Income Tax Appellate Tribunal - Delhi
Rakesh Gupta vs Income Tax Officer [Alongwith Ita Nos. ... on 30 June, 2004
Equivalent citations: (2005)95TTJ(DELHI)1100
ORDER
K.C. Singhal, J.M.
1. Since common issue is involved in all these appeals, the same are being disposed of by common order for the sake of convenience. The common issue arising in these appeals relates to the validity of reassessment proceedings.
2. Briefly stated, the facts are these : The Parliament introduced a scheme--Voluntary Disclosure of Income Scheme (VDIS) by Finance Act, 1997. The scheme is contained in Sections 62 to 78 of this Act. Both the assessees made disclosures of income of Rs. 10 lakhs each for the years under consideration in the form of cash vide declarations dt. 30th Dec., 1997 accompanied by their affidavits. Since both the assessees did not pay the tax as required by the scheme, the AO issued notices under Section 148 to both the assessees by registered post for the years under consideration. In response to the same, the assessees filed returns disclosing nil income for the years under consideration except for asst. yr. 1990-91 for which no return was filed as according to the assessee, no notice under Section 148 was received by him. In the course of assessment proceedings, their statements were recorded in which it was stated by them that tax was not paid as they had withdrawn their declarations. In support of the same, they furnished copies of the letters dt. 2nd Jan., 1998 which was not acknowledged by any authority. Hence, their explanation was not accepted and accordingly the AO assessed the sum of Rs. 10 lakhs each for the years under consideration in the case of both the assessees.
3. On appeal, the validity of assessments under Section 148 was challenged on the ground that declarations under VDIS did not constitute any material for issuing notices under Section 148 in view of the provisions of Section 67(2) of Finance Act, 1997, which provided that if the tax was not deposited then such declarations shall be deemed never to have been made under the scheme. The CIT(A) repelled such contention by holding as under :
"I have considered the rival submissions. The assessment proceedings under the IT Act allow the AO to make use of such information which have come to his notice including all the relevant material which is available for making an assessment of the total income of the assessee. This is a case where the declaration made under the voluntary disclosure of income scheme did not enjoy the immunity granted under the said scheme because the requisite taxes were not paid. It is correct that such declaration has to be taken as not a declaration made under VDIS. However, the information submitted by the appellant himself including the affidavit has to be considered as a material information which is fully relevant for the purposes of making an assessment of the total income. The AO was, therefore, within his rights to frame a belief for the purposes of invoking the provisions of Section 148 and also making use of this relevant information for the purposes of completing the assessment proceedings and determining the taxable income based upon this information which was relevant as well as material. Under the circumstances, the action of the AO in determining the income at Rs. 10 lakhs is upheld."
Aggrieved by the same, the assessees are in appeal before the Tribunal.
4. The learned counsel for the assessee has reiterated the stand taken before the CIT(A) and also referred to some decisions for the proposition that if there is no material on record then proceedings under Section 147/148 are void ab initio. The entire emphasis of his argument was that existence of declarations could not be assumed in the eye of law in view of Section 67(2) of Finance Act, 1997.
5. The argument of learned counsel for assessee appears to be attractive but we are not inclined to accept the same. In order to appreciate his contention, it would be appropriate to refer to the salient features of the scheme. Section 64 of the Finance Act, 1997, provides the circumstances when a declaration can be made--(a) where an assessee has failed to furnish a return under Section 139 of the IT Act, 1961, (b) where he has failed to disclose any of his income chargeable to tax in the return furnished by him under IT Act before the commencement of the scheme, and (c) where income chargeable to tax has escaped assessment by reasons of his omissions or failure by the assessee to make the return or to disclose fully and truly all material facts necessary for assessment or otherwise. Such declaration has to be made in accordance with Section 65. Section 66 provides that the declaration shall be accompanied by the proof of payment of tax due under the scheme. However, Section 67 is an exception which permits the payment of tax within three months from the date of declaration subject to payment of interest. Section 67(2) provides that if tax is not paid within the prescribed period then the declaration filed by the assessee shall be deemed never to have been made under this scheme. If declaration is made as per scheme, then certain benefits arise under the scheme. Section 68 provides that income declared shall not be included in the total income of the assessee under the IT Act. Section 71 provides that nothing contained in the declaration shall be admissible as evidence against the declarant for the purpose of proceedings relating to imposition of penalty or for the purpose of prosecution under IT Act/WT Act or FERA or Companies Act. Section 72 provides that all particulars of declaration shall remain confidential and no Court or any other authority shall be entitled to require any public servant to produce before it such declaration. Section 72(2) further provides that no public servant shall disclose any particulars contained in such declaration except to any officer employed in the execution of IT Act/WT Act or to any officer appointed by Comptroller and Auditor General of India or the Board. Section 73 provides that income so declared shall not be included in the wealth of the assessee. Other provisions of the scheme are not relevant for our purpose.
