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TMI Blog1972 (12) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... nd this unaccounted income was a source of great mischief in the economy. The question as to how to mitigate this evilwas a difficult and baffling question and it was seriously engaging the attention of the Government. The legislature had taken several measures to encourage voluntary disclosures of concealed income and these measures were partially successful in inducing voluntary disclosures particularly by persons having comparatively small and medium incomes to disclose. But they were not enough. The legislature, therefore, introduced section 68 in the Finance Act, 1965, with a view to encouraging voluntary disclosures of concealed income on a large scale. That section, omitting portions immaterial; provided : " 68. (1) Where any person makes a declaration in accordance with sub-section (2) in respect of the amount representing income (a) which he has failed to disclose in a return of income for any assessment year filed by him before the 1st day of March, 1965, under the Indian Income-tax Act, 1922 (XI of 1922), or the Income-tax Act, 1961 (XLIII of 1961), or (b) which has escaped assessment for any assessment year for which an assessment has been made before the 1st day of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any amount so declared or any amount of tax so paid, to reopen any assessment or reassessment made under the Indian Income-tax Act, 1922 (XI of 1922), or the Income-tax Act, 1961 (XLIII of 1961), or the Excess Profits Tax Act, 1940 (XV of 1940), or the Business Profits Tax Act, 1947 (XXI of 1947), or the Super Profits Tax Act, 1963 (XIV of 1963), or the Companies (Profits) Surtax Act, 1964 (VII of 1964), or claim any set-off or relief in any appeal, reference, revision or other proceeding in relation to any such assessment or reassessment.. (6) (a) Any amount declared by any person under this section in respect of which the tax referred to in sub-section (3) is paid shall not be included in his total income for any assessment under any of the Acts mentioned in sub-section (5) if he credits in the books of account, if any, maintained by him for any source of income or in any other record, the amount declared as reduced by the tax paid thereon under this section . . . " Taking advantage of this section, the assessee made a declaration voluntarily disclosing concealed income of Rs. 7,00,000 on 31st May, 1965. The declaration contained a statement by the assessee that this concealed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he concealed income was earned. There was nothing in section 68 of the Finance Act, 1965, said the Tribunal, which displaced this liability under section 3 of the Indian Income-tax Act, 1922, or section 4 of the Income-tax Act, 1961, or created a new liability for payment of income-tax which did not exist prior to the enactment of the Finance Act, 1965. The Tribunal pointed out that the liability to pay income-tax was always there by reason of section 3 of the Indian Income tax Act, 1922, or section 4 of the Income-tax Act, 1961, and it was only in order to induce assessees to come forward to make voluntary disclosures of concealed income so that this existing liability to pay income-tax could be realised, that the legislature gave certain concessions to the assessees by enacting section 68 of the Finance Act, 1965. No new liability to pay income-tax was created by section 68 of the Finance Act, 1965: it merely provided for a concessional quantification of the existing tax liability with a view to bringing black money representing concealed income on the surface. The Tribunal accordingly accepted the contention of the assessee and held that " in computing the net wealth of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontained in the Income tax Act, be charged income-tax at the rate specified in sub-section (3) in respect of the concealed income so declared, if one of, the three conditions specified in clauses (i) to (iii) is satisfied. The important words in, subsection (1) are " charged income-tax ". These words show that sub-section (1) imposes a charge to income-tax on the concealed income disclosed by the assessee. Now, it may be argued that these words are used in the same sense in which the words " income-tax shall be charged " are used in the various Finance Acts. They have reference to charge of income-tax under the Income-tax Act but that charge has to be made in accordance with the rate specified in sub-section (3). What sub-section (1) seeks to provide is that the disclosed income shall be charged to tax under the Income-tax Act not at the rate laid down in the Finance Act but at the rate specified in sub-section (3). The emphasis in subsection (1) is on the prescription of the rate at which the income-tax is to be charged and not on charging, which is done by the Income-tax Act. But this argument cannot prevail because it is contrary to the provisions of section 68 as also against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was earned. The disclosure of concealed income coupled with the payment of tax as contemplated in clause (i) of subsection (1) not only creates a charge of tax but also satisfies it. So also, the disclosure of concealed income coupled with furnishing of security and undertaking as contemplated ill. clause (ii) creates a charge of tax and when the undertaking is carried out by payment of tax, the liability arising from the charge of tax is satisfied. And, similarly, the disclosure of concealed income coupled with payment of part of the tax or furnishing security for payment of the said and giving security and undertaking for payment of the balance as contemplated in clause (iii) creates a charge of tax and when the amount of the tax is fully paid off, the liability arising from the charge of tax is satisfied. Now, under the Income-tax Act, the disclosed income when it comes to light, would be liable to be assessed as part of the total income for the assessment year in which it was earned. But once the disclosed income has borne tax under section 68, it would not be fair and just that it should be allowed to be taxed once again as part of the total income under the Income-tax Act. S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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