Skip to content


Manilal Gafoorbhai Shah Vs. Commissioner of Income-tax, Gujarat - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 57 of 1970
Judge
Reported in[1974]95ITR624(Guj)
ActsIncome Tax Act, 1961 - Sections 9, 11, 24, 24(1), 24(2), 24(4), 24(9), 132, 139, 142, 143, 146 and 148; Finance Act, 1965 - Sections 24
AppellantManilal Gafoorbhai Shah
RespondentCommissioner of Income-tax, Gujarat
Appellant Advocate S.P. Mehta, Adv.
Respondent Advocate K.H. Kaji, Adv.
Excerpt:
direct taxation - assessment - section 24 of income tax act, 1961 - assessment on basis of declaration made by assessee - acceptance of such declaration does not debar authorities from reopening assessment on account of escape of income from assessment - authorities not estopped from reopening assessment on account of such acceptance. - - 43,219. 2. the facts of the case are that the assessee deals in precious stones like rubies, sapphires, etc. 2) act of 1965 had already come into force having received the president's assent on 11th september, 1965. section 24 of this act enabled every person, who had failed to furnish a return of his income in time or who had failed to disclose any income in the return already filed by him or whose income had escaped assessment, to make a.....mehta, j.1. this reference involves the interpretation and effect of the finance (no. 2) act of 1965 (act no. 55 of 1965), which is hereinafter referred to as the act, and arises out of the reassessment of the income of the applicant for the assessment year 1957-58 (s. y. 2021) on the ground that an undisclosed income of rs. 90,000 has escaped assessment during the course of the original assessment, which was made on 24th october, 1961, on the total income of rs. 43,219. 2. the facts of the case are that the assessee deals in precious stones like rubies, sapphires, etc., which are mainly sold to foreign countries. during the course of the assessment of the petitioner's income for the assessment year 1961-62 (s. y. 2016) his accounts were scrutinised by the concerned income-tax officer.....
Judgment:

Mehta, J.

1. This reference involves the interpretation and effect of the Finance (No. 2) Act of 1965 (Act No. 55 of 1965), which is hereinafter referred to as the Act, and arises out of the reassessment of the income of the applicant for the assessment year 1957-58 (S. Y. 2021) on the ground that an undisclosed income of Rs. 90,000 has escaped assessment during the course of the original assessment, which was made on 24th October, 1961, on the total income of Rs. 43,219.

2. The facts of the case are that the assessee deals in precious stones like rubies, sapphires, etc., which are mainly sold to foreign countries. During the course of the assessment of the petitioner's income for the assessment year 1961-62 (S. Y. 2016) his accounts were scrutinised by the concerned Income-tax Officer with a view to see how his business was financed. During the said scrutiny it was noticed that the business was financed by money introduced in the form of hundi loans. It was further revealed that during the assessment year 1957-58, the petitioner introduced the amount of Rs. 90,000 in the form of hundi loans from 20 Multani brokers of Bombay. These Multani brokers admitted that they had not advanced any amounts to the petitioner and that they were mostly name-lenders.

3. The record of the case reveals that on 3rd January, 1966, the concerned Income-tax Officer informed the petitioner by his letter, annexure 'B', that investigation of his case had revealed that he was borrowing hundi loans since long and, therefore, he should show cause why assessments of his income right from the assessment year 1957-58 should not be reopened.

4. For more than three months the petitioners gave no reply to this notice but some developments took place during this interval which should be stated at this stage.

5. When above notice, annexure 'B', was issued by the Income-tax Officer on 3rd January, 1966, the Finance (No. 2) Act of 1965 had already come into force having received the President's assent on 11th September, 1965. Section 24 of this Act enabled every person, who had failed to furnish a return of his income in time or who had failed to disclose any income in the return already filed by him or whose income had escaped assessment, to make a declaration thereof before 1st April, 1966. By making such a declaration the person concerned could avail of the advantage contemplated by the Act.

