1987 (9) TMI 35 - HC - Income Tax

Voluntary Disclosure Scheme - Hindu undivided family - additions under Undisclosed sources - expression individual - Whether family members disclosures should benefit the family entity - HELD THAT - In my considered opinion therefore there is no scope for much discussion on account of the change of the definition in the 1961 Act. The expression individual is now a unit of assessment and referable only to a natural person i.e. a human being a situation different from that in the 1922 Act. A Hindu undivided family is a separate legal entity and it is in this sense that this legal expression has been employed in the taxation laws. (See CWT v. Smt. Champa Kumari Singhi 1972 (1) TMI 4 - SUPREME COURT . The Legislature deliberately did not define the expression in the Income-tax Act as it has a well-known connotation under the Hindu law. The Hindu undivided family is being assessed to income-tax as a distinct entity or a unit of assessment. Section 18 of the disclosure scheme clearly provides that no benefit or immunity under the scheme shall be given to any person other than the person making the declaration under that provision. It may be noticed that an exception has been made specifically with respect to a declaration made by a firm. A firm and Hindu undivided family being two separate assessable units under the Income-tax Act no such benefit having been contemplated for the members of a joint Hindu family I would hold that the Tribunal has taken the correct view of the law namely that the benefit would go to the assessee only with respect to the declarations made under the voluntary disclosure scheme to the extent of disclosure made by the assessee and not in the name of the individual members of the joint family particularly in view of the finding that they had no independent source of investment of their own. Therefore the answer to the question must be given in favour of the Department and against the assessee.

Summary

The High Court of Orissa considered a case involving the entitlement of a Hindu undivided family to set off amounts disclosed by individual family members under the Voluntary Disclosure of Income and Wealth Ordinance, 1975. The core legal question was whether the family could benefit from the disclosure made by its members. The assessments for the years 1973-74 and 1974-75 were reopened under section 147(a) of the Income-tax Act, 1961, resulting in additions under "Undisclosed sources." The Commissioner of Income-tax (Appeals) granted some relief to the assessee, leading to an appeal to the Tribunal.The Tribunal rejected the contention that individual declarations should be considered as made on behalf of the Hindu undivided family. The assessee argued that certificates under the Disclosure Scheme proved income disclosure by family members, entitling them to benefits. However, the standing counsel asserted that the benefits were only for the declarant under the Act.The Court referenced previous decisions to support its analysis. It noted that the immunity under the Act was granted solely to the declarant, not to others to whom the income belonged. The definition of "person" in the Act distinguished between individuals and Hindu undivided families, emphasizing their separate legal status. Section 18 of the 1976 Act clarified that benefits were limited to the declarant only.The Court held that the benefit of the Disclosure Scheme extended only to the assessee based on declarations made under the scheme, not to individual family members. It emphasized the distinct legal entity of a Hindu undivided family for tax assessment purposes. Therefore, the Tribunal's decision was upheld in favor of the Department and against the assessee.In conclusion, the Court ruled in favor of the Department, denying the family the benefit of set-off based on individual disclosures. Each issue was analyzed in detail, considering legal precedents, the Court's interpretation, key evidence, and the application of the law to the facts presented. The significant holding established that benefits under the Disclosure Scheme were limited to the declarant, not extended to other family members.