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 VOLUNTARY DISCLOSURE OF INCOME

& WEALTH ORDINANCE, 1975

Provisions at a glance

SECTION/SCHEDULE PARTICULARS
PROVISIONS RELATING TO VOLUNTARILY DISCLOSED INCOME
3(1) and Sch. Income which can be declared and rates of income-tax 6-8
3(3) Investment in notified Government securities 9
4 Particulars to be furnished in declaration only one declaration permitted 10-11
5 Time for payment of income-tax and for investment in notified securities 12-13
6 Interest payable by the declarant 14
7 Mode of recovery 19
8, 11, 12, 13 Concessions and immunities 15-16
9 Voluntarily disclosed income not to affect the finality of completed assessment 17
10 Income-tax in respect of voluntarily disclosed income not refundable 18
PROVISIONS RELATING TO DISCLOSURE OF INCOME IN CASES OF SEARCH AND SEIZURE
14(1), (5) (part) Immunity provided in respect of declared income 21
and (7)
14(2), (3) Particulars to be furnished in the declaration 22
14(4) Copy of declaration to be forwarded to the Income-tax Officer 23
14(5), (6) Payment of income-tax on declared income 24-25
15(1) Income which can be declared 20
PROVISIONS RELATING TO VOLUNTARY DISCLOSURE OF WEALTH
15(1) (part) Wealth-tax which can be declared and immunity provided in respect of declared net wealth 26-27
15(1)(a), (b) Time for payment of wealth-tax and for investment in notified Government securities 33-34
15(2), (3) Particulars to be furnished in declaration 30
15(4)/(7) Copy of declaration to be forwarded to the Wealth-tax Officer 31-32
15(5), (6) Payment of wealth-tax and investment in notified Government securities 28-29
MISCELLANEOUS PROVISIONS
16 Representative assessee 35
17 Scope of benefits, etc. 36
18 Power to remove difficulties 37
19 Power to make rules 38
Voluntary Disclosure of Income and Wealth Ordinance, 1975
Provisions relating to Voluntarily Disclosed Income
Income which can be declared
6. Under section 3(1) of the Ordinance, a person can declare his income liable to tax for any assessment year up to and including the assessment year 1975-76 falling under any of the following categories:
            ( a)       income for which he has failed to furnish a return under section 139 of the Income-tax Act; or
            ( b)       income which he has failed to disclose in a return of income filed