1. The assessee is a registered firm of partners carrying on the business of spinning and weaving of woollen yarn and fabrics. For the assessment year 1966-67 ending on April 12, 1966, there were cash credits in the account books of the assessee amounting to Rs. 2,43,000 in the names of 25 persons. The deposits appeared to have been made on the same day, i.e., March 7, 1966. When the ITO called upon the assessee to explain the nature and source of these deposits, the assessee stated that they were made by these persons who had made voluntary disclosures under Section 24 of the Finance (No. 2) Act, 1965, on March 2, 1966, before the CIT and had paid tax thereon. The ITO was not satisfied with the explanation given or the evidence produced and the entire sum of Rs. 2,43,000 credited in the books of the assessee was treated as its income from undisclosed sources. The assessee went up in appeal.
2. The AAC noted that most of these deposits were made in the names of close relations of the partners of the assessee-firm and they fell under two categories. Cash credits of Rs. 1,35,000 were in the names of ten persons who were minors at the relevant time and the declarations under Section 24 of the Finance (No. 2) Act, 1965, were made on their behalf by their guardians. These ten persons were the minor sons and daughters of the partners of the assessee-firm. In respect of the otter category of deposits totalling Rs. 1,08,000, the AAC noted that affidavits of the depositors or ef the heirs of the deceased depositors had been filed wherein they had sworn that they had made voluntary disclosures of the respective amounts. The AAC accepted the contention raised on behalf of the assessee and deleted the entire addition of Rs. 2,43,000. The Revenue went up in appeal before the Income-tax Appellate Tribunal.
3. Before the Tribunal, it was contended on behalf of the Revenue that under Section 24 of the Finance (No. 2) Act, 1965, a guardian could not make a voluntary disclosure on behalf of a minor. In this connection, reliance was placed on a Division Bench judgment of the Gujarat High Court reported as Manilal Gafoorbhai Shah v. CIT : 95ITR624(Guj) . On behalf of the assessee, reliance was placed on a Division Bench judgment of the Delhi High Court reported as Rattan Lal v. ITO : 98ITR681(Delhi) . The learned judges of the Delhi High Court held that a declaration made and the tax paid by the declarant under the voluntary disclosure scheme as envisaged by the Finance (No. 2) Act of 1965 could not be questioned to ascertain the nature and source of the sum so declared by the declarant. The Tribunal followed this view and dismissed the appeal filed by the Revenue.
4. Pursuant to a petition of mandamus under Section 256(2) issued by this court at the instance of the Revenue, the Income-tax Tribunal has referred to us the following three questions of law for our opinion :
'1. Whether, on the facts and in the circumstances of this case, and on a true interpretation of Section 24 of the Finance (No. 2) Act, 1965, the Appellate Tribunal was right in law in holding that after having accepted the voluntary disclosures of the various creditors holding cash credits totalling Rs. 2,43,000 in the books of the assessee, the Department could not question the genuineness of these cash credits as appearing in the books of the assessee-firm ?
2. Whether, on the facts and in the circumstances of the case, the assessee-firm had discharged the onus which lay on it under Section 68 of the Income-tax Act, 1961, to explain the source of the deposits of Rs. 2,43,000 introduced in its business in the accounting year under consideration ?
3. Whether, on the facts and in the circumstances of the case, the nature and source of the sum of Rs. 1,35,000 credited in the books of the assessee in the names of the ten minors stand satisfactorily ?'
5. We have heard the learned counsel for the parties. As far as the 15 persons, who had themselves declared their respective incomes under Section 24 of the Finance (No. 2) Act, 1965, totalling to Rs. 1,08,000, are concerned, the matter admits of no difficulty. These persons have themselves made the necessary declarations and paid the tax on this income. The affidavits filed by them were rightly accepted by the AAC to show that at the relevant time they did have the relevant amounts of money which they invested with the assessee. To the extent of this amount of Rs. 1,08,000, it must be held that the assessee has discharged the burden.
