2003 (12) TMI 649 - HC - Income Tax

Summary

Issues:
1. Entitlement to credit of tax deducted at source under the Voluntary Disclosure Act.

Analysis:
The judgment revolves around the petitioner's entitlement to credit of tax deducted at source under the Voluntary Disclosure Act, 1976. The petitioner filed a declaration under the Voluntary Disclosure Scheme, disclosing income for assessment years 1965-66 to 1975-76. The main contention was whether the petitioner could adjust the tax deducted at source against the income tax payable under the Voluntary Disclosure Scheme.

The Voluntary Disclosure Act provided for a special rate of income tax under the scheme. The petitioner argued that any income tax already paid should be adjusted against the liability under the Act. The court emphasized that the Act did not prohibit such adjustment and that the Revenue should not claim more tax than what was payable under the special Act.

The court illustrated the unfairness of denying credit for tax already paid. It highlighted that allowing such adjustment was essential to ensure fairness, especially when comparing cases of declarants who had not paid any tax before the scheme's introduction.

The judgment also addressed the argument raised by the Income-Tax Authorities that the entire tax liability had to be paid upfront for the declaration to be accepted. However, since the petitioner had paid income tax but was denied credit, the court found this reasoning flawed.

Additionally, the court rejected the reference to a decision by the Gauhati High Court, stating that it did not apply to the present case where tax had been paid and received by the revenue.

The court scrutinized the Board's reliance on Section 7(2) of the Voluntary Disclosure Act, clarifying that it did not preclude the adjustment of tax already paid. It emphasized that the Act did not contain provisions disentitling declarants from receiving credit for tax paid earlier.

Ultimately, the court ruled in favor of the petitioner, directing the authorities to give credit and adjust the tax deducted at source against the income tax payable under the Voluntary Disclosure Scheme. It further instructed a reconsideration of the petitioner's eligibility for the scheme, with a directive to drop assessment proceedings if the petitioner was found entitled to the scheme's benefits.

In conclusion, the judgment clarified the petitioner's entitlement to credit for tax deducted at source under the Voluntary Disclosure Act, emphasizing fairness and adherence to the provisions of the Act.