K.L. Roy, J.
1. This is an application under, Article 226 of the Constitution for the issue of appropriate writs for cancelling and/or quashing certain alleged decisions said to be contained in two letters dated the 27th/28th November, 1967, and the 20th November, 1967, by the respondent-Income-tax Officer, and prohibiting the said respondent from proceeding to make any assessment on the petitioner for the years 1959-60 to 1964-65, and this rule was obtained on the 4th January, 1968.
2. The facts are shortly these :
The petitioner is the well-known partnership firm of Aminchand Payarilal whose partners are Shree Satya Pal, Shree Jit Pal, Shree Swaraj Pal and Shree Surrendra Pal. The petitioner filed a disclosure petition before the Central Board of Direct Taxes on the 19th September, 1958, and in the course of the said disclosure proceedings the petitioner agreed that the income of the firm and its partners for the assessment years 1951-52 to 1958-59 may be taken at Rs. 1 crore which was to be paid in certain instalments. This was accepted by the Central Board of Revenue. For the assessment years 1959-60 and 1960-61 the petitioner's assessments were completed by the respondent No. 1, who included in the total income very large sums as undisclosed income in respect of certain hundi loans which were held to be bogus. On appeal, the Appellate Assistant Commissioner set aside the aforesaid two assessment orders and directed the Income-tax Officer to make fresh assessments according to law.
3. By Section 68 of the Finance Act, 1965, a scheme for voluntary disclosure of income was introduced which provided that where any person made a declaration in respect of any amounts representing income which he had failed to disclose in his return filed for any assessment year before the 1st day of March, 1965, and which had escaped assessment, then notwithstanding anything contained in the Income-tax Act he would be charged tax at certain rates specified in Sub-section (3) of that section in respect of the amount so declared. It was further provided that the declaration should be made to the Commissioner and contain certain particulars as mentioned therein. One of the conditions for the submission of a voluntary disclosure was that the person making the disclosure must pay the amount of income-tax as computed at the rate prescribed in the said section. The material provisions are in Sub-sections (6) and (7) of that section which are as follows:
'68. (6) (a) Any amount declared by any person under this section in respect of which the tax referred to in Sub-section (3) is paid shall not be included in his total income for any assessment under any of the Acts mentioned in subjection (5) if he credits in the books of account, if any, maintained by him for any source of income or in any other record, the amount declared as reduced by the tax paid thereon under this section.
(b) A credit made under Clause (a) shall be intimated to the Income-tax Officer.'
4. Sub-section (7) provides that the Commissioner shall grant a certificate to every person who has made a declaration under that section and paid the income-tax under that section and such certificate shall set forth the particulars of the amount stated in the declaration, the amount of income-tax paid in respect of the same and the date of payment.
5. On the introduction of the aforesaid scheme the petitioner made twodisclosures, the first, on the 31st March, 1965, for a sum of Rs. 8,50,000and the tax of Rs. 4,85,500 at the prescribed rate was paid on that date ;while the second disclosure was made on the 31st May, 1965, for a sum ofRs. 16,52,000. Both the disclosures were in respect of undisclosed incomeof the financial years 1958-59 to 1963-64, corresponding to the assessmentyears 1959-60 to 1964-65. So far as the second declaration was concerned,the petitioner was not in a position to pay the amount of the tax in cashand furnished security therefor and ultimately paid the total amount ofsuch tax being Rs. 9,91,200 by the 6th December, 1965. The respondent-Commissioner of Income-tax, while issuing a certificate under Sub-section (7.)in respect of the first disclosure has failed to issue any such certificate inrespect of the second disclosure. In the application form filed for the firstdisclosure, which was for a sum of Rs. 8,50,000 in item 5(i)--the querywhether the amount declared is represented by cash, etc., was answered ascash represented in the shape of hundis and interest and brokerage thereonand difference in assets from March 31, 1958, to March 31, 1964; item 6which requires details of the financial years for which the income disclosedwas earned and the amount pertaining to each such year was simplyanswered by saying from 1958-59 to 1963-64 financial years. Similarly, inthe application for the second declaration item 5(i) was answered by statingcash represented by hundis and interest involved therein while item 6 wassimilarly answered as 1.953.59 to 1963-64 financial years.