6. Pursuant to the provisions contained in section 24, the following five persons made declarations to the Commissioner in the prescribed form on 31st January, 1966, as found at annexures 'J' to 'J-4', and disclosed the amounts shown herein against their names :

Rs.1. Shah Lalitaben Hiralal 15,0002. ' Niruben Keshrichand 15,0003. ' Sushilaben Babubhai 20,0004. ' Keshrichand Ratilal 19,0005. ' Babubhai Uttamchand 21,000

7. The total of the amounts so disclosed by these five persons comes to Rs. 90,000. All of them made declarations in identical terms and explained that the amounts was 'paid in cash to Manilal Gafoorbhai Shah, Kachhia Pole, Cambay, for the purpose of his business.' Shri Manilal, to whom this reference is made, is the present petitioner. The declarations made by these five persons also stated that they did not know in what form the petitioner utilised the amounts deposited with him.

8. These declarations were thereafter dealt with by the concerned authorities according to the provisions of the Act and the declarants were eventually assessed and taxed accordingly. Notices of demand were issued to them on 10th March, 1966, and the assessed tax was paid by each of them on 25th March, 1966.

9. As noted above, the Income-tax Officer's notice, dated 3rd January, 1966, informing the petitioner-assessee to show cause against the reopening of his assessment remained unanswered for above three months. The petitioner-assessee is, however, found to have given a reply to it as late as 10th March, 1966, when the assessments of the income declared by the above-named five persons were already over. This reply of the petitioner is found at annexure 'C'. The petitioner contended by this reply that the amounts of hundies appearing in his books of account to the credit of various Multani brokers were really the deposits made by the above-named five declarants. The petitioner also contended in this reply that since these five declarants were not eager to disclose their names, the amounts were introduced in the form of hundies. A similar letter was addressed by the petitioner again on 24th March, 1966, as found at annexure 'E'.

10. During the course of the inquiry which followed, the above-named five declarants gave their statements to the Income-tax Officer giving full support to the stand taken by the petitioner, as is clear from annexures 'D-1' to 'D-5', which are dated 24th March, 1966.

11. Ultimately, the Income-tax Officer finalised the assessment by adding Rs. 90,000 being the principal amount of the hundi loans and Rs. 4,367 being the amount of interest, which was shown in the books of the petitioners as paid on the said hundi loans. This order of the Income-tax Officer is dated 7th March, 1967. The petitioner-assessee preferred an appeal against the same and succeeded before the Appellate Assistant Commissioner. The Income-tax Officer then took the matter in appeal before the Appellate Tribunal.

12. After going through the evidence on record, the Tribunal held that the credits in question were not genuine. On behalf of the petitioner-assessee, however, a point of law was raised before the Tribunal contending that looking to the scheme of the Finance (No. 2) Act of 1965, the revenue having once accepted the position that the amount declared by the above-named five persons, under the provisions of section 24 of the Act, was the income of those five persons, it is not now open to it to resile from that position and to hold that those declared amounts were the undisclosed income of the assessee. It was also pointed out that if the Finance (No. 2) Act of 1965 is construed as the department wants it to be construed, it would result in double taxation on the same amounts.

13. The Tribunal rejected these contentions of the assessee and held, after scrutinising the scheme of the Act, that by accepting the declarations made by the above-named declarants and by charging them to tax on the basis of those declarations under the provisions of the Act, the department was not estopped from holding in the assessment of the petitioner's income for the relevant year that the income assessed pursuant to the declarations under section 24 of the Act, was really the escaped income of the assessee. The petitioner being dissatisfied with this decision of the Tribunal has preferred this reference, as a result of which the following question is referred to us by the Tribunal :

'Whether, on the facts and in the circumstances of the case, it was open to the revenue authorities to investigate into the genuineness of the deposits aggregating Rs. 90,000 and record a finding in regard thereto when disclosure petitioners made by the five persons referred to in paragraph 3 under section 24 of the Finance (No. 2) Act of 1965 had been upon by the revenue authorities ?'

