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2003 DIGILAW 625 (CAL)

SUSHILA DEVI MOHATA v. COMMISSIONER OF INCOME TAX

2003-12-09

PRADIPTA RAY

body2003
PRADIPTA RAY, J. ( 1 ) THE writ petitioner did not submit any Income Tax Return under the income Tax Act, 1969 or Wealth Tax Return under the Wealth Tax Act, 1957 upto assessment year 1975-1976. On or about Oct. 8, 1975 the voluntary Disclosure of Income and Wealth Ordinance, 1975 was promulgated providing for Voluntary Disclosure of Income and Wealth and introducing a Voluntary Disclosure Scheme. Subsequently the said ordinance was replaced by the Voluntary Disclosure Income and Wealth act, 1976 (hereinafter referred to as the Voluntary Disclosure Act ). In accordance with the said Voluntary Disclosure Scheme the petitioner filed a declaration in Form 'a' under Section 3 (1) of the Ordinance on December 30,1975 disclosing her income by way of interests, dividends, capital gains etc. amounting to Rs. 4,54,640/- for the assessment years 1965-66 to 1975-76. In her declaration in the prescribed form the petitioner disclosed that during the said assessment years from 1965-66 to 1975-76. Income tax amounting to Rs. 65,989. 32 in total was deducted at source by the companies at the time paying dividends. The petitioner claimed adjustment of the said amount of income tax which was deducted at source against the income tax payable under the Voluntary Disclosure Scheme. The petitioner also requested the Government Authority to allow her to pay the balance amount of income tax in instalments. The time to make payment of tax and or investment in relevant bond was extended from time to time upto Jan. 1,1978. The petitioner paid the income tax and wealth tax payable under the Voluntary Disclosure Scheme on different dates excepting the said amount of Rs. 65,989. 32 which was deducted at source from her income. By memo dated March 15,1978, the concerned Income Tax Officer informed the petitioner that assessee was not entitled to claim adjustment of the amount deducted at source as the Voluntary Disclosure Act, 1976 did not include any such provision for adjustment. In view of the said decision the Income Tax Authorities did not accept the petitioner's declarations under the Voluntary Disclosure Scheme and initiated assessment proceedings for different assessment years against the writ petitioner and notices under Section 148 of the Income Tax Act were issued. In view of the said decision the Income Tax Authorities did not accept the petitioner's declarations under the Voluntary Disclosure Scheme and initiated assessment proceedings for different assessment years against the writ petitioner and notices under Section 148 of the Income Tax Act were issued. The writ petitioner thereafter submitted an application before the Central board of Direct Taxes (hereinafter referred to as the Board) for accepting her declaration under the Voluntary Disclosure Scheme and to grant a certificate of payment of entire tax liability on the disclosed income. By letter dated May 9,1980 the petitioner was informed that the Central Board of Direct Taxes has rejected the petitioner's request for the following reason :"the declarant is not entitled to seek any benefit which is not strictly spelt out in the Voluntary Disclosure of Income and Wealth act, 1976, which shuts out the operation of Income-tax Act once a declarant invokes it. The provisions of Section 199 of Income-tax, 1961, which are contained in Chapter-XII are not made applicable to the Voluntary Disclosure of Income and Wealth Act, 1976 though sections 221 to 227, 229, 231 and 232 contained in this Chapter- xvii are made applicable. (Please refer Section 7 (2) of Voluntary disclosure of Income and Wealth Ordinance 1976 ). In view of the above mentioned legal position no credit for taxes deducted at sources can be given as requested by you in your said petition. " ( 2 ) THE petitioner again moved the Central Board of Direct Taxes for reconsideration of its decision. The petitioner was informed by letter dated dec. 1, 1980 that the Central Board of Direct Taxes had nothing more to say than what was stated in the letter dated May 9,1980. After such rejection assessment orders were passed in the different proceedings initiated against the petitioner as her declaration under the Voluntary Disclosure scheme was not accepted on the ground of non-payment of the full amount payable under the Voluntary Disclosure Scheme. Being agrieved against such refusal to accept the petitioner's declaration under the Voluntary disclosure Scheme, initiation of Income Tax proceedings and the assessment orders passed in those proceedings the petitioner has filed this writ application. Being agrieved against such refusal to accept the petitioner's declaration under the Voluntary disclosure Scheme, initiation of Income Tax proceedings and the assessment orders passed in those proceedings the petitioner has filed this writ application. ( 3 ) THE main question required to be determined in this proceeding is whether the petitioner was entitled to get credit of the amount of Income tax deducted at source, for the purpose of payment of Income tax under the Voluntary Disclosure Act or not. ( 4 ) SECTION 3 sub-section 1 and Section 5 of the Voluntary Disclosure