6. Trouble arose between the petitioner and the assessing authority when assessments for the years 1960-61 to 1964-65 were sought to be made. The petitioner's contention was that, as declaration had been made covering this period under Section 68 of the Finance Act of 1965, no further assessment in respect of these years was permissible. It was in this context that the two impugned letters were addressed by the respondent-Income-tax Officer to the petitioner. In the first of these, namely, the letter dated the 20th November, 1967, the respondent-Income-tax Officer stated that, whereas the petitioner's claim for examining the position of its income and accretion to wealth over the period of these six years was under examination, it was also considered necessary to examine the position of income earned and taxable separately for each year. In that connection the petitioner was requested to file the details of trading, profit and loss account, balance-sheet and the position of its assets and liabilities separately for each year giving reconciliations and explanations for each item of adjustment that it might wish to make. Corresponding books of account must be produced. It was further stated that from the statement of assets and liabilities filed by the petitioner it was seen that the petitioner was not providing for any liability against hundi loans. Since there were hundi loans in each year the petitioner was requested to state clearly if it were agreeable to have the amounts taxed as its own income. In the alternative, the petitioner was requested to produce all the hundis, khokas, complete copies of accounts for each creditor, their present address and also evidence to prove that the loans were genuine. The other impugned letter, that dated the 27th/28th November, 1967, contained the following prejudicial (according to the petitioner) statement, viz.:
'Later towards the close of the office hours your representative, Shri J.D. Bhanot, filed a letter and argued that the assessments cannot be possibly proceeded with unless your statement of affairs was accepted...... this claim of yours is not acceptable vis-a-vis the regular assessments and as mentioned in this office letter dated the 28th November, 1967, the assessment for each year has to be done separately in accordance with law--the statement of affairs being only one of the factors in this determination,'
7. I have pointed out to Mr. Pal, the learned advocate for the petitioner, that it is not possible for me to accept his contention that since the hundi loans had been included in the disclosure petition, no assessment could be made in respect of such loans, All the concession that Sub-section (6) of Section 68 of the Finance Act, 1965, grants any person 'making a declaration under that section is that any amount so declared in respect of which tax is paid shall not be included in his total income for any assessment under the Income-tax Act provided he credits in his books of account or any other record the amount so declared as reduced by the tax paid thereon under that section and such credit is notified to the Income-tax Officer. The concession does not extend to an exemption from tax in the ordinary course under the provisions of the Income-tax Act for the period covered by the disclosure petitions. Regular assessments must be made but in making these assessments the Income-tax Officer should exclude any amount included in such disclosure petitions and on which taxes have been paid as provided in Section 56. From the correspondence it appears that both the petitioner and the Income-tax Officer seem to be acting under a sense of grievance and have taken up the position which is not fully in accordance with the law. If by the aforesaid two letters the Income-tax Officer intends to say that the hundi loans included in the aforesaid disclosures and shown as the petitioner's undisclosed income can again be assessed he is certainly in error. But, he is not precluded from requiring the petitioner to produce evidence in support of other hundi loans which are not included in either of the two disclosures. It also appears that the petitioner has been proceeding under the assumption that the declaration of undisclosed income on the basis of the accretion in the net assets would cover all sources of undisclosed income. That is not correct. It is for it to explain to the Income-tax Officer each source of income disclosed for each year on which tax has been paid and the Income-tax Officer is under an obligation to exempt such items of income from the assessment of the petitioner for those respective years. The respondent-Income-tax Officer is accordingly directed to proceed with the assessment for these years in accordance with the observations made above after giving the petitioner full opportunity of producing any evidence that he might require and also of producing any books of account or other records that the Income-tax Officer might require it to produce. The rule is disposed of accordingly, there will be no order as to costs. The interim order is vacated.