14. Before the considering the merits of the points involved in this question, it would be proper to go through the scheme of section 24 of the Act. It should, however, be stated before the Act was passed, the legislature had already passed a similar Act, being Act No. 10 of 1965, section 68 whereof contemplated a scheme of voluntary disclosure. In the budget speech given by the Finance Minister for the year 1965-66, he explained the object which guided the Government to sponsor the voluntary disclosure scheme in the following words :

'I now come to any proposals in regard to unaccounted incomes and wealth which, as I have already mentioned, are a source of considerable mischief in the economy. The question of how of mitigate this evil is a baffling and difficult one. We have already taken a number of measures, apart from intensification of searches and the like, to encourage voluntary disclosures. Amounts so disclosed are being exempted from penalty. These measures have had some success in encouraging voluntary disclosures particularly from people who have comparatively small and medium incomes to disclose. Various suggestions have been made from time to encourage disclosures on a larger scale and to give an opportunity to those who wish to turn a new leaf to do so without undue harassment, I have every hope that with the reduction in tax rates that I have already proposed, the scope and incentive for tax evasion in future would be reduced. The present time, therefore, offers a good opportunity to enable people who have evaded tax in the past to come out and make a clean breast of it. I recognise that it is not at all an easy matter to devise a solution which would at the same time be fair to people who have paid taxes honestly in the past and reasonable enough to encourage voluntary disclosures on an adequate scale on the part of those who wish wish now to be relieved of their past evasion. I have attempted to devise a solution bearing in mind all the complex economic, social and oral considerations that underlie the phenomenon of unaccounted income and wealth. I can only hope that honest taxpayers will not be aggrieved by what I propose to do and that those who have been misled in the past would find in it reason enough to return to the path of civic responsibilities.'

15. In this reference we are concerned with section 24 of the Act which is slightly different from section 68 of the previous Act inasmuch as it provides for a procedure in case any of the declared amounts is detected or is deemed to have been detected. Of course, section 24 is more liberal in imposing the rate of tax on the disclosed income. This section is divided into 16 sub-sections, all of which are not relevant for our purpose. Sub-section (1) enables the persons who have failed to furnish return, or have failed to disclose some income in the return already filed by them in the past, or whose income has escaped assessment on account of omission or failure on the part of such persons to make return under the Income-tax Acts of 1922 and 1961. It provides that in the case of the declarations made of such undisclosed income, the income-tax shall be charged in respect of the amounts so declared in accordance with sub-section (3) notwithstanding anything contained in the Indian Income-tax Act of 1922 or the Act of 1961. The sub-section contains a proviso which says that it shall not apply to the income in respect of which notices under section 23 of 34 of the At of 1922 or section 139 or 143 of the Act of 1961 have been served.

16. Sub-section (2) provides what would be the contents of the declarations contemplated by sub-section (1) and says that such declarations shall be made to the Commissioner. Sub-section (3) provides for the charges on the amount voluntarily disclosed under the scheme of the Act and then follows sub-section (4) which is important so far as this reference is concerned. It is in the following terms :

'4. (a) Within thirty days of the receipt of a declaration under sub-section (2) the Commissioner shall, if he is satisfied that the whole or any part of the amount of income declared therein has been detected or is deemed to have been detected by the Income-tax Officer prior to the date of the declaration, make an order in writing to that effect recording therein his reasons thereof and specifying the amount of such income [which he shall estimate to the best of his judgment on the basis of such statement, information, document or other relevant material (including any asset) as is referred to in clause (b)] and forward a copy thereof to the declarant :

Provided that no order under this sub-section shall be made unless the declarant has been given an opportunity of being heard.

(b) For the purpose of this section, income shall be deemed to have been detected by the Income-tax Officer if -

(i) on the basis of any statement, information, document or other relevant material (including any asset seized under section 132 of the Income-tax Act, 1961 (XLIII of 1961)), which is in the knowledge or possession of the Income-tax Officer before the date of the declaration, or

(ii) on the basis of any statement, information, documents of other relevant material (including any asset seized under any other law for the time being in force) which is in the knowledge or possession of any other officer of Government before the said date and which has come to the knowledge or possession of the Income-tax Officer not later than fifteen days from the date of the declaration,

such income can be shown to exist or its existences is considered to probable that a prudent man ought under the circumstances of the particular case to act upon the supposition that it exists.'