6. Before coming to any conclusion, we would also like to mention that this scheme was also examined by the Hon'ble Supreme Court in the case of Hemlatha Gargya v. CIT and Anr. (2003) 259 ITR 1 (SC), though in a different context. Their Lordships observed as under :
1. The Voluntary Disclosure of Income Scheme, 1997, does not form part of the IT Act, 1961, at all.
2. The provisions of Section 67(2) make it abundantly clear that if the declarant fails to pay the tax within the period of three months as specified, the declaration filed shall be deemed never to have been made under the scheme. In other words, the consequences of non-compliance with the provisions of Section 67(1) relating to the payment have been provided. It is well settled that when the consequence of failure to comply with the prescribed requirement is provided by the statute itself, there can be no manner of doubt that such statutory requirement must be interpreted as mandatory.
3. The scheme has conferred a benefit on those who had not disclosed their income earlier by affording protection against the possible legal consequences of such non-disclosure under the IT Act. Where the assessees seek to claim the benefit under the statutory scheme, they are bound to comply strictly with the conditions under which the benefit is granted : there is no scope for the application of any equitable consideration when the statutory provisions of the scheme are stated in such plain language.
7. The above discussion reveals that assessee is liable to face the consequences if tax has not been paid as per the scheme. Section 67(2) is by way of disincentive to the declarant who has failed to pay the tax due under the scheme. The words "under this scheme" at the end in Section 67(2) are important. By use of these words, the legislature has provided the deeming provisions for the purpose of this scheme and as it did not intend to give any benefit under the scheme to the defaulter declarant. Such deeming provisions must be construed in the context in which used by the legislature. If the contention of the assessee's counsel is accepted then it would amount to conferring benefits on the defaulting declarant. The scheme basically gives benefits with reference to the income chargeable to tax, which had escaped assessment inasmuch as such income is not to be included in the total income of the assessee under the IT Act as well as not to be included in the wealth of the assessee under the WT Act. Hence, the declarant gets immunity from the penalty or prosecution under the IT Act/WT Act. The Hon'ble Supreme Court has held in Hemlatha's case (supra) that the scheme is not part of IT Act. Therefore, the effect of deeming provisions under Section 67(2) has to be restricted to the scheme and cannot be extended to IT Act/WT Act. So, the defaulting declarant cannot be allowed to contend that such escaped income cannot be taxed under Section 147 on the ground that existence of such declaration cannot be assumed. In our opinion, non-existence of declaration is to be assumed only under the scheme and not otherwise and, therefore, such declaration would constitute material for the provisions of Section 147 of the IT Act.
8. Further, there is another aspect of the matter. The declaration is supported by the affidavit of the assessee which is an independent evidence and can be used as material for the purpose of Section 147. Hence, it cannot be contended that there was no material for issuing notice under Section 148.
9. The view taken by us is also fortified by the provisions of Section 72 of the Finance Act, 1997, which reads as under :
"Section 72 : Secrecy of Declaration--(1) All particulars contained in a declaration made under Sub-section (1) of Section 64 shall be treated as confidential and, notwithstanding anything contained in any law for the time being in force, no Court or any other authority shall be entitled to require any public servant or the declarant to produce before it any such information or any part thereof or to give any evidence before it, in respect thereof.
(2) No public servant shall disclose any particulars contained in any such declaration except to any officer employed in the execution of the IT Act or the WT Act, or to any officer appointed by the Comptroller and Auditor General of India or the Board to audit the tax receipts or refunds."
10. The above provisions clearly provide that particulars of declaration have to be kept confidential and no Court or authority can compel the production of the same. However, an exception has also been provided in Sub-section (2) according to which such particulars can be disclosed to some of the authorities mentioned therein which inter alia includes any officer employed in execution of the IT Act. So the legislature has not thought it proper to grant immunity if such particulars are required by an officer employed in execution of IT Act. If such is the legal position then where is question of granting immunity where there is non-compliance by the declarant. An assessee cannot be allowed to take advantages of his own lapses/mistakes.
11. In view of the above discussion, we are of the view that declaration as well as affidavit of assessee constituted material for taking action under Section 147. In the absence of any other argument, the initiation of reassessment proceedings is held to be valid.
12. The next argument of Shri Prakash Narain was that the declaration was withdrawn by the assessee vide letter dt. 2nd Jan., 1998. Hence, the same could not be considered as material for the purpose of Section 147. We are unable to accept such argument. Firstly, no evidence has been brought to us to show that such declaration was withdrawn. The copy of letter does not bear the signature of any official of the IT Department. Secondly, there is no provision in the scheme for withdrawal of such declaration. Once, the assessee declares his income which escaped assessment, he cannot withdraw the same. Either he has to comply with the provisions of the scheme or he has to face the consequences. Hence, such submission of the assessee is rejected.
13. Lastly, he has raised a contention by way of additional ground which was admitted that notice under Section 148 pertaining to asst. yr. 1990-91 in the case of Rakesh Gupta was never served upon the assessee. The assessment record was not available on the date when the case was heard. However, it was pleaded that it is a matter of record and can be verified by lower authority. Accordingly, we set aside the order of the CIT(A) for asst. yr. 1990-91 on this issue and restore the matter to the file of the CIT(A) for adjudication after verifying the fact of service from the assessment record.
14. In the result, appeals filed by both the assessees, except ITA No. 4228/Del/2003 in the case of Rakesh Gupta, are dismissed. However, ITA No. 4228/Del/2003 is allowed for statistical purposes.