1. These two writ petitions arise out of similar facts and raise a common question of law. They are, therefore, disposed of by this single judgment.
2. The finance Act, 1965, which was published in the Gazette of India on 11th May, 1965, provided a scheme in Section 68 of that Act for voluntary disclosure of secreted income and settlement of income-tax liability on the amount so disclosed on a concessional basis. This section was given retrospective effect from 1st March, 1965. Such a scheme was there already; and the above section was enacted to give legislative sanction for the same. It may be sufficient for the purpose of this case to read only Sub-sections (1), (2) and (3) of Section 68 :
'68. Voluntary disclosure of income.--(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, or the Income-tax Act, 1961, or
(b) which has escaped assessment for any assessment year for which an assessment has been made before the 1st day of March, 1965, under either of the said Acts, or
(c) for the assessment of which no proceeding under either of the said Acts has been taken before the 1st day of March, 1965,
he shall, notwithstanding anything contained in the said Acts, be charged income-tax at the rate specified in Sub-section (3) in respect of the amount so declared if he,--
(i) pays the amount of income-tax as computed at the said rate, or
(ii) furnishes adequate security for the payment thereof in accordance with Sub-section (4) and undertakes to pay such income-tax within a period, not exceeding six months, from the date of the declaration as may the specified by him therein, or
(iii) on or before the 31st day of May, 1965, pays such amount as is not less than one-half of the amount of income-tax as computed at the said rate or furnishes adequate security for the payment thereof in accordance with Sub-section (4), and in either case assigns any shares in, or debentures of, a joint stock company or mortgages any immovable property, in favour of the President of India by way of security for the payment of the balance, and undertakes to pay such balance within the period referred to in, Clause (ii).
(2) The declaration shall be made to the Commissioner, and shall specify the period required to be specified under Clause (ii) of Sub-section (1), contain the name, address and signature of the person making the declaration and also full-information in respect of the following matters, namely :--
(a) Whether he was assessed to income-tax or not; and, if assessed, the name of the income-tax circle in which he was assessed.
(b) The amount of income declared, giving where available, details of the financial year or years in which the income was earned and the amount pertaining to each such year.
(c) Whether the amount declared is represented by cash (including bank deposits), bullion, investments in shares, debts due from other persons, commodities, or any other assets, and the name in which it is held and location thereof:
Provided that the declaration shall be of no effect unless it is made after the 28th day of February, 1965, and before the 1st day of June, 1965. (3) The rate of income-tax chargeable in respect of the amount referred to in Sub-section (1) shall be sixty per cent. of such amount. Provided that if before the 1st day of April, 1965, the tax on the amount declared is paid by the declarant at the rate of fifty-seven per Cent. of such amount, he shall not be liable to pay any further tax on such amount.'
3. The petitioners in both these cases availed of the above scheme. The petitioner in O. P. No. 1511 of 1969 made a voluntary disclosure of income of Rs. 5,50,000, which he spread over for the assessment years 1962-63, 1963-64 and 1964-65 at the rate of Rs. 1,85,250, Rs. 2,43,250 and Rs. 2,99,250, respectively. The petitioner in O.P. No. 1512 of 1969 made a total disclosure of Rs. 8,30,000 which he distributed for the assessment years 1962-63, 1963-64, 1964-65 and 1965-66 at the rate of Rs. 1,00,000, Rs. 1,50,000, Rs. 2,40,000 and Rs. 2,40,000, respectively. Both the petitioners paid income-tax on the amounts thus disclosed by them in accordance with the provisions of the above scheme.
4. On the basis of the above disclosures, the Wealth-tax Officer, Calicut, who is the first respondent in both these cases, took proceedings under Section 17 of the Wealth-tax Act, 1957, in respect of the assessment years to which the disclosed income was attributed by the petitioners, to reassess the net wealth which escaped assessment. He accepted the distribution of the disclosed income as made by the petitioners for the purpose of Section 68 of the Finance Act, 1965 ; and there was no dispute that the petitioners are liable for reassessment on that basis. But they claimed that the whole amount of income attributed to an assessment year was not net wealth which escaped assessment for that year; the net wealth was only the said amount less the amount of income-tax payable under the Income-tax Act, 1961, in respect of the said amount. The argument may be illustrated with reference to one of the assessment years for the sake of clarity. The income attributed by the petitioner in O. P. No. 1511 for the assessment year 1962-63, in the declaration under Section 68 of the Finance Act, 1965, was Rs. 1,85,250, as already stated. The Wealth-tax Officer proposed to reassess the said amount as net wealth which escaped assessment for the above assessment year. The petitioner claimed that the net wealth which escaped assessment was not the whole amount of Rs. 185,250; but it was only the said amount less the income-tax payable in respect of the said amount under the Income-tax Act, 1961, if the said amount was included in his total income and assessed for the year 1962-63. The petitioners put forward this contention in respect of all the assessment years. The claim was repelled by the Wealth-tax Officer . The petitioners filed appeals before the Appellate Assistant Commissioner of Wealth-tax without success. Thereafter, they filed revision petitions before the Commissioner of Income-tax, Ernakulam, who is the second respondent in both these cases. The revision petitions of petitioner in O. P. No. 1511 of 1969 were dismissed by the Commissioner of Income-tax by a common order dated September 30, 1968, copy of which has been marked as exhibit P-7 in that case. In the case of the petitioner in O.P. No. 1512 of 1969, his revision petitions were dismissed by the Commissioner by a common order dated September 19, 1968, a copy of which is marked in that case as exhibit P-9. These writ petitions have been filed to quash the above orders of the Commissioner of Income-tax as well as the original orders passed by the Wealth-tax Officer in the said cases, on the ground that the said orders were contrary to the relevant provisions of the Wealth-tax. Act, 1957, in so far as they did not allow the deduction claimed by the petitioners on account of income-tax in determining the net wealth.
