1970 (5) TMI 24 - HC - Income Tax

Application under article 226 of the Constitution for the issue of appropriate writs for cancelling and/or quashing certain alleged decisions by the respondent-Income-tax Officer, and prohibiting the said respondent from proceeding to make any assessment on the petitioner - Whether voluntary disclosure of income operates as exemption from tax for period covered by disclosure - It is for it to explain to the Income-tax Officer each source of income disclosed for each year on which tax has been paid and the Income-tax Officer is under an obligation to exempt such items of income from the assessment of the petitioner for those respective years

Summary

Issues:
1. Application under article 226 for writs to cancel decisions of Income-tax Officer.
2. Interpretation of section 68 of the Finance Act, 1965 regarding voluntary disclosure of income.
3. Failure to issue certificate for second disclosure under section 68.
4. Dispute over assessments for years 1960-61 to 1964-65 due to disclosure petition.
5. Requirement of evidence for hundi loans not included in disclosures.
6. Obligation of Income-tax Officer to exempt disclosed income from assessment.

Analysis:
The judgment involves an application under article 226 seeking writs to cancel decisions of the Income-tax Officer and prevent assessment for certain years. The petitioner, a partnership firm, made voluntary disclosures under section 68 of the Finance Act, 1965, for undisclosed income. The scheme required payment of taxes on the disclosed amounts. The Income-tax Officer failed to issue a certificate for the second disclosure, leading to a dispute during assessments for 1960-61 to 1964-65. The petitioner argued that assessments were not permissible due to the disclosures made. However, the court clarified that the concession under section 68 did not exempt the firm from regular assessments but required exclusion of disclosed amounts from taxable income. The Income-tax Officer was directed to proceed with assessments, allowing the petitioner to provide evidence for undisclosed income not covered by the disclosures.

The judgment highlights the importance of interpreting section 68 of the Finance Act, 1965, concerning voluntary disclosure of income. The petitioner's compliance with the disclosure scheme by making two declarations was a central issue. The court emphasized that the scheme required payment of taxes on the disclosed amounts and issuance of certificates by the Commissioner. Failure to issue a certificate for the second disclosure raised concerns during assessments, leading to a dispute with the Income-tax Officer. The court's analysis focused on the conditions and implications of the disclosure scheme, ensuring that the Income-tax Officer followed the prescribed procedures for assessments.

The dispute over assessments for the years 1960-61 to 1964-65 stemmed from the petitioner's contention that the voluntary disclosures made under section 68 precluded further assessments. However, the court clarified that while disclosed amounts were to be excluded from taxable income, regular assessments were still necessary. The Income-tax Officer's requirement for evidence regarding hundi loans not included in the disclosures was deemed valid, emphasizing the need for transparency and verification during assessments. The judgment aimed to resolve the conflict between the petitioner and the assessing authority regarding the scope and implications of the disclosure scheme.

Overall, the judgment underscores the obligation of the Income-tax Officer to exempt disclosed income from assessments for the respective years covered by the voluntary disclosures. The court directed the Officer to proceed with assessments while allowing the petitioner to provide necessary evidence and documentation. The ruling clarified the limitations of the concession under section 68 and emphasized the importance of adhering to the prescribed procedures for voluntary disclosure of income. The judgment aimed to resolve the dispute between the parties by providing a clear interpretation of the legal provisions and ensuring a fair assessment process for the petitioner.