2000 (7) TMI 64 - HC - Income Tax

Summary

Issues Involved
1. Validity of the Voluntary Disclosure of Income Scheme, 1997 (Disclosure Scheme, 1997) in relation to the amount of Rs. 1,36,42,000.
2. Direction for the Commissioner of Customs to pay the tax liability from the amount of Rs. 1,36,42,000.
3. Refund of the balance amount to the appellant.
4. Assessment of tax liability and initiation of penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961.

Detailed Analysis

1. Validity of the Disclosure Scheme, 1997
The main grievance of the appellant is that the learned single judge erred in directing the service of notice to determine his tax liabilities for Rs. 1,36,42,000, which was disclosed under the Disclosure Scheme, 1997. The appellant declared this amount in December 1997, under section 64(1) read with section 65 of the Finance Act, 1997. However, the declaration was rejected by the Assistant Commissioner of Income-tax because the required tax was not paid within the allowed time. The court noted that clause (ii) of sub-section (2) of section 64 of the Finance Act, 1997, prohibits the disclosure of income under the Disclosure Scheme, 1997, if a requisition under section 132A of the Income-tax Act was made. Since a warrant of authorisation under section 132A was issued in April 1997 for the amount deposited by Shambhu Pandey, the appellant could not avail the benefits of the Disclosure Scheme, 1997.

2. Direction for the Commissioner of Customs to Pay Tax Liability
The appellant argued that since the amount of Rs. 1,36,42,000 was disclosed under the Disclosure Scheme, 1997, there was no need for a notice to assess the tax liability. However, the court held that the amount could not be taxed under the Disclosure Scheme, 1997, due to the prior issuance of the warrant of authorisation under section 132A. Therefore, the amount must be taxed under the provisions of the Income-tax Act, 1961, and the tax liability must be assessed after issuing a notice to the appellant.

3. Refund of the Balance Amount to the Appellant
The learned single judge directed the Commissioner of Customs to refund the amount to the petitioner, subject to final clearance from the Income-tax Department. The court clarified that the Commissioner of Customs should first pay the tax liability, including tax assessed, penalty amount, and interest, from the Rs. 1,36,42,000. The balance amount, if any, should be refunded to the appellant.

4. Assessment of Tax Liability and Penalty Proceedings
The court noted that if the income is assessed after notice to the appellant, there is no prejudice caused to the appellant. The appellant can challenge the assessment order in appeal if there are any grievances. The court also addressed the appellant's challenge to the penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961. It was stated that if the concerned officer finds concealed income, it is within their power to initiate penalty proceedings. The appellant can appeal against any penalty order imposed.

Conclusion
The appeal was disposed of with the direction that the Commissioner of Customs should first pay the tax liability from the amount of Rs. 1,36,42,000, and refund the balance to the appellant. The appellant is not entitled to the benefits of the Disclosure Scheme, 1997, for the amount in question due to the prior issuance of the warrant of authorisation under section 132A. The assessment of tax liability and any subsequent penalty proceedings must follow the provisions of the Income-tax Act, 1961.