The Voluntary Disclosure of Income and Wealth Ordinance, 1975-Clarifications regarding - Income Tax - 181/1975

Circular No. 181 Dated 25/10/1975 Subject : The Voluntary Disclosure of Income and Wealth Ordinance, 1975-Clarifications regarding. The Voluntary Disclosure of Income and Wealth Ordinance, 1975, offers an opportunity to persons who have evaded tax in the past to declare their undisclosed income and wealth, pay tax thereon on a reasonable basis and return to the path of rectitude. The Provisions of this Ordinance have been explained in the Board's Circular No.180 (F.No.131(19)/75 TPL)* See [1975] 101 ITR (St.) 88. dated 15th October, 1975. 2. In respect of certain provisions of the Ordinance, clarifications have been sought and these are given below:- (i) Question.-- Disclosures may be made by minors and ladies or by Hindu undivided families with no nucleus funds of their own. Will any enquiries be made as to the real person whose income has been declared by one or more persons falling in these three categories? Answer.-- While minors, ladies and Hindu undivided families are competent to make declarations on their own account, they cannot make declarations to help another person. This is evident from item (c) of the Verifications to the Declaration Forms A, B and C wherein the declarant has to solemnly declare that the income/wealth in respect of which he is not chargeable to tax is not included in his declaration. Section 17 of the Ordinance makes it clear that any benefit, concession or immunity conferred under the Ordinance will be available only to the declarant. A declaration made by a minor, lady or Hindu undivided family will not be a starting point for making enquiries. However, subsequently, on evidence available, if it is found that the income/wealth in fact belongs to a person other than the declarant, it will be open to the Income-tax Officer to assess the former and take further proceedings against him in accordance with law. (ii) Question.-- Whether an assessee already on registers of the income-tax department can make a declaration for a year for which no notice under section 139(2) of the Income-tax Act has been issued and no return has been furnished? Answer.-- Yes. (iii) Question.-- If a firm had concealed income, can the partners file declarations in respect of such concealed income? Answer.-- If the firm has concealed its income, it is the firm which should make the declaration. The partners need not make declarations regarding their respective shares of the undisclosed income and pay tax on the shares of income in respect of which declaration has been made. The registration of the firm will not be affected by the fact of such a declaration having been made. (iv) Question.-- Whether in a case where no payment has been made before the declaration, the Commissioner can grant instalments or extend time for payment? Answer.-- Section 5 of the Ordinance requires some payment of tax before making a declaration, if the declarant for any good and sufficient reason, is unable to make full payment. (v) Question.-- How many declarations can be made by one person? Answer.-- As regards the voluntarily disclosed income, a person is entitled to make only one declaration under section 3(1) of the Ordinance. Any subsequent declaration filed by him under section 3(1) will be void. The aforesaid restriction does not apply to the declarations that may be made under sections 14(1) and 15(1) of the Ordinance. (vi) Question.-- Whether a declaration under section 3(1) of the Ordinance can be filed by a person who has not submitted a return, but on whom a notice under section 139(2) or section 148 has been served on or after October 8, 1975? Answer.-- Yes. (vii) Question.-- Whether a declaration can be made in respect of the undisclosed income for an assessment year where a return had been filed and assessment made before October 8, 1975, but which has been set aside on or after that date? Answer.-- Yes. (viii) Question.-- Is it necessary for any assessee who is maintaining account books to credit the amount in his books? Can he credit it in any other record? Answer.-- An assessee who maintains account books may at his option credit the amount in his books or any other record. (ix) Question.-- Will declarations under section 3(1) of the Ordinance made by some of the owners of flats in a multi-storey building admitting payment of money be used in evidence in the cases of the alleged recipients/owners of other flats who have not admitted such payments? Answer.-- In view of the stipulation in section 12(1) of the Ordinance that all particulars contained in a declaration made under section 3(1) of the Ordinance shall be treated as confidential, the declarations will not be used in evidence against the alleged recipients/owners of other flats who have not admitted such payment. (x) Question.-- Whether an assessee whose premises were searched after April 1, 1975, resulting in the seizure of certain assets, can file a declaration in respect of his undisclosed income as represented by the seized assets? Answer.-- If the seized assets represent the undisclosed income of 1975-76 or an earlier assessment year, he can make a declaration under section 14(1) of the Ordinance subject to the other conditions of the Ordinance being satisfied. (xi) Question.-- In a search and seizure case, the assessee is willing to offer undisclosed income represented by seized cash, etc., under section 14(1) of the Ordinance. As regards payment of tax thereon, he wants the department to adjust the amount held in deposit by order under section 132(5) against the tax payable as per the declaration. Is this possible? Answer.-- In respect of seizures made prior to October 1, 1975, under section 132(5), seized assets can be retained to satisfy the existing liability under the specified Acts as well as the tax calculated on the undisclosed income estimated in a summary manner. In a case where an order under section 132(5) has been passed, and after satisfaction of the existing liability, there remains some amount retained under section 132(5), the latter may be adjusted against the tax chargeable in respect of the declaration under section 14(1) of the Ordinance to the extent the declared income corresponds to the undisclosed income estimated earlier under section 132(5) and the declarant makes a specific request in this behalf. It is to be noted that on account of such an adjustment there will be no release of any assets retained under section 132(5). The above course of action will also be in accordance with section 14(6) of the Ordinance. (xii) Question.-- Whether the department can compute the concealed income more than what has been declared in a declaration made under section 14(1) of the Ordinance and whether the department can assess it for assessment years different from those shown in the declaration? Answer.-- The Income-tax Officer will make the assessment in the normal manner and give credit for the tax paid under the Ordinance. Immunity will be available in respect of the declared income, irrespective of the assessment year(s) for which it is assessed. Similarly, tax paid under the Ordinance will be given credit irrespective of year(s) for which it has been paid. (xiii) Question.-- An assessee discloses some assets under section 15(1) of the Ordinance and states that he had inherited/purchased the same several years back at price which was only a fraction of the present value of the assets. Will it be permissible to enquire into the source of funds actually utilised in the acquisition thereof? Answer.-- A declaration under section 15(1) of the Ordinance in respect of net wealth or value of assets not disclosed or understated does not debar the income-tax authorities from enquiring into the source of funds actually utilised in the acquisition thereof and the year in which the assets were acquired and to assess the unexplained investment, if any, to income-tax in the appropriate assessment year(s). (xiv) Question.-- Whether the declaration in Form C should be accompanied by a return of net wealth in respect of an assessment year for which there is no default in furnishing the return of net wealth under section 14 of the Wealth-tax Act, but the value of any assets had not been disclosed or had been understated? Answer.-- No. A declaration in Form C should be accompanied by return(s) of net wealth only in respect of assessment year(s) for which the declarant had failed to furnish a return under section 14 of the Wealth-tax Act. Sd. H.K. Sondhi, Director, Central Board of Direct Taxes. * See [1975] 101 ITR (St.) 88.