2003 (5) TMI 54 - HC - Income Tax

Voluntary Disclosure of Income Scheme, 1997 - The petitioner submitted an application under section 65(1) in respect of the scheme, the petitioner claimed depreciation on machinery and cast iron moulds and gas cylinders. A search under section 132 of the Income-tax Act was carried out in the business premises of Mega Gas Pvt. Ltd., on March 6, 1996, and it was concluded on May 22, 1996. During the search proceedings it was detected by the Department that DDK Industries, Bangalore, from whom the petitioners claimed to have purchased the cylinders is a non-existent entity. - Respondents in terms of section 64(2)(ii) of the Scheme and in the light of an answer to question No. 29, decided to cancel the certificate issued under section 68(2) of the Scheme. Notice was issued in terms of annexure C calling for objections. Objections were filed in terms of annexure D. After considering the objections, the respondents cancelled the certificate in terms of annexure E. Thereafter they have issued annexures F, F1 and F2, notices under section 148. Those notices provide for an escaped assessment in terms of section 147. These proceedings are challenged by the petitioner. - I am unable to accept the arguments of the petitioner. The petition stands rejected.

Summary

Issues:
Challenge to the cancellation of certificate under the Voluntary Disclosure of Income Scheme, 1997 and subsequent notices issued under section 148 for escaped assessment.

Analysis:
The petitioner, a public limited company owning plantations, sought to quash a letter and notices issued under section 148 for assessment years 1994-95, 1995-96, and 1996-97. The petitioner claimed depreciation on machinery and cast iron moulds, and gas cylinders purchased from a non-existent entity, DDK Industries. A search revealed the fictitious nature of the transactions, leading to the cancellation of the certificate under the Scheme and issuance of notices for escaped assessment. The respondents justified their actions in a detailed affidavit.

Legal Arguments:
The petitioner argued that once a certificate is accepted, the transaction is concluded and cannot be reopened, citing relevant case law. However, the court noted that the Scheme aims to end disputes between parties and benefits only bona fide assessees. Therefore, the respondents were justified in canceling the certificate due to incorrect declarations by the petitioner.

Judgment:
After hearing arguments from both sides, the court found that the transactions were fictitious, and the petitioner's claim of ignorance regarding the search was not credible. The court rejected the petitioner's arguments, emphasizing that benefits under the Scheme are for genuine assessees, and recalled certificates due to incorrect declarations. The petition was rejected without costs.