1989 (1) TMI 87 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the prohibitory orders issued under section 132(3) of the Income-tax Act, 1961.
2. Validity of the assessment of income declared under the Amnesty Scheme.
3. Authority of Income-tax officials to enquire into the source of income declared under the Amnesty Scheme.
4. Application of Supreme Court judgments in the context of the Amnesty Scheme.

Issue-wise Detailed Analysis:

1. Legality of the prohibitory orders issued under section 132(3) of the Income-tax Act, 1961:
The petitioner challenged the prohibitory order dated December 15, 1986, served on the bank, which froze her savings account. The petitioner argued that the account belonged exclusively to her and there was no outstanding tax demand against her at the time of the seizure. The court found that the prohibitory orders were issued based on a predetermined notion without verifying the facts, and thus, were not bona fide. The court quashed the prohibitory orders, allowing the petitioners to operate their accounts freely.

2. Validity of the assessment of income declared under the Amnesty Scheme:
The petitioners had declared their income for the assessment years 1983-84 to 1986-87 under the Amnesty Scheme, and the Income-tax Officer accepted these declarations without variation. The court noted that the amounts in the petitioners' bank accounts were less than the declared amounts under the Amnesty Scheme. The court emphasized that the Amnesty Scheme's purpose is to allow tax evaders to voluntarily declare their income without being compelled to disclose the source. The court held that the income declared and assessed under the Amnesty Scheme should not be subject to further scrutiny regarding its source.

3. Authority of Income-tax officials to enquire into the source of income declared under the Amnesty Scheme:
The respondents argued that they were justified in treating the amounts in the petitioners' accounts as unexplained investments of their husbands, as the petitioners could not explain the source of the deposits. The court rejected this argument, stating that under the Amnesty Scheme, the declarant cannot be compelled to declare the source of income. The court distinguished the present case from the Supreme Court judgments cited by the respondents, noting that the declared income was not credited in the accounts of the petitioners' husbands or their firms.

4. Application of Supreme Court judgments in the context of the Amnesty Scheme:
The respondents relied on the Supreme Court judgments in Jamnaprasad Kanhaiyalal v. CIT and ITO v. Rattan Lal, which held that the immunity under the Voluntary Disclosure Scheme is available only to the declarant and not to other persons to whom the income actually belongs. The court clarified that these judgments applied to cases where the declared income was credited in the accounts of firms or other persons. In contrast, the petitioners' declared income was deposited in their own bank accounts and was not used by their husbands or their firms. Therefore, the court held that the income-tax authorities could not enquire into the source of the petitioners' declared income under the Amnesty Scheme.

Conclusion:
The court allowed all five petitions, quashed the prohibitory orders, and permitted the petitioners to operate their bank accounts without any restrictions. The court awarded costs to the petitioners and directed the refund of any security deposits after due verification. The judgment reaffirmed that the Amnesty Scheme's protection extends to the declarant's declared income, provided it is not credited in the accounts of other persons or firms.