2017 (3) TMI 983 - HC - Income Tax

Vladity of search proceedings under Section 132 - Scheme of 2016 applicability - Held that - The perusal of Clause (e) Scheme of 2016 reveals that it would not apply in relation to any undisclosed income chargeable to tax under the Income Tax Act for any previous year relevant to an assessment year prior to 1st day of April, 2017 where search/proceedings under Section 132 and 132A of the Act of 1961 have been undertaken. It would not apply even on a notice under Section 153A apart from many other provisions. In the instant case, search proceedings were conducted on 30th June, 2016 and it was during the currency of the Scheme of 2016. Till search was conducted under Section 132 of the Act of 1961, the petitioner did not make disclosure/declaration under the Scheme of 2016. It is subsequent to the search proceedings under Section 132 of the Act of 1961. As per para quoted above, the petitioner is not entitled to seek benefit of the Scheme of 2016. The position would have been different if declaration under the Scheme of 2016 would have been made earlier to proceedings under Section 132 of the Act of 1961. It is not that relevant provisions of the Income Tax Act were kept in abeyance during currency of the Scheme of 2016, rather, there exists no provision under the scheme and otherwise scheme cannot override provisions of law so as to keep it in abeyance. Taking into consideration the aforesaid, no ground to cause interference in the search and subsequent proceedings

Summary

Issues:
1. Validity of search proceedings under Section 132 of the Income Tax Act, 1961 during the Income Declaration Scheme, 2016.
2. Consideration of benefit under the Scheme of 2016 when search proceedings are initiated.
3. Interpretation of Clause (e) of Para 196 of the Scheme of 2016 in relation to undisclosed income chargeable to tax.

Analysis:
1. The petitioner sought to quash search proceedings under Section 132 of the Income Tax Act, 1961, conducted during the Income Declaration Scheme, 2016. The petitioner contended that the search should not debar them from availing benefits under the Scheme, as it would defeat the purpose of the Scheme. However, the court noted that the Scheme itself excluded certain situations where it would not apply, including cases where search proceedings had already been initiated. The search in this case was conducted during the currency of the Scheme, and the petitioner had not made any disclosure under the Scheme before the search. Therefore, the petitioner was not entitled to the benefits of the Scheme due to the specific provisions outlined in the Scheme.

2. The court considered the petitioner's argument that the search proceedings should not have been initiated during the period of the Income Declaration Scheme, 2016. The petitioner contended that the search proceedings hindered their ability to benefit from the Scheme. However, the court interpreted Clause (e) of Para 196 of the Scheme, which clearly stated that the Scheme would not apply to undisclosed income chargeable to tax under the Income Tax Act for any previous year relevant to an assessment year prior to April 1, 2017, where search proceedings had been conducted. Since the search in this case was carried out during the relevant period, the petitioner was not eligible for the benefits of the Scheme.

3. The court examined the provisions of the Income Declaration Scheme, 2016, and specifically analyzed Clause (e) of Para 196 to determine its applicability to the petitioner's case. The clause outlined situations where the Scheme would not apply, including cases where search proceedings had been undertaken under Section 132 of the Income Tax Act. In this instance, the search was conducted before the petitioner made any declaration under the Scheme. As a result, the court concluded that the petitioner could not seek the benefits of the Scheme due to the specific provisions outlined in the Scheme, which did not allow for retrospective application in cases where search proceedings had already commenced.

This detailed analysis of the judgment provides a comprehensive understanding of the issues raised and the court's interpretation of the relevant legal provisions in the context of the Income Declaration Scheme, 2016.