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2010 (12) TMI 54 - HC - Income TaxBenefit of VDIS - ITAT interpreted the expression in relation to prosecution in section 78 (b) of Finance Act, 1997, in holding that the assessee against whom First Information Report was lodged (but no charge sheet was filed ) was entitled to the benefit of VDIS - CBI itself moved the court seeking withdrawl of First Information Report and filed final report - certificate of VDIS was issued in favour of the assessee - Held that - CBI court accepted the final report/withdrawl of F.I.R - Since neither the prosecution was pending on the date when VDIS was sought by the assessee, nor prosecution was initiated on the investigation pending on the date VDIS benefit was sought, as such, it can not be said that assessee was one of such persons to whom clause (b) of section 78 of Finance Act, 1997, applied - question of law stands answered in favour of the assessee
Issues:
Interpretation of expression "in relation to prosecution" under section 78 (b) of Finance Act, 1997 for eligibility of Voluntary Disclosure Income Scheme (VDIS). Analysis: The case involved a dispute regarding the eligibility of the assessee for VDIS under the Finance Act, 1997. The primary issue was whether the assessee, against whom a First Information Report (FIR) was lodged but no charge sheet was filed, was entitled to the benefits of VDIS. The assessee had disclosed income under VDIS for the assessment years 1993-1994 and 1994-1995. The Assessing Officer (AO) rejected the VDIS claim citing section 78 (b) of the Finance Act, 1997, which excludes certain persons from the scheme in relation to prosecution for specified offenses. The Commissioner of Income Tax (Appeals) partially allowed the appeal but denied VDIS benefits. However, the Income Tax Appellate Tribunal (ITAT) ruled in favor of the assessee, stating that as there was no pending prosecution against her, she was eligible for VDIS. The court analyzed the relevant provision of law, section 78 (b) of the Finance Act, 1997, which outlines the exclusion from the VDIS scheme in cases related to prosecution for specific offenses. The court noted that the provision did not mention pending investigations and interpreted that prosecution is considered initiated when summons are issued by the court based on an Investigating Officer's report. In this case, no charge sheet was filed against the assessee, and CBI withdrew the FIR before the VDIS certificate was issued. The court observed that since no prosecution was pending or initiated against the assessee at the time of seeking VDIS benefits, she was not barred by section 78 (b) of the Finance Act, 1997. The court dismissed the revenue's argument that VDIS was not available for offenses under certain acts, emphasizing that the key consideration was the absence of pending or initiated prosecution against the assessee. The court concluded that the assessee was entitled to VDIS as no prosecution was pending when she sought the benefits. The judgment favored the assessee, upholding the ITAT's decision that she was eligible for VDIS benefits for the assessment year 1993-1994. Consequently, the appeal was dismissed, affirming the ITAT's order.
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