9911796707
TMI Blog1999 (6) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... he search, some records of appellants Nos. 1 to 4 had been seized ; that prohibitory orders were issued in regard to certain bank accounts and certain records ; and that the fifth appellant's wife and two sons have been mentioned in the notice issued under section 132. The Voluntary Disclosure of Income Scheme, 1997, introduced by Chapter IV (sections 62 to 78 of the Finance Act, 1997 ("the Act" for short)), was in force between July 1, 1997, and December 31, 1997. The relevant provisions of the scheme are as follows : Section 64 relates to charge of tax on voluntarily disclosed income. Subsection (1) provides that subject to the provisions of the Scheme, where any person makes, on or after the date of commencement of the Scheme (July 1, 1997) but on or before December 31, 1997, a declaration in accordance with the provisions of section 65 in respect of any income chargeable to tax under the Income-tax Act for any assessment year : (a) for which he has failed to furnish a return under section 139 of the Income-tax Act ; (b) which he has failed to disclose in a return of income furnished by him under the Act before the date of commencement of the Scheme; (c) which has escaped as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircular No. 755, dated July 25, 1997. The relevant portions are extracted below : Circular No. 754, dated June 10, 1997: Question No. 6 : Where search and seizure action has taken place in financial year 1995-96, the block period is 1985-86 to 1995-96, can disclosure under the present scheme be made by the persons searched for an assessment year prior to 1985-86? Answer: No. In respect of a case where search has taken place in any financial year, the person cannot make a declaration in respect of any previous year prior to the previous year in which search has taken place. Question No. 23 : The scope of the scheme should be expanded so as to include cases where--- (a) action under sections 132, 133A has been taken ; (b) appeal is withdrawn, as this will reduce litigation. Answer : This is not possible. In respect of survey under section 133A. the declarants are debarred for that previous year only. Circular No. 755, dated July 25, 1997 : Question No. 35: Action under section 132 of the Income-tax Act, was taken in the case of Mr. A on March 30, 1992, and the same was concluded on April 5, 1992. Can he take advantage of VDIS for the assessment year 1993-94 and subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sought to be achieved. Therefore, the provision is unconstitutional being arbitrary and discriminatory. There is no fetter on the discretion on the part of the Income-tax Department to pick and choose whomsoever it prefers to search. Regardless of the fact whether anything is found or not, such person's eligibility to take benefit under the scheme is destroyed for ever. The power to search is an unfettered discretion vested in the hands of the officers and there are no constraints on the power. The discretion is absolute and unbridled. There are no instructions that no raid or search be conducted during the period when the scheme is in vogue. The entire manner of conducting a search is left to the caprice of the officers without any fetters and with total discretion, and the discretion exercised by them will have the effect of denying the benefit of application of the scheme to the persons who are searched. Merely because by a stroke of an accident a person is searched after July 1, 1997, it does not make him different from any other person not searched, in respect of undisclosed income, an event that has already occurred in relation to both these persons independent of the searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I Scheme, 1997. Re : Ground (i) : The grounds on which a statute or a provision in a statute can be challenged are limited. In State of A. P. v. McDowell and Co., AIR 1996 SC 1627, the Supreme Court held that a law made by Parliament or the Legislature can be struck down by the courts only on two grounds that is (i) lack of legislative competence, and (ii) violation of any of the fundamental rights guaranteed in Part III of the Constitution or of any other constitutional provision. The Supreme Court further held that no enactment can be struck down by just saying that it is arbitrary or unreasonable, or because the court thinks it unjustified ; and Parliament and the Legislature, composed as they are, of the representatives of the people, are supposed to know and be aware of the needs of the people and what is good and bad for them and the courts will not sit in judgment over their wisdom. The constitutional validity of the entire Voluntary Disclosure of Income Scheme, 1997, was considered and upheld by a Division Bench of the Bombay High Court in All India Federation of Tax Practitioners v. Union of India [1997] 228 ITR 68. The said decision of the Bombay High Court was affirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Reig Refining Company [1950] 94 L Ed 381, be converted into Tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any Legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation, which may be made by those subject to its provisions, and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The court must, therefore, adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the Legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the Legislature i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covery of undisclosed income. These three categories are matters in regard to which notices can be issued under section 142 or section 148. Search under section 132 is followed by assessment under Chapter XIV-B of the Act. A request under section 132A is initiation of process to discover material related to concealed income. A survey under section 133A will lead to discovery of available assets and discovery of concealed income. Thus, all the three categories which are excluded from the benefit of section 64(1) are persons in regard to whom there is initiation or some kind of action relating to discovery of concealed income. Such persons are different and distinct from those in regard to whom no proceedings, process or action has been initiated to find out concealed income. In fact, initiation of action for search under section 132 or requisition under section 132A is authorised by the respective empowered authority, only where, in consequence of information in his possession, he has reason to believe that there is some concealment or existence of other conditions stipulated in the said section. As observed by the Supreme Court in the decisions in R. K. Garg v. Union of India [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch under section 132 or requisition under 132A was made, or in respect of any earlier previous years. The phrase "or survey under section 133A under the income-tax Act" was later inserted before the phrase "or in respect of any earlier previous year". This has led to a situation where a reference to the earlier previous years get attached to the survey operation though it can only refer to the current or specific year and not all earlier years. Both sections 132 and 132A refer to the special procedure for assessment of search cases involving a block of ten previous years. The resulting anomaly has however been removed by the clarifications given by the CBDT. The CBDT has clarified the matter while answering questions Nos. 6 and 23 in Circular No. 754, dated June 10, 1997, and questions Nos. 27,35 and 36, in its Circular No. 755, dated July 25, 1997. While answering question No. 23 of a circular dated June 10, 1997, and question No. 27, under the circular dated July 25, 1997 the CBDT has clarified that a survey under section 133A or 133A(5) of the Income-tax Act will bar a person from making a disclosure for the previous year in which the search was carried out. While answering qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as laid down in section 119. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorised as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities." The complaint of the petitioners that while section 64(2)(ii) treats cases of search under section 132 and survey under section 133A on par, the clarifications under the circulars dated June 10, 1997, and July 25, 1997, have altered the position and permitted the assessees subjected to survey under section 133A to file declarations in respect of all the years other than the year in which survey was done, but has not extended such benefit to assessees subjected to search under section 132 and therefore, there is discrimination, or that the benefit of the clarifications should be extended to cases of search also, is, therefore, without merit. It is evident the CBDT has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : On an examination of the provisions of sub-section (2)(ii) of section 64, we are in agreement with the reasoning of the learned single judge in upholding the validity of that provision. Learned counsel for the petitioner lastly submitted that the Andhra Pradesh High Court in Shankarlal v. ITO [1998] 230 ITR 536 while upholding the validity of section 64(2)(ii) has clarified that the benefit of the scheme should be denied only to the income which is detected in a search under section 132, or a requisition under section 132A or in a survey under section 133A, whichever be the previous year to which the detected income relates. Having carefully considered the matter, we are of the view that no such exception to the exception need be carved out, in the absence of express provision to that effect in the scheme. We do not find any need for making such exception to uphold the validity of section 64(2)(ii). Learned counsel for the appellants submitted that in pursuance of the interim order dated March 18, 1998, the appellants had made a voluntary disclosure and had paid tax on that basis. The interim direction was made subject to the final decision in the appeals. As we are affirmi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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