997. Under the Disclosure Scheme, 1997, any person can declare his any income which was never subjected to tax under the Indian Income-tax Act, 1922, or the Income-tax Act, 1961, or declared as wealth under the Wealth-tax Act, 1957. That declaration can be made under Sub-section (1) of Section 64 of the Finance Act, 1997. ( 26 ) SUB-SECTION (2) of Section 64 of the Finance Act, 1997, provides that nothing contained in Sub-section (1) shall apply in relation to the income assessable for the assessment year for which a notice under Section 142 or Section 148 of the Income-tax Act has been served upon such person and the return has not been furnished before the commencement of this Scheme. Clause (ii) of Sub-section (2) of Section 64 of the Finance Act, 1997, further provides that income in respect of the previous year in which a search under Section 132 of the Income-tax Act was initiated or requisition under Section 132a of the Income-tax Act was made, or survey under Section 133a of the Income-tax Act was carried out or in respect of any earlier previous year, the benefit of the Disclosure Scheme, 1997, will not be available. ( 27 ) THE relevant Clause (ii) of Sub-section (2) of Section 64 of the Finance Act, 1997, reads as under (see [1997] 225 ITR (St.) 113, 142) :"64. (2) Nothing contained in Sub-section (1) shall apply in relation to- -. . . (ii) the income in respect of the previous year in which a search under Section 132 of the Income-tax Act was initiated or requisition, under Section 132a of the Income-tax Act was made, or survey under Section 133a of the Income-tax Act was carried out or in respect of any earlier previous year. . . (ii) the income in respect of the previous year in which a search under Section 132 of the Income-tax Act was initiated or requisition, under Section 132a of the Income-tax Act was made, or survey under Section 133a of the Income-tax Act was carried out or in respect of any earlier previous year. " ( 28 ) IT is manifest from the provision of Clause (ii) of Sub-section (2) of Section 64 of the Finance Act, 1997, that in case a requisition under Section 132a of the Income-tax Act, that is warrant of authorisation, has been issued by the competent authority regarding any "income" or asset which was never subject to tax, that asset or "income" cannot be disclosed under the Disclosure Scheme, 1997, as that has been prohibited by Clause (ii) of Sub-section (2) of Section 64 of the Finance Act, 1997. For the purpose of Clause (ii) of Sub-section (2) of Section 64 "income" which was not disclosed is material and not the person who deposited or from whose possession assets came to the custody of any authority or person. ( 29 ) THE warrant of authorisation under Sub-section 132a reveals that the authorisation was signed by the Director of Income-tax on April 7, 1997. That was issued on information the director received before issue of authorisation under Section 132a of the Act of 1961. That authorisation refers to the amount/assets deposited by Shambhu Pandey, with the Customs Commissioner. That was never subject to income-tax. ( 30 ) WHEN the authorisation was issued by the authority competent under the provisions and for the assets/amounts deposited by Shambhu Pandey in respect of the auction sale and that amount belonged to the appellant, which admittedly were never subject to tax either under the Act of 1922 or of 1961, that amount or asset cannot be disclosed under the Disclosure Scheme, 1997. ( 31 ) IT is pertinent to note that the disclosure by the appellant is an admission that the amount was never subject to tax under the Act of 1961. ( 32 ) THUS, the case of the appellant has come in a narrow compass that when the appellant has disclosed the amount of Rs. ( 31 ) IT is pertinent to note that the disclosure by the appellant is an admission that the amount was never subject to tax under the Act of 1961. ( 32 ) THUS, the case of the appellant has come in a narrow compass that when the appellant has disclosed the amount of Rs. 1,36,42,000 under the Disclosure Scheme, 1997, whether the Commissioner of Customs should pay the required income-tax out of the amount lying with him, as per the Disclosure Scheme, 1997, and the balance of amount should be returned to the appellant. ( 33 ) AS discussed above, the warrant of authorisation under Sub-section (1) of Section 132a which was issued refers to the assets/amount deposited by Shambhu Pandey with the Commissioner of Customs in respect of the auction sale. The amount in question belonged to the appellant. For that asset/amount a warrant of authorisation under Section 132a was issued in April, 1997, that is, prior to the declaration made by the appellant under the Disclosure Scheme, 1997. ( 34 ) WHEN the warrant of authorisation was issued prior to the declaration, Clause (ii) of Sub-section (2) of Section 64 of the Finance Act, 1997, prohibits the disclosure of such income under the Disclosure Scheme, 1997. ( 35 ) THEREFORE, from the aforesaid discussion we are of the view that the appellant is not entitled to the benefit of the Disclosure Scheme, 1997, on the amount of Rs. 1,36,42,000 which was never subject to tax. When the amount cannot be taxed under the Disclosure Scheme, 1997, the amount has to be taxed under the provisions of the Act of 1961 as income of the assessee. That can be assessed only after notice to the assessee/appellant. ( 36 ) THEREFORE, in view of these facts if income is assessed after notice to the assessee there is nothing wrong in the notice. Even if he has any grievance against the assessment made, he can challenge that assessment order in appeal. ( 37 ) IN the memo of appeal the appellant has also challenged the penalty proceedings under Section 271 (1) (c) of the Act of 1961. If the concerned officer found that there is concealed income, in that case it is always open to the officer to initiate penalty for concealment under Section 271 (1) (c) of the Act of 1961. If the concerned officer found that there is concealed income, in that case it is always open to the officer to initiate penalty for concealment under Section 271 (1) (c) of the Act of 1961. If any penalty is imposed in a proceeding under Section 271 (1) (c), the appellant can file appeal against that penalty order. ( 38 ) IN the result, the Commissioner of Customs is directed first to pay the tax liability on behalf of the appellant out of Rs. 1,36,42,000, such as tax assessed, penalty amount and the amount of interest as determined by the tax authorities under the Act of 1961. The balance amount, if any, out of Rs. 1,36,42,000 be refunded to the appellant. ( 39 ) THE appeal stands disposed of in the manner aforesaid.