act, 1976 are reproduced below : s. 3. (i) "subject to the provisjons of this Act, where any person makes, on or after the date of commencement of this Act but before the 1st day of January, 1976, a declaration in accordance with the provisions of Section 4 in respect of any income chargeable to tax under the Indian income-tax Act, 1922 (XI of 1922), or the Income-tax Act for any assessment year (a) for which he has failed to furnish a return under Section 139 of the Income-tax Act, or (b) which he has failed to disclose in a return of income furnished by him under the Income-tax Act before the date of commencement of this act, or (c) which has escaped assessment by reason of the omission or failure on the part of such person to make a return under the Indian Income- tax Act, 1922 (XI of 1922), or the Income-tax Act or to disclose fully and truly all material facts necessary for his assessment or otherwise. then notwithstanding anything contained in the Indian Income-tax Act, 1922 (XI of 1922), or the Income-tax Act or in any Finance Act, income-tax shall be charged in respect of the income so declared (such income being hereinafter referred to as the Voluntarily disclosed income) at the rate or rates specified in the Schedule. ( 5 ) TIME FOR PAYMENT OF INCOME-TAX AND FOR investment IN NOTIFIED SECURITIES : (1) Subject to the provisions of sub-section (2), the income-tax payable under this Act in respect of the Voluntary Disclosed Income shall be paid by the declarant before making the declaration and the declaration shall be accompanied by proof of payment of such tax. ( 5 ) TIME FOR PAYMENT OF INCOME-TAX AND FOR investment IN NOTIFIED SECURITIES : (1) Subject to the provisions of sub-section (2), the income-tax payable under this Act in respect of the Voluntary Disclosed Income shall be paid by the declarant before making the declaration and the declaration shall be accompanied by proof of payment of such tax. (2) If the Commissioner is satisfied, on an application made in this behalf by the declarant, that the declarant is unable, for good and sufficient reasons to pay the full amount of income-tax in respect of the voluntarily disclosed income in accordance with sub-section (1), he may extend the time for payment of the amount which remains unpaid or allow payment thereof by instalments if the declarant furnishes adequate security for the payment thereof, so, however, that an amount which is not less than one-half of the amount of income-tax payable in respect of the voluntarily disclosed income shall be paid on or before the 31st day of March, 1976, and the remainder, if any, on or before the 31st day of March 1977. (3) The security required to be furnished by a declarant for the purposes of sub-section (2) shall be in such form and in such manner as the Commissioner may, in his discretion, direct. (4) The investment in the securities referred to in sub-section (3) of Section 3 shall be made by the declarant within thirty days from the date on which the declaration is made by him under subsection (1) of that section. " 5. The Voluntary Disclosure Scheme under the Voluntary Disclosure act was a special provision for payment of income tax at a special rate prescribed in the said Act and the declarant was to pay income-tax on the disclosed income at the special rate prescribed under the Voluntary disclosure Act. If the declarant had already paid any Income-tax on the disclosed income at or any time before submitting such declaration there is no justifiable reasons why said payment of income tax would not be adjusted against the liability under the Voluntary Disclosure Scheme. The only difference between the Income-tax Act and the Voluntary Disclosure act is that the declarant was to pay income tax not at the rate prescribed under the Income-tax Act but at the rate prescribed under the Voluntary disclosure Act. The only difference between the Income-tax Act and the Voluntary Disclosure act is that the declarant was to pay income tax not at the rate prescribed under the Income-tax Act but at the rate prescribed under the Voluntary disclosure Act. The Income Tax Authorities cannot claim or realise incometax more than what was/is payable under the Voluntary Disclosure Act. The Board of Direct Taxes has taken the view that the provisions of voluntary Disclosure Act do not provide for any such adjustment. The reasoning is unacceptable as the approach itself is erroneous. The Board should have noticed that the Voluntary Disclosure Act did not prohibit or put any restriction on the adjustment of the Income-tax already paid on the income disclosed. ( 6 ) AN illustration will be helpful in appreciating the unreasonableness of the view adopted by the Board and Income Tax Authorities. An assessee- 'x' did not pay any Income-tax before introduction of the Voluntary disclosure Scheme. He disclosed his income under the Voluntary Disclosure scheme and paid income-tax as payable under the Voluntary Disclosure act. Another Assessee Y paid some amount of Income-Tax but did not file any income-tax return. After introduction of the Voluntary Disclosure scheme he disclosed his income to get the benefit of the said scheme. If y is not given the credit of the Income-tax already paid by him Y will be ultimately required to pay