1994 (11) TMI 68 - HC - Income Tax

Summary

Issues Involved:
1. Whether the income-tax authorities were precluded from examining the genuineness of the deposit of Rs. 25,000 in the firm's books due to the partner's declaration under the Voluntary Disclosure Scheme, 1976.

Issue-Wise Detailed Analysis:

1. Examination of the Genuineness of the Deposit:

The primary issue revolves around the authority of income-tax officials to scrutinize a deposit of Rs. 25,000 in the firm's books, given that one of the partners, Dhanji Bhavanji, had declared this amount under the Voluntary Disclosure Scheme, 1976. The assessee-firm, comprising two partners, credited Rs. 25,000 to its agents, Messrs. R. Ratilal and Co., during the assessment year 1972-73. The Income-tax Officer questioned the source of this amount, and the firm claimed it was paid by the partner, Dhanji Bhavanji. This explanation was rejected, leading to the inclusion of the amount as "Income from undisclosed sources."

2. Tribunal's Findings and Assessee's Appeal:

The Commissioner (Appeals) initially sided with the assessee, asserting that the burden of proof lay with the partner, not the firm. However, the Tribunal overturned this decision, stating there was no material evidence to support the claim that the Rs. 25,000 deposited was from the partner. The Tribunal also dismissed the argument that the Voluntary Disclosure Scheme protected the firm from scrutiny, noting that the firm was not the declarant under the Act.

3. Legal Provisions and Interpretation:

Section 8 of the Voluntary Disclosure of Income and Wealth Act, 1976, was scrutinized. It specifies that voluntarily disclosed income should not be included in the total income of the "declarant." Since the declaration was made by the partner as an individual and not by the firm, the immunity did not extend to the firm. Section 18 of the Act further clarifies that benefits, concessions, or immunity are not available to anyone other than the declarant.

4. Precedents and Judicial Interpretation:

The Supreme Court's decision in Jamnaprasad Kanhaiyalal v. CIT [1981] 130 ITR 244 was referenced, which held that immunity under similar disclosure schemes applies only to the declarant. The Income-tax Officer retains the authority to investigate the nature and source of credits in the assessee's books, even if those amounts were declared by another party under such schemes. This principle was reiterated in subsequent cases like ITO v. Rattan Lal [1984] 145 ITR 183 and Radhe Shyam Tibrewal v. CIT [1984] 145 ITR 186.

5. Conclusion and Judgment:

The court concluded that the income-tax authorities were not precluded from examining the genuineness of the Rs. 25,000 deposit in the firm's books, despite the partner's declaration under the Voluntary Disclosure Scheme. The immunity provisions of the Act applied solely to the declarant (the partner) and not to the firm. Consequently, the question was answered in the negative, favoring the Revenue, with no order as to costs.