17. Sub-sections (5) and (6) make provisions for an application to the Board if a person feels aggrieved by the order passed by the Commissioner under sub-section (4).

18. Sub-section (7) says that after receiving the declaration contemplated by the section, the Commissioner shall forward the same to the Income-tax Officer together with a copy of his order, if any, under sub-section (4), and the Income-tax Officer shall thereupon determine the sum payable by the declaration in accordance with sub-section (3). This sub-section also provides for the demand of the assessed tax and the manner of paying the same.

19. Sub-section (8) says that the order passed by the Board shall be final.

20. According to sub-section (9) any amount of tax paid in pursuance of the declaration made under the scheme of the section shall not be refundable in any circumstances and no person, who has made the declaration, shall be entitled in respect of the income so disclosed or any amount of tax paid thereon to re-open any assessment made under the Indian Income-tax Act of 1922 or the Income-tax Act of 1961 and other Acts mentioned in the sub-section.

21. Sub-section (10) provides that the amount of voluntarily disclosed income shall not be included in the total income of the declarant for any assessment year under either the Indian Income-tax Act of 1922 or the Income-tax Act of 1961, provided that he has credited such amounts in his books of account. Clause (b) of this sub-section further says that the said credit should be intimated by the declarant to the Income-tax Officer.

22. Sub-section (11) protects the declarant by providing that nothing contained in the declaration made by him under the section shall be admissible as evidence against the declarant for the purpose of any assessment proceedings or any proceedings relating to the imposition of penalty, under any of the Acts mentioned in sub-section (9) or under the Wealth-tax Act, 1957. Rest of the sub-sections are not relevant for our purpose.

23. A bare perusal of the scheme of section 24 shows that it protects the declarant from any of the consequence which would arise from the non-declaration of his income at a proper stage.

24. Shri S. P. Mehta, the learned counsel for the applicant-assessee, heavily relied upon the objects of the legislature in enacting the Act and contended that the main purpose for which this legislation was passed was not so much to collect taxes as to bring out unaccounted money with the help of which a parallel economy was being run. According to him, therefore, the legislature wanted to encourage people to make as much disclosure as possible of the unaccounted income lying concealed. Legislature, contended Shri Mehta, did not mind whether the disclosure made under the Act were true or false and it was for that reason that the Act provided a speedy assessment during the course of which no inquiry about the source of income and like questions was contemplated and assessment was completed on the basis of the income disclosed. Shri Mehta further contended that, if the assessing authorities, acting under section 24, were precluded from making inquiry regarding the source of disclosed income during the course of the proceedings undertaken under section 24, it would stand to reason that no such inquiry could be made even at a subsequent stage during the course of the assessment of somebody else's income, because any such subsequent inquiry was likely to result in finding that the amount on which Income-tax was previously charged in the hands of the declarant did not really belong to him. Shri Mehta pointed out to sub-section (9) of section 24 of the Act which provides that any amount of Income-tax paid in pursuance of declaration made under section 24 shall not be refundable under any circumstances, and no person, who had made the declaration, shall be entitled, in respect of the voluntarily disclosed income to reopen and assessment made under the Income-tax Act of 1922 and/or of 1961 and other Acts mentioned therein. He contended that having thus obtained an irrevocable advantage of obtaining tax on the disclosed income on the basis that the income belonged to the declarant, the department should not be allowed to make any further assessment on a different basis that the disclosed income did not belong to the said declarant.

25. In further support to this contention Shri Mehta also pointed out to sub-section (4) of section 24 of the Act which empowered the Commissioner to make an order regarding the income, which is detected or deemed to have been detected, and contended that since no such order was passed by the Commissioner in the case of any of the five declarants of this case, even though the concerned Income-tax Officer was knowing that declarations made by those five persons amounted to an attempt to cover up the detection of escaped income of the petitioner, it is not now open to the department to contend that the declared income belongs to the assessee.

