2017 (11) TMI 859 - HC - Income Tax

Declaration of voluntarily disclosed income - petitioner was not holding the assets on the date of declaration and it was declared invalid - Held that - In the instant case, admittedly and undisputedly, the petitioner has not declared any jewellery towards undisclosed income, whereas he has stated that he had already sold jewellery and computation sheet of capital gains has been filed, therefore, the said clarification would not be applicable to the facts of the present case. There is no enabling provision in the VDIS, 1997 directing holding of assets included in the statement of capital gains on the date of declaration. Therefore, the reason assigned by the Assistant Commissioner of Income Tax rejecting the VDIS by the petitioner as invalid, is contrary to law and also contrary to the provisions of their own VDIS. Accordingly, it is quashed. The competent authority / respondents are directed to consider and accept the declaration as submitted by the petitioner under the VDIS, in accordance with law.

Summary

Issues:
1. Validity of declaration under the Voluntary Disclosure of Income Scheme, 1997 (VDIS).
2. Rejection of declaration by income tax authorities.
3. Interpretation of the VDIS provisions regarding holding assets at the time of declaration.

Analysis:
1. The petitioner made a declaration under VDIS, but it was rejected by the income tax authorities on the grounds that the petitioner was not holding the assets at the time of declaration. The petitioner challenged this rejection, arguing that his declaration was in accordance with VDIS provisions. The respondent contended that since the petitioner was not holding the assets at the time of declaration, it was rightly declared invalid.

2. The petitioner's counsel argued that the declaration included the computation of capital gains from the sale of gold and silver articles, thus fulfilling the requirement of disclosing income. They emphasized that there was no explicit condition in VDIS necessitating the holding of assets at the time of declaration. In contrast, the respondent cited a clarification by the Central Board of Direct Taxes (CBDT) stating that declarants must declare assets they hold at the time of making the declaration.

3. The court analyzed the VDIS provisions, noting that disclosure could be made for income not previously disclosed in a tax return. The petitioner had disclosed capital gains from the sale of assets, which was considered a valid disclosure under VDIS. The court highlighted that the CBDT clarification regarding jewellery declarations did not apply to the petitioner's case as he did not declare any jewellery as undisclosed income. The rejection of the petitioner's declaration was deemed contrary to law and VDIS provisions.

4. Consequently, the court quashed the rejection of the petitioner's VDIS declaration and directed the competent authority to accept the declaration in accordance with the law. The court clarified that the petition was limited to the issuance of a certificate under VDIS and did not address other tax matters. The writ petition was allowed, and no costs were imposed.

This detailed analysis of the judgment highlights the key arguments presented by both parties, the court's interpretation of VDIS provisions, and the ultimate decision in favor of the petitioner regarding the validity of their declaration under VDIS.