6. Qua the sum of Rs. 1,35,000, declarations were made by the partners of the firm on behalf of their minor sons and daughters under Section 24 of the Finance (No. 2) Act, 1965. The opinion on this point stands concluded against the assessee by a recent judgment of their Lordships of the Supreme Court in Jamnaprasad Kanhaiyalal v. CIT : 130ITR244(SC) . Therein, under somewhat similar circumstances, the court observed as under (p. 258) :
' The next question that calls for determination is whether the non obstante clause contained in Sub-section (1) of Section 24 of the Act precludes the Department from proceeding against the person to whom the income actually belonged. Under Sub-section (1) of Section 24, the declaration was required to be made in respect of the amount which represented the income of the declarant. The declaration could not be made in respect of an amount which was not the income of the declarant. If, therefore, a person made a false declaration with respect to an amount which was not his income, but was the income of somebody else, then there was nothing to prevent an investigation into the true nature and source of the said amount. There was nothing in Section 24 of the Act which prevented the ITO, if he was not satisfied with the explanation of an assessee about the genuineness or source of an amount found credited in his books, in spite of its having already been made the subject of a declaration by the creditor and then taxed under the scheme. We find no warrant for the submission that Section 24 had an overriding effect over Section 68 of the I.T. Act, 1961, in so far as the persons other than the declarants were concerned.
In our judgment, the legal fiction created by Sub-section (3) of Section 24 of the Act by virtue of which the amount declared by the declarant was to be charged to income-tax 'as if such amount were the total income of the declarant' was limited in its scope, and it cannot be invoked in assessment proceedings relating to any person other than the person making the declaration under the Act so as to rule out the applicability of Section 68 of the I.T. Act, 1961.
The last question that remains is whether the same income cannot be taxed twice, once in the hands of the creditors and again in the hands of the assessee. In a case of this description, there is no question of double taxation. The situation is of the assessee's own making in getting false declarations filed in the names of the creditors with a view to avoid a higher slab of taxation. Once it was found that the income declared by the creditors did not belong to them, there was nothing to prevent the same being taxed in the hands of the assessee to which it actually belonged.
It follows that the decisions of the Gujarat High Court in Manilal Gafoorbhai Shah v. CIT : 95ITR624(Guj) , of the Allahabad High Court in Badri Pd. and Sons v. CIT : 98ITR657(All) and Pioneer Trading Syndicate v. CIT : 120ITR5(All) , and of the Madhya Pradesh High Court in Addl. CIT v. Samrathmal Santoshchand : 124ITR297(MP) , which lay down the true scope of the Voluntary Disclosure Scheme under Section 24 of the Act, must be upheld. The decisions of the Delhi High Court in Rattan Lal v. ITO : 98ITR681(Delhi) and Shakuntla Devi v. CIT : 125ITR18(Delhi) and of the Jammu & Kashmir High Court in Mohd. Ahsan Wani v. CIT , taking a view to the contrary, are overruled.'
7. The learned counsel for the assessee has invited our attention to the words 'or the income of such other persons' occurring in Section 139 of the I.T. Act, 1961, and also the definition of a representative assessee contained in Clause (ii) of Sub-section (1) of Section 160 for the argument that it was open to the parents or the guardians of minor assessees to file income-tax returns on their behalf and in case their incomes were concealed to declare them under Section 24 of the Finance (No. 2) Act, 1965. We are afraid it is not possible for us to take these arguments into consideration in preference to the clear and binding observations made by the highest court of the land extracted above.
8. For the reasons aforementional, our answer to question No. 1 is that the Appellate Tribunal was not right in holding that after having accepted voluntary disclosures of various creditors holding cash credits in the account books of the assessee, the Department could not question the gennineness of these cash credits regarding which disclosures had been made by the guardians of the creditors on behalf of their minor children.
9. Regarding question No. 2, our answer is that the assessee had discharged the onus which lay on it under Section 68 of the I.T. Act, 1961, to the extent of deposits in the sum of Rs. 1,08,000 only made by declarants who had themselves declared their assets under the Voluntary Disclosure Scheme.
10. Regarding question No. 3, our answer is in the negative, i.e., in favour of the Revenue and against the assessee.
11. The reference stands disposed of accordingly. No costs.