2019 (8) TMI 1069 - HC - Income Tax

Validity of Declaration made under Income Declaration Scheme, 2016 ( IDS ) - whether such declaration to be void for being in contravention of Section 193 of the FA, 2016 - as per petitioner no prior notice was issued to either of the Petitioners before passing the impugned order rejecting the declarations of undisclosed income under the IDA scheme - HELD THAT - The mere fact that an acknowledgement may have been issued in Form- 4 by the CIT, CPC did not provide any immunity to the Petitioners if it was found that the declaration was contrary to Section 193 of the FA, 2016 which begins with a non-obstante clause. There is no merit in the objection to the jurisdiction of the PCIT, Delhi to issue the impugned order. The fact remains that the Petitioners declarations were uploaded electronically at Delhi where both Petitioners reside. Their assessments were completed in Delhi. The explanation offered in the counter affidavits of the Respondent that the PCIT-30, New Delhi had by an order dated 10th January, 2017 under Section 127 of the Act transferred jurisdiction to Additional Commissioner of Income Tax, Special Range-4 who in turn was authorised to make the impugned order merits acceptance. Moreover, since this is a case of suppression of material facts the Respondent No.1 was duty bound to give effect to the provision provided under Section 193 of the FA, 2016. Therefore, where the jurisdictional Pr. CIT/CIT finds a declaration to be based on such misrepresentation or suppression of facts, he would not be precluded from holding the declaration itself to be void in terms of Section 193 of the FA, 2016. The Court accepts the contention of the Respondent that there is no provision as such in the IDS to afford the declarant a hearing prior to passing an order holding such declaration to be void for being in contravention of Section 193 of the FA, 2016. For all of the aforementioned reasons, the Court finds no error having been committed by Respondent No.1 in passing the impugned order.

Summary

Issues Involved:
1. Justification of the Principal Commissioner of Income Tax-4 (PCIT-4) in declaring the petitioners' declarations under the Income Declaration Scheme (IDS) void for misrepresentation and suppression of facts.
2. Alleged violation of principles of natural justice by not issuing prior notice to the petitioners before passing the impugned order.
3. Jurisdictional authority of PCIT-4, New Delhi to pass the impugned order.
4. Impact of the provisional attachment orders under the Prohibition of Benami Property Transactions (PBPT) Act on the IDS declarations.

Detailed Analysis:

1. Justification of the PCIT-4 in Declaring the Declarations Void:
The core issue was whether the PCIT-4 was justified in declaring the petitioners' declarations under the IDS void under Section 193 of the Finance Act, 2016. The PCIT-4 held that the declarations were made by "misrepresentation and suppression of facts." The declarations were found to be void because the investments in shares declared by the petitioners actually belonged to another individual, Mr. Satyender Kumar Jain, as evidenced by the report and provisional attachment orders under the PBPT Act. The court upheld this finding, noting that the petitioners failed to provide complete details of the persons in whose names the shares were held and that the declarations were not truthful and complete.

2. Alleged Violation of Principles of Natural Justice:
The petitioners argued that the impugned order was passed without prior notice, violating the principles of natural justice. However, the court found no merit in this argument, stating that the IDS did not envisage the issuance of a show cause notice before passing an order under Section 193 of the FA, 2016. The court emphasized that the IDS was a one-time measure requiring complete and truthful disclosure, and the petitioners had failed to meet this requirement.

3. Jurisdictional Authority of PCIT-4, New Delhi:
The petitioners contended that the PCIT-4, New Delhi, lacked jurisdiction to pass the impugned order since the declaration was made to the PCIT, CPC, Bangalore. The court rejected this argument, noting that the declarations were uploaded electronically in Delhi, where the petitioners resided, and their assessments were completed in Delhi. The court accepted the explanation that the jurisdiction had been transferred to the Additional Commissioner of Income Tax, Special Range-4, who was authorized to make the impugned order.

4. Impact of Provisional Attachment Orders under the PBPT Act:
The PCIT-4 relied on the provisional attachment orders under Section 24(4) of the PBPT Act, which indicated that the investments in shares declared by the petitioners actually belonged to Mr. Satyender Kumar Jain. The court found that the petitioners had not convincingly countered the conclusions of the PCIT-4 and upheld the finding that the petitioners had made declarations by misrepresentation and suppression of facts.

Conclusion:
The court dismissed the writ petitions, finding no error in the impugned order passed by the PCIT-4. The declarations under the IDS were void due to misrepresentation and suppression of facts, and there was no violation of the principles of natural justice or jurisdictional defect in the PCIT-4's actions. The court emphasized that the IDS required complete and truthful disclosure, which the petitioners failed to provide.