Anilkumara vs Commissioner of Income Tax and Others

B.P. Dharmadhikari, J—Heard Shri S.N. Bhattad, learned Counsel for Petitioner. Shri A. Parchure, learned Counsel who appears for respondents is stated to be not available. Shri P. Waghmare, learned Counsel holding for him informs that the department has not supplied necessary papers to the office of Advocate Anand Parchure till date. He is, therefore, seeking adjournment.

On 30.10.2014 this Court has passed the following order:

"The learned Counsel for the respondents is seeking time to argue the matter. We find that the department is not ready and willing to assist the Court. However, in the interest of justice, we grant time of one week by way of last chance."

In view of that order, we have rejected the request of Shri Waghmare, learned Counsel.

Shri Bhattad, learned Counsel appearing on behalf of the petitioner has stated that in at least 10 similar matters this Court has allowed the Writ Petitions to be withdrawn, because second declaration made by the petitioner after leave granted by this Court was processed and certificates under Voluntary Disclosure of Income Scheme (VDIS), 1997 were issued to them. He invites attention to Court order dated 24.12.1997, to show that similar liberty was given to the present petitioner and within time the petitioner has submitted second declaration. That declaration has been still not processed. He has also invited our attention to orders passed by this Court on 07.08.2007 in Writ Petition No. 3386/1997. He further states that challenge in that Writ Petition Nos. 3857, 3721, 3723 to 3728, 3742, 3744 and 3745 all of the year 1997, was identical and same, as in the present petition. He states that VDIS 1997, does not contemplate disclosure of source of undisclosed income and as such, merely because petitioner has in his declaration mentioned gold coins as the source of deriving the undisclosed income of Rs. 15,42,000/- in the assessment year 1987-88, that by itself cannot dis-entitle the petitioner to the benefits of the scheme. He has read out provisions of Section 63, 64 and 65 for said purpose. He also points out that as per Section 65(3), an assessee like that of petitioner cannot submit second declaration under the Scheme.

Our attention is also invited to Section 73 to show that, there even an asset created by investing such undisclosed income can also be disclosed and immunity is granted in terms of 1997 Scheme for that asset and disclosure. He argues that in VDIS 1997, there is absolutely nothing which prohibits disclosure of consideration of such asset, if such asset created through undisclosed income, has been sold between 1987-1997. According to him stand taken in the reply-affidavit before this Court is inconsistent with main scheme and the CBDT clarification dated 16.10.1997 is contrary to the 1997 Scheme. Learned Counsel has stated that in any case, it cannot be retrospective, as Section 65[3] prohibits making of second declaration under the Scheme.

The order of this Court dated 07.08.2007 is already placed on record by the petitioner. The fact that present Writ Petition was being considered along with the said Writ Petition is not in dispute. In this situation, when all other persons who have made similar declaration of cash generated by selling a bullion or another similar article, have been given certificate for exemption under VDIS 1997, we fail to understand why similar treatment cannot be extended to the present petitioner.

Perusal of clarification dated 16.10.1997 shows that there CBDT noted that instances given to its notice where declarant declared jewellery, but, also claimed that they had sold it prior to the date of declaration. CBDT clarified that asset which he holds at the time of making the declaration, could only be declared and therefore, declaration of asset sold was found contrary to the provisions of the Scheme and clarification was issued with directions not to accept such declarations.

In reply affidavit filed on behalf of respondent Nos. 1 to 3, in paragraph No. 9 it has been stated as under:

"6. AS TO PARA 9. It will be incorrect to interpret Section 64[1] of the Scheme in isolation. It has to be read alongwith Section 73 within the overall objective of the Scheme. Section 73[1] provides that the voluntarily disclosed income can be represented not only by cash [including Bank deposits] but by bullion, investment in shares, debts due from other persons, commodities or any other assets. Therefore, an asset based declaration has been duly provided for in the Scheme. Since any declaration of assets has to be translated in monetary amount, it has to represent a figure. In terms of Section 64[1] the asset has to represent the undisclosed income of the year in which the income arose which is presently represented by the asset in question. It is necessary to draw a distinction between a declaration of an asset and an asset based declaration. In case of a declaration of an asset the market value as on the date of declaration or cost of acquisition, as the case may be, may have to be declared. But in an asset based declaration what is declared is year-specific undisclosed income which has suffer materialization into the asset. Specific provision has been provided in Section 73[1][c][iii] for valuation of jewellery in as much as the value of jewellery disclosed in respect of an assessment year earlier to 1987-88 will be frozen as per market value as on 1.4.1987. Reading all these provisions together it will not be correct to ignore the nexus between asset and income. These provisions also lead to the conclusion that the asset has to be in existence at the time of declaration. Otherwise asset based declaration would not make any sense. The precise implication of the words and phrases "where the voluntarily disclosed income is represented by.....[assets].....specified in the declaration made under sub-section [1] of Section 64" occurring in Section 73[1] points towards the existence of assets at the material point of declaration. If the assets are no longer in existence, there is no scope to specify them in the declaration. Similarly the form of declaration under rule [3] with reference to statement of voluntarily disclosed income seeks the detail of income which is represented either in cash or in assets. Hence, existence of the asset at the material point of declaration is essential if the declarant has to take advantage available under Section 73 for making an asset based declaration where the present value of the asset could be much higher than income sought to be disclosed."

Thus, insistence of respondents is that asset must be in existence on the date of declaration. Effort is made to urge that, when declaration is asset based, what is declared is a year specific undisclosed income, which has suffered materialization into asset. According to the department, it is necessary to draw distinction between declaration of asset and asset based declaration. We find that in 1997 Scheme, there is no such distinction drawn. 1997 Scheme no where prohibits the declaration of consideration received after sale of an asset, which is accrued by investing undisclosed income.

However, we do not wish to pronounce upon the validity or otherwise of the clarification dated 16.10.1997, in view of the fact that the other declarants who have submitted similar declaration, have been given certificates of exemption by the respondents. This Court has on 24.12.1997 permitted the present petitioner to submit his second declaration. Said declaration has been accordingly submitted by the petitioner. It is therefore, necessary for the respondents to process it and find out entitlement or eligibility of petitioner to such certificate in terms of 1997 Scheme. Thus, we direct the respondent No. 1 to process the second declaration submitted by the petitioner in terms of Courts order dated 24.12.1997 within a period of two months from today and to take necessary decision upon it.

With this direction Writ Petition is, partly allowed and disposed of. Rule is made absolute in the aforesaid terms with no order as to costs.