1980 (1) TMI 52 - HC - Income Tax

Summary

Issues Involved:
1. Effect of acceptance by the Commissioner of the voluntary disclosure of income under the Finance (No. 2) Act, 1965.
2. Relevance and admissibility of declarations under the Finance Act as evidence in assessment proceedings.
3. Scope of investigation by revenue authorities into the correctness of the explanation provided by an assessee regarding credit entries in his books of account.

Issue-wise Detailed Analysis:

1. Effect of Acceptance by the Commissioner of the Voluntary Disclosure of Income:
The court examined the provisions of Section 24 of the Finance (No. 2) Act, 1965, which deals with "voluntary disclosure of income." The court noted that the Commissioner is required to forward the declaration to the Income-tax Officer (ITO) for tax determination and issuance of a notice of demand. The court emphasized that the Commissioner's role in this process is largely ministerial and does not involve an inquiry into the source of the income or whether the declarant was liable to income tax on the disclosed amount. The court concluded that the mere acceptance of a voluntary disclosure by the Commissioner does not preclude an inquiry into the genuineness of the income in subsequent proceedings involving persons other than the declarant.

2. Relevance and Admissibility of Declarations Under the Finance Act as Evidence:
The court held that declarations made under the Finance Act and the certificates granted by the Commissioner are relevant and admissible as evidence in assessment proceedings. However, the court clarified that these declarations and certificates are neither final nor conclusive. They do not preclude the revenue authorities from investigating the correctness of the explanation provided by an assessee regarding the source of the income. The court stated: "The mere fact that Smt. Swati Devi Jhunjhunwalla disclosed the amount of Rs. 28,000 which is entered in the books of the assessee in the name of B. S. Jhunjhunwalla or that Smt. Bhagwati Devi Tibrewalla in her declaration mentioned the amounts standing in the books of the assessee in the names of Smt. Swati Devi and other firm (sic) persons, it does not mean that these amounts did not belong to the assessee or that the assessee had discharged the onus."

3. Scope of Investigation by Revenue Authorities:
The court affirmed that the revenue authorities are entitled to investigate the correctness of the explanation provided by an assessee regarding credit entries in his books of account. The court emphasized that the burden of proof lies on the assessee to explain the nature and source of the credit entries. In the absence of a satisfactory explanation, the revenue authorities are justified in inferring that such entries represent the assessee's undisclosed income. The court stated: "The Tribunal was justified in holding that while considering the explanation of the assessee the revenue was entitled to be satisfied amongst other matters, as to whether the amount reflected or shown in the books of account of the assessee were the income earned by 'the declarants' or were the income derived by the assessee from some undisclosed sources."

Conclusion:
The court concluded that the voluntary disclosures made under the Finance Act and the certificates granted by the Commissioner are relevant and admissible but not conclusive. The revenue authorities are entitled to investigate the genuineness of the credit entries in the assessee's books of account. The court answered the question referred to it in the affirmative, in favor of the department and against the assessee. The Commissioner was entitled to costs assessed at Rs. 300.