26. According to Shri Mehta, any further inquiry about the source of income disclosed and declared under section 24 of the Act, runs counter to the spirit of the Act, because, had the assessee known that by making disclosure under section 24, they were enabling the Income-tax authorities to inquire into the source of income declared by them, they would have thought twice before responding to the provisions of the Act.

27. Lastly, according to Shri Mehta, the view taken by the Tribunal and canvassed by the department result in double taxation of the same amount, and loss of protection given to it by the Act and, therefore, this court should desist from accepting any interpretation which is conducive to such results.

28. We are not impressed by any of these contentions of Shri Mehta. The scheme of the Act makes it abundantly clear that it was to protect only those who preferred to disclose the income which they themselves had earned in the past and which they failed to disclose at a proper time. It is undoubtedly true that the Act was brought on the statute book with a view to unearth unaccounted money, but there is no warrant for the proposition that by enacting the same, the legislature intended to permit, or connive at frauds sought to be committed by making benami declarations. Sub-section (1) of section 24 makes it clear that the declaration, which are expected to be made under sub-section (2), are with regard to the income which was chargeable to tax either under the Indian Income-tax Act of 1922 or under the Income-tax Act of 1961, but which was not disclosed at the proper time. Neither under the Act of 1922 nor under the Act of 1961 a person is required to submit a return with regard to the income which is either not earned or not deemed to have been earned by him. It, therefore, follows that even the declarations under sub-section (2) of section 24 must relate to the income actually earned by him. If, therefore, a person makes a false declaration with regard to the income not earned by him, it is difficult to comprehend how the department can be prevented from proceeding against the person to whom the income actually belonged and during the course of whose assessment that income has escaped.

29. We are also unable to accept Shri Mehta's broad contention that, in enacting the Act, the only intention of the legislature was to bring out on surface the hidden income irrespective of the method by which it was brought out, for the simple reason that we cannot attribute to the legislature an intention to encourage fraud. If the point canvassed by Shri Mehta is accepted it would follow that an assessee of the higher income group can, with immunity, filed out a few new relatives who would oblige him by filing returns under section 24 of the Act disclosing unaccounted income of the assessee as their own, and claiming that the said income was kept by them in deposit with the assessee. Such a contrivance would not only substantially reduce the tax incidence but would also result in the evasion of gift-tax. Could it, therefore, be said that by enacting the Act, the legislature had intended to encourage such a process So far as we are concerned, the only answer which we can provided to this question is in the negative.

30. Shri Mehta's next contention was that the department having once accepted the tax on declarations filed under sub-section (2) of section 24 of the Act, on the basis that the declared belonged to the declarant, cannot now be permitted to say in the assessment of another assessee that the income declared under section 24 did not, in fact, belong to the concerned declarant.

31. We find that even this contention is equally unacceptable. The protection envisaged by the Act is confined only to the declarant and none else. Under the provisions of the Income-tax Acts of 1922 and 1961, the department had authority to proceed to re-open a closed assessment, if any income was found to have escaped the assessment in the past. This power of the concerned authorities has been somewhat curtailed by the Act only with reference to the declarants, but who have responded to the scheme of the Act and not with reference to those who have not cared so to respond. This will be evident from the provisions contained in sections 9 and 11 of the Act. If that is so, the department cannot be prevented from performing its lawful duties to bring the escaped income of the non-declarants to assessment by re-opening their closed assessments according to law.

