9911796707
TMI Blog1972 (12) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer in due course on the basis of the returns submitted by the assessee. Now, it appears that there was a considerable amount of unaccounted income in circulation which was concealed from revenue authorities and 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, unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount: . . . . (5) Any amount of income-tax paid in pursuance of a declaration made under this section shall not be refundable in any circumstances, and no person who has made the declaration shall be entitled, in respect of 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 sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision contained in section 3 of the Indian Income-tax Act, 1922, or section 4 of the Income-tax Act, 1961, and the latest date on which it must be said to have arisen was the last day of the relevant accounting year in which the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of income-tax under section 68 is not in satisfaction of that liability. Sub-section (1) of section 68 provides that where any person makes a declaration in respect of the concealed income, he shall, notwithstanding anything contained 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act. It does not provide a method of quantification of the liability to income-tax under the Income tax Act. It enacts a new charge to tax, on an ad hoc basis, on disclosed income irrespective of the assessment year in which it 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Act. The tax paid on concealed income disclosed by the assessee under section 68 is, therefore, not in satisfaction of any liability under section 3 of the Indian Income-tax Act, 1922, or section 4 of the Income-tax Act, 1961. It is in satisfaction of a new liability to tax in respect of a particular item of income, namely, concealed income disclosed by the assessee, which arises for the first time under section 68 and, therefore, for the purpose of computing the net wealth of the assessee, it cannot be deducted as debt owed by him on the last day of the relevant account year in which such concealed income was earned. We find that the view we are taking is supported by a decision given by a single judge of the Kerala High Court in C. K. Babu Naidu v. Wealth-tax officer, but we are unable to agree with the reasoning on which this decision is based. The problem does not appear to have been presented before the learned judge in its proper perspective and, therefore, with great respect to the learned judge, though we agree with the final conclusion reached by him, we do so for different reasons. We accordingly answer both the questions referred to us for our opinion in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