a higher amount of income tax than X. Although x did not pay anything at any time before. Y, who at least paid something towards income-tax, would have to pay more than what was paid by X and what was payable as income-tax under the voluntary disclosure scheme. ( 7 ) AS already pointed out that the Revenue was entitled to get Income tax only. Whatever was paid as income-tax by the assessee/declarant on the disclosed income would have to be adjusted and the Revenue cannot be permitted to get more than the income-tax payable under the special act. Under Section 198 of the Income-tax ail sums deducted at sources under various provisions of the Income-Tax Act are deemed income received by the assessee and under Section 199 of the Income-tax Act. The said amount of tax which is deducted at source is to be treated as payment of tax on behalf of the person from whose income the deduction is made. The said amount of tax which is deducted at source is to be treated as payment of tax on behalf of the person from whose income the deduction is made. Thus, there cannot be any dispute that the deduction made at source from the income of the petitioner was to be accepted as the payment of income tax by the assessee. There is no provision under the Voluntary disclosure Act, 1976 which entitled/entitle the income-tax authorities not to treat the amount of tax deducted at source as payment of tax by the assessee. ( 8 ) MR. Mitra, learned Advocate appearing for the Income-Tax authorities points out that along with the declaration a declarant was to pay entire tax liability and without such payment the declaration could not be accepted. In the present case there is no dispute that if the amount of tax deducted at source was adjusted then the entire tax payable under the voluntary disclosure scheme was paid before the extended date. It is not a case where a petitioner had not paid any part of the income-tax and claimed benefit of the Voluntary Disclosure Act. The petitioner had actually paid income-tax but the authorities were not willing to give credit of the said payment against the tax payable at the special rate under the Voluntary disclosure Act. ( 9 ) MR. Mitra has referred to a decision of the Gauhati High Court in sri Jnanananda Sharma Pathak v. Commissioner of Income-Tax and Anr. reported in Vol. 263 Income-Tax Reports 667. The said decision does not apply to the facts of the present case. In the said case the assessee did not pay the tax. His house was searched and cash seized. The assessee therein requested the Authorities to adjust the tax amount from the cash seized by the Central Bureau of investigation. Such request was not accepted as payment of tax for availing of the benefit of the Amnesty scheme of 1985-86. In the present case tax has been paid and received by the revenue. ( 10 ) IN its order the Board has referred to Section 7 of the Voluntary disclosure Act to support its decision. Board has completely misread and misconstrued the provision of Section 7 (2) of the Voluntary Disclosure act. In the present case tax has been paid and received by the revenue. ( 10 ) IN its order the Board has referred to Section 7 of the Voluntary disclosure Act to support its decision. Board has completely misread and misconstrued the provision of Section 7 (2) of the Voluntary Disclosure act. The purpose and effect of Section 7 (2) of the Act was to adopt the same method of recovery as contained in the Income Tax Act for the purpose of recovering tax payable under the Voluntary Disclosure Act. This does not mean that other provisions of the Income Tax Act, if not inconsistent with the provisions of the Voluntary Disclosure Act would not at all apply. It is significant that no general non-obstante Clause has been included in the Voluntary Disclosure Act. Only non-obstante clause as contained in Section 3 was for the purpose of realising income tax at a special rate notwithstanding the rate prescribed under the Income Tax Act. There is no provision in the Voluntary Disclosure Act which disentitles a declarant to get credit of the amount of income tax, if any, paid earlier, towards payment of income tax at the special rate on the disclosed income. ( 11 ) FOR the reason aforesaid this Court holds that the writ petitioner was/is entitled to get credit and adjustment of the amount of tax deducted at source for the purpose of the income-tax payable under the Voluntary disclosure Scheme. The decision of the Income Tax Officer and the Board of Direct Taxes rejecting the petitioner's prayer for adjustment of the aforesaid amount are set aside. The Authorities are directed to give credit of and adjust the said amount of Rs. 65,989. 32 against the income-tax payable undert he Disclosure Scheme under the Voluntary Disclosure Act, 1976 and to reconsider whether the petitioner was otherwise entitled to get benefit of the said scheme. If the concerned authorities find that the petitioner was/is otherwise entitled to get benefit of the Voluntary Disclosure scheme all the assessment proceedings for the assessment years covered under the Voluntary Disclosure Scheme would be deemed to have been dropped and the assessments orders in those proceedings withdrawn. ( 12 ) THE rule is made absolute to the extent indicated above. No order as to costs.