32. It should also be noted that the acceptance of tax by the department on the amount declared under sub-section (2) of section 24 does not involve any admission of the revenue that the declared amount was in fact earned by the declarant as his income. The scheme of section 24 shows that no authority acting under the Act is expected to enter into an inquiry to find out whether the declared amount represented the income of the declarant or any other person. The inquiry, if any, is contemplated only by sub-section (6) of the section. But that inquiry is not compulsory and is limited only to find out whether the declared amount has been already detected, or is deemed to have been detected. This, as pointed out hereafter, is not an inquiry involving the question whether the income really belongs to the declarant or someone else. The truth of the matter is that the fact that the source of the declared income shall not be inquired, was the main inducement to the delinquent assessees to respond to the scheme of the Act. The Act, therefore, advisably contemplates that no inquiry should be made after regarding the source of income or regarding the truth or otherwise of the claim to income, and subject to the provisions contained in sub-section (4), the assessment on the declared amount should at once be carried out. It is not without significance that the Act contains no provisions similar to those which are contemplated by section 142 of the Income-tax Act of 1961. The result, therefore, is that if a person makes a declaration under sub-section (2) of section 24 disclosing a particular amount as his income, the taxing authorities are expected to take the declarant at his own word and to proceed further to assess the tax amount subject to the order, if any, passed by the Commissioner under sub-section (4). In view of this position of law, it is not possible to hold that the acceptance of tax pursuant to assessment under sub-section (7) would amount to an admission of the department that the income declared really belonged to the declarant.

33. Even if it is believed, for the sake of argument, that there is any admission as is suggested by Shri Mehta, it is difficult to see how in taxation proceedings, admission made during the assessment of the income of one person would work either as an estoppel or as res judicata during the course of the assessment of income of another person.

34. Shri Mehta's next contention related to the effect of non-detection of income under sub-section (4) of section 24. The argument was that the detection contemplated by sub-section (4) includes the detection of the declared amount as belonging to some person other than the declarant and, therefore, if the Commissioner is not found to have 'detected' any income within 30 days of the receipt of the declarations filed by the five persons, the presumption is that there was an implied finding that the declared amounts belonged to the five persons and to none else. According to Shri Mehta, therefore, it is now not open to the department to do anything which would go against that finding. In this connection, Shri Mehta drew our attention to clause (b) sub-section (4) which explains the expression 'deemed to have been detected by the Income-tax Officer' and contended that when the declarations were filed by the above-named five persons, the Income-tax Officer was the same, who had issued show-cause notice, annexure 'B' of 3rd January, 1966, for re-opening the assessments of the petitioner's income for the assessments year 1957-58. The declarations were filed by the five persons under sub-section (2) of section 24 subsequent to this notice. Under the circumstances, the Income-tax Officer had sufficient materials before him to know that the declarations were filed with a view to cover up the allegations made in the notice and to explain hundi loans which stood in the bogus names of 20 Multani brokers in the account books of the petitioner. It was submitted that in spite of this facts, the Commissioner did not 'detect' the declared income and allow it to be assessee as the income of five declarants. The contention was that it is not now open to the Income-tax Officer to do what was not done previously under sub-section (4).

35. We find that this contention is based on total misapprehension of the contention of 'detection' which is contemplated by sub-section (4). Considering the scheme of section 24, we have no doubt in our mind that the detection which is stipulated by this sub-section is the detection of the declared amount as the income of the declarant himself and of none else. If the sub-section is read as contemplating the detection of the declared amounts as the income of a non-declarant, who has nothing to do with the proceedings contemplated by section 24, the whole of sub-section (4) would be rendered meaningless and absurd. The idea is that if the declared amounts is already 'detected' by the Income-tax authorities as the income of the declarant, or is deemed to have been so 'detected' prior to the date of declaration, the declarant should not be allowed to take the special and peculiar benefits which the Act contemplates. In such cases the legislature wants to convey to the concerned declarant that since his income is already detected or deemed to have been detected, it would now be of no use to be wise by responding to the special scheme of the Act. It need not be emphasised that at the time of enacting the Act, the legislature was not concerned with the income of the assessee, which was already detected or deemed to have been detected by the department, because such detected income could, at any time, have been dealt with according to the existing provisions of law. The obvious anxiety of the legislature was, therefore, to bring out the income which was not already detected or deemed to have been detected in the hands of an assessee. It was for this reason that the provisions contained in sub-section (4) were enacted and special procedure contemplated by the Act was restricted only to that part of the amount which was not detected or deemed to have been detected as the income of the declarant.

