Madhya Pradesh High Court
Lachhiram Puranmal And Anr. vs Income-Tax Officer And Ors. on 11 December, 1989
Equivalent citations: [1990]184ITR186(MP)
JUDGMENT A.G. Qureshi, J.
1. Petitioner No. 1 is a registered partnership firm and petitioner No. 2 is one of the partners of the firm. The firm submitted its return for the assessment year 1988-89 for the accounting period 1986-87 ending with Diwali 1987. In the account of the firm, an amount of Rs. 1,17,000 is shown deposited by Jagdishchandra and Rs. 1,10,000 by Rameshchandra. Rs. 60,000 were shown deposited by Anilkumar. According to the petitioners, all these amounts were invested by these persons in the firm after making voluntary declaration under the Amnesty Scheme declared for the assessment years 1984-85 to 1986-87. Respondent No. 1 on November 17, 1989, issued a notice under Section 143(2) of the Income-tax Act, 1961, challenging the deposit of the above sums on the ground that these amounts shown as deposited in the firm, are actually the income of the firm and not of the persons in whose accounts the amounts have been shown. The grievance of the petitioners is that once these amounts have been declared by the individuals under the Amnesty Scheme and assessed to tax by the competent authority, the Income-tax Officer was not authorised to issue the impugned notice. The notice is, therefore, without jurisdiction and should be quashed.
2. Learned counsel for the petitioners, Shri Chaphekar, placing reliance on a decision of this court in Mst. Anisa Bano v. ITO [1989] 177 ITR 368, argues that once the amount has been declared under the Amnesty Scheme and assessed to tax, the income-tax authorities have no jurisdiction to reopen that assessment by holding that such declared and assessed amount, if deposited with a firm, is the amount actually earned by the firm and that the firm had got it declared under the Amnesty Scheme through the individuals.
3. We are unable to agree with the contention of learned counsel for the simple reason that in Mst. Anisa Bano v. ITO [1989] 177 ITR 368, this court had considered the Supreme Court judgments in ITO v. Rattan Lal [1984] 145 ITR 183 and Jamnaprasad Kanhaiyalal v. CIT [1981] 130 ITR 244. This court had actually followed the two decisions of the Supreme Court but had decided the case in view of the fact that the amount declared under the Amnesty Scheme was with the declarants and not credited with any firm and, secondly, the declarants had their own source of income which was declared under the Amnesty Scheme. The Supreme Court in the case of Jamnaprasad Kanhaiyalal v. CIT [1981] 130 ITR 244 has taken a view that the declaration under Section 24(2) of the Finance (No. 2) Act, 1965, had to relate to income actually earned by the declarant and the Act granted immunity to the declarant alone and not to other persons to whom the income really belonged and that the finality under Section 24(8) of the Finance (No. 2) Act, 1965, was to the order of the Central Board under Section 24(6) and not to the assessment of tax made on the declarations under the Scheme. The declaration could be made only in respect of the amount which represented the income of the declarant and such a declaration could not be made in respect of an amount which was not the income of the declarant. If, therefore, a person made a false declaration with respect to an amount which was not his income, but was the income of somebody else, then there was nothing to prevent an investigation into the true source of the amount. There was nothing in Section 24 of the Finance (No. 2) Act, 1965, which prevented the Income-tax Officer, if he was not satisfied with the explanation of the assessee about the genuineness of the source of an amount found credited in his books in spite of its having already been made the subject of a declaration by the creditor and taxed under the Scheme, from investigating the true nature and source of credits. The legal fiction created by Section 24(3) of the Finance (No. 2) Act, 1965, was limited in its scope and could not be invoked in assessment proceedings relating to any person other than the person making the declaration under that Act so as to rule out the applicability of Section 68 of the Income-tax Act, 1961. The same view was followed in the case of ITO v. Rattan Lal [1984] 145 ITR 183 (SC).
4. In the instant case, the impugned notice has been issued by the Income-tax Officer against the petitioners on the ground that the amount was credited with the petitioner-firm but in view of the facts brought to the notice of the Income-tax Officer in the decision given by the Commissioner of Income-tax (Appeals)-II, Indore, the Income-tax Officer was of the view that the amount shown credited with the firm in different names was actually the income of the firm. Therefore, it was proposed to add that income in the income of that firm. As such, the notice issued by the Income-tax Officer cannot be held to be without jurisdiction as held by the Supreme Court in the two decisions referred to above that the Income-tax Officer has to seek the explanation of the assessee about the genuineness of the sources of amount found credited in the books of the firm in spite of these having already been made the subject-matter of a declaration made by the depositors to include them as income of the assessee from undisclosed sources. Section 24 of the Finance (No. 2) Act, 1965, does not have an overriding effect over Section 68 of the Income-tax Act, 1961, in so far as persons other than the declarants are concerned. The petitioners are free to show before the Income-tax Officer that the income shown as deposits of Rameshchandra, Jagdishchandra and Anilkumar is their own income and not the income of the petitioner-firm.
5. In the result, this petition is dismissed without notice to the other party.