1966 (3) TMI 8 - HC - Income Tax

Voluntary Disclosure - though the order of the Commissioner of Income-tax dated 25th March, 1965, rejecting the disclosure statement is quashed, no relief can be given to the petitioner-company and the petition must, therefore, fail.

Issues Involved:

1. Validity of the disclosure under Section 68 of the Finance Act, 1965.
2. Jurisdiction of the Commissioner of Income-tax in rejecting the disclosure statement.
3. Legality of the assessment order including the disclosed amount.
4. Legality of the order under Section 23A(1).
5. Direction to accept payment of tax due under Section 68 after the expiry of the prescribed time.

Issue-wise Detailed Analysis:

1. Validity of the disclosure under Section 68 of the Finance Act, 1965:

The petitioner-company filed a declaration on 22nd March, 1965, disclosing certain concealed income and enclosed a cheque for Rs. 50,000. The Commissioner of Income-tax rejected the declaration, stating it was invalid. The core controversy was whether the disclosure conformed to Section 68. The petitioner-company argued that it complied with Section 68 by filing the declaration and offering to pay the tax within the stipulated period. The court noted that the Finance Act, 1965, was enacted on 11th May, 1965, but Section 68 was enforced retrospectively from 1st March, 1965. The court concluded that the petitioner-company could legitimately make a disclosure under Section 68, as the assessment had not been made, nor had any proceedings been taken for the assessment of the disclosed amount.

2. Jurisdiction of the Commissioner of Income-tax in rejecting the disclosure statement:

The Commissioner of Income-tax rejected the disclosure without providing reasons. The court emphasized that fiscal statutes should be construed in favor of the subject when ambiguities exist. The court found that the petitioner-company had the right to make a disclosure under Section 68 and that the Commissioner should have waited to see if the petitioner-company complied with the provisions of Section 68 before rejecting the declaration. The court held that the Commissioner acted without jurisdiction in rejecting the disclosure statement on 25th March, 1965.

3. Legality of the assessment order including the disclosed amount:

The petitioner-company sought to quash the assessment order that included the disclosed amount. The court held that the disclosed income should be part of the total income until excluded under sub-section (6) of Section 68. The court stated that the amount must be included in the assessment order until the tax is paid in accordance with sub-section (3) of Section 68. Therefore, the court found no justification for quashing the assessment order.

4. Legality of the order under Section 23A(1):

The petitioner-company also challenged the order under Section 23A(1). The court held that the order under Section 23A was legal, as the disclosed income was part of the total income until excluded under sub-section (6) of Section 68. The court noted that the petitioner-company could avoid an order under Section 23A by paying the entire amount before the assessment order was made. The court concluded that the order under Section 23A could not be quashed at the present stage.

5. Direction to accept payment of tax due under Section 68 after the expiry of the prescribed time:

The petitioner-company argued that a writ should be issued to accept the payment of tax due under Section 68, even though the time for making the payment had expired. The court acknowledged that public officers could be compelled to perform their duties even after the prescribed time. However, the court found that the petitioner-company did not tender the amount due by the specified date and did not offer to comply with sub-clause (iii) of clause (c) of sub-section (1) of Section 68. The court concluded that no writ could be issued to accept the payment now, as the petitioner-company did not fulfill its obligations under the statute.

Conclusion:

The court quashed the order of the Commissioner of Income-tax dated 25th March, 1965, rejecting the disclosure statement. However, no relief was granted to the petitioner-company, and the petition was dismissed. The court left the parties to bear their own costs.

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