5. It is necessary to refer to some of the provisions of the Wealth-tax Act in order to appreciate the petitioners' contention. Section 3 is the charging section; and it provides that there shall be charged for every assessment year commencing on and from 1st April, 1957, a tax in respect of the net wealth on the corresponding valuation date of every individual,. Hindu undivided family or company at the rate or rates specified in the Schedule. 'Assessment year' is defined in Section 2(d) as the period of twelve months commencing on the 1st day of April every year. 'Valuation date' is defined in Section 2(q) as the last day of the previous year as defined in the Income-tax Act, 1961. 'Net wealth' is defined in Section 2(m) and it is as follows :
''Net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, as in excess of the aggregate value of all the debts owed by the assessee on the valuation date. . . '
6. The latter part of the definition clause excludes certain debts specifically mentioned therein from 'the debts owed by the assessee on the valuation date.' It is not necessary for the purpose of dealing with the petitioners' contention to read that part of the definition ; and it has not, therefore, been extracted. In substance, net wealth is the aggregate value of all the assets belonging to the assessee less the aggregate of the debts owed by him on the valuation date ; and the tax is charged for every assessment year on the net wealth of the assessee as on the valuation date, which means the last day of the previous year.
7. Counsel for the petitioners contends that the income disclosed by them for each of the assessment years represents part of their assets which was not taken into account when making the original assessments, that the income-tax payable in respect of the said income is a debt owed by the assessee on the valuation date and that the same has to be deducted from the income disclosed for each year for determining the net wealth, which escaped assessment. He submits that the liability for income-tax arises during the course of the previous year or at least on the last day of the previous year, even if the Finance Act which fixes the rate of income-tax for the previous year has not been passed, and that the said liability is a debt though it has not been assessed and quantified. This proposition is well-established by the decision of the Supreme Court in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax,  59 I.T.R. 767 ;  2S.C.R.688 (S.C.) Counsel for the petitioners then contends that what the petitioners paid under the voluntary disclosure scheme envisaged by Section 68 of the Finance Act, 1965, was really income-tax payable under the Income-tax Act, 1961, in respect of the disclosed income, that the tax payable in respect of each assessment year is a debt owed by them on the last day of the previous year, and that at least this amount should be deducted from the disclosed amount for each year in determining the net wealth. In my view, these contentions cannot be sustained on a careful reading of Section 68 of the Finance Act, 1965, and the relevant provisions of the Wealth-tax Act, 1957, referred to above. Section 68 of the Finance Act is a special provision to compound the income-tax liability in respect of an income which an assessee may choose to disclose under the scheme envisaged by the said provision. By such a disclosure he does not incur a liability to pay any tax under the said section. He may comply with the provisions of that section and avail himself of the concession given thereunder and discharge the liability to pay income-tax in respect of the income so disclosed under the relevant Income-tax Act. If he takes advantage of this scheme and pays the tax accordingly, his assets would be reduced to the extent of the amount of tax paid by him. The amount of tax so paid is not a debt owed by him on the valuation date for the purpose of determining the net wealth under the Wealth-tax Act. It may happen that the assessee borrowed the whole or part of the amount of tax paid under the above scheme, then it would be a debt owed by him on the valuation date, to the extent it is outstanding on that date. Under the disclosure scheme, the assessee is protected from assessment on the disclosed income under the relevant Income-tax. Act. If the assessee, after making the disclosure, does not comply with the conditions of Section 68 of the Finance Act, 1965, and avail of the concession thereunder, he would be assessed in respect of that income for the relevant assessment years under the relevant Income-tax Act. If he did not make any disclosure at all, the undisclosed income may be discovered and assessed in accordance with the relevant Income-tax Act. In both these circumstances, different considerations arise ; the tax liability arises in respect of the income so assessed on the last date of the previous year to which the assessment relates. That liability would be a debt owed by him on the above date, and has to be deducted from the amount of income so assessed in determining the net wealth. I am clear in my mind that, when an assessee avails himself of the scheme envisaged under Section 68 of the Finance Act, 1965, and compounds the income-tax liability under the said scheme, and he subsequently becomes liable to assessment under the Wealth-tax Act, 1957, in respect of the income so disclosed and attributed by him as income accrued during different financial years, there is no question of any debt owed by him on the valuation dates concerned. The whole of the disclosed income relating to a financial year would be liable for assessment as escaped net wealth for the relevant assessment years. In any view of the matter, the assessee does not incur any tax liability before the income is disclosed under the scheme envisaged under Section 68 of the Finance Act, 1965, and the question of deduction of any income-tax paid by him does not arise in determining the escaped net wealth for assessment under the Wealth-tax Act, 1957.
8. It follows that the claim made by the petitioners in these cases cannot be sustained. These writ petitions are accordingly dismissed. There will be no order as to costs.