36. Scrutiny of the procedure contemplated by sub-section (4) rules out any scope for the contention that the detection contemplated by it is the detection of the declared amount as the income of a non-declarant stranger. For one thing, the sub-section does not contemplate that the Commissioner is obliged to make an inquiry, because it is his subjective satisfaction which matters so far as the question of detection is concerned. But even if in a given case he prefers to make an inquiry, the scope of that inquiry is very limited inasmuch as it is directed to find out only one thing, namely, whether before the date of the declaration made under section 24, the declared amount was found out to be the income of the declarant. Thus, during the course of that inquiry the Commissioner has no power or to inquire whether the declared amount was the income of the declarant or of some body else.

37. We find that section 24 itself provides some indications which show that detection contemplated by sub-section (4) is the detection of the amounts as the income of the person who has made the declaration under sub-section (2) and of none else.

38. The first indication is provided by the proviso which is attached to sub-section (1) and which is in the following terms :

'Provided that nothing in this section shall apply to the amount representing income assessable for any assessment year for which a notice under section 22 or section 34 of the Indian Income-tax Act, 1922 (XI of 1922), or section 139 or section 148 of the Income-tax Act, 1961 (XLIII of 1961), has been served upon such person and the date for furnishing the return, whether fixed originally or on extension, falls beyond the 19th day of August, 1965, and the return has not been furnished on or before the said date.'

39. This proviso shows that if proceedings for re-opening the closed assessments of the declarants are pending, the declarants is entitled to take advantages of section 24 with regard to the income covered by such proceedings. Sub-section (4) is merely an extension of the principal involved in this proviso, because the income, regarding which reassessment proceedings are undertaken, is obviously the income which is 'detected'. The deeming clause of sub-section (4) as defined in sub-section (4) (b) has a wider scope than the above-quoted proviso attached to sub-section (1), because it covers even those incomes regarding which no notice under section 34 of the Indian Income-tax Act of 1922 or section 146 of the Income-tax Act of 1961 issued. Therefore, if the proviso to sub-section (1) is read with sub-section (4), it would indicate that the protection referred to in sub-section (4) is the detection of the declarant's own income as such.

40. Another indication is that sub-section (4) does not provide any procedural machinery which would suggest that the satisfaction of the Commissioner should be on the question whether the declared amount is of the ownership of the declarant or of any other person. It does not contemplate any notice or inquiry from the person to whom his income is suspected to belong. It is, therefore, difficult to believe that the legislature contemplated that an order under sub-section (4) could be passed behind the back of the person who is vitally affected by this order.

41. We are thus of the opinion that sub-section (4) is of no help to the petitioner-assessee to induce us to draw any inference against the department.

42. What now requires to be considered is the last arguments of Shri Mehta, namely, that the view which we are taking is likely to result in double taxation of the same income in some cases and in want of immunity to the said income as contemplated by the Act. Here also we find ourselves unable to agree with Shri Mehta's contention. It is undoubtedly true that in case such as this, the same income would be liable to double taxation but that is not the consequence of any interpretation put by us. It is rather the consequence of the petitioner's own act, because, if the petitioner preferred to make a false declaration at a previous stage and if that falsity was exposed at a subsequent stage, the department cannot be prevented from discharging its duties to bring the escaped income of the petitioner to tax. If in this connection the petitioner himself had responded to the scheme of section 24, he would not have been faced with any such difficulty as would obviously arise from double taxation of the same amount.

43. So far as the argument as regard loss of immunity is concerned, it would be sufficient to say that the immunity which is contemplated by section 24 is the immunity given to the declarant and not to the amount declared by him.

44. We, therefore, find ourselves in agreement with the view taken by the Tribunal and, therefore, our answer to the question referred to us in the affirmative. The reference is accordingly disposed of. The petitioner shall bear the costs of this reference including the costs of the respondent.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //