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TMI Blog2015 (8) TMI 617X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Act, 1997 was in operation ; with effect from July 1, 1997. Section 64 of the Finance Act, 1997, provided for voluntary disclosure of undisclosed income and dropping of all further proceedings on payment of the Income-tax thereon. Sub-section (2) thereof, however, kept the income, referable to an assessment year, as regards which, notices under section 142 or 148 of the Act have been issued ; and the income referable to any year preceding the one, in which search under section 132 or requisition under section 132A or survey under section 133A of the Act have been carried out. 4. The respondents filed W. P. No. 20316 of 1997 before this court challenging certain provisions of the Scheme. Their plea was that the Scheme, in so far as it discriminates between the income referable to the previous years during which search was conducted or notices were issued under section 142 or section 148 of the Act is violative of article 14 of the Constitution of India. 5. The Department, i.e., the appellant, on the other hand, pleaded that the Scheme provides for a special facility and when once Parliament has identified certain items to be kept outside the Scheme, the same cannot be said to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Finance Act, 1997. He submits that even otherwise, this court categorically held in that case, in clauses "B" and "C" of the concluding paragraph, that the amount which is the subject matter of a search does not qualify for the benefit under the Scheme. He further submits that the Tribunal did not take into account, the correct purport of the Scheme nor did it properly understand the scope of the judgment of this court and allowed the appeals, virtually rendering the entire proceedings under Chapter XIV-B of the Act redundant. 11. Sri Y. Ratnakar, learned counsel for the respondents, on the other hand, submits that the question as to whether sub-section (2)(ii) of section 64 of the Finance Act, 1997, bars an assessee, against whom search is conducted, from availing of the benefit under the Scheme for any years earlier thereto was specifically dealt with and it was answered in favour of the appellant. He contends that once the special leave petition filed by the Department against such judgment was dismissed, it is not at all open to the appellant to raise that very question. He submits that the amount that was found during the course of search was only Rs. 20,00,000 and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tarily disclosed income. (2) Nothing contained in sub-section (1) shall apply in relation to- (i) the income assessable for any assessment year for which a notice under section 142 or section 148 of the Income-tax Act has been served upon such person and the return has not been furnished before the commencement of this Scheme ; (ii) the income in respect of the previous year in which a search under section 132 of the Income-tax Act was initiated or requisition under section 132A of the Income-tax Act was made, or survey under section 133A of the Income-tax Act was carried out or in respect of any earlier previous year." 14. From a reading of this, it becomes clear that while clauses (a) to (c) of sub-section (1) enlisted the amounts that can be disclosed voluntarily, sub- section (2) identified the incomes that are kept outside the Scheme. A perusal of clause (ii) of sub-section (2) discloses that if a search has taken place under section 132 of the Act against an assessee, he is disabled from availing of the benefit under the Scheme in respect of any income referable to any earlier previous years. 15. Being under the impression that the search has virtually disabled them f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion after satisfying himself that the stipulated amount of tax was paid. 17. The search proceedings under Chapter XIV-B of the Act spilled over beyond two years. In addition to the one recorded on July 16, 1997, another statement was recorded on September 11, 1997. Ultimately, a block assessment order was passed on September 30, 1999. Though it was pleaded that the amount referable to search has already suffered tax under the Scheme, the Assessing Officer proceeded to levy tax stipulated under Chapter XIV-B of the Act. The appeals before the Commissioner did not fructify and the Tribunal accepted the contention of the respondents. 18. The principal contention advanced by the appellant is that the judgment of this court in Shankarlal's case (supra), in so far as it enabled an assessee against whom search was conducted under section 132 of the Act to avail of the benefit under the Scheme under the Act in respect of the period anterior to search cannot be said to be good law and in fact it amounts to per incuriam. According to the appellant, the question is one of jurisdiction and it is always open to the Department to raise it at any point of time. In support of the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner, who operated the Scheme, gave receipt for that amount also. Such a step does not accord with section 64 of the Finance Act, 1997. Further, it runs contrary to the judgment in Shankarlal's case (supra). Even otherwise, a step taken under the Scheme does not nullify the proceedings initiated under the Act. The non obstante clause contained in Chapter IV of the Finance Act, 1997, is not that wide enough. The net result is that the amount which was the subject matter of search was liable to be dealt with under Chapter XIV-B of the Act notwithstanding the fact that it was mentioned in the declaration filed under the Scheme. The only difference would be that the respondents would be under obligation to pay the differential tax if any. 22. Whenever the search proceedings take place, an assessee would be exposed not only to higher rate of tax but also to the incidence of levy of interest and penalty. In the instant case, a senior official of the Department i.e., the Commissioner, who operated the Scheme itself, was of the view that the amount covered by search can be the subject matter of the benefit under the Scheme. It is only on a close analysis of the relevant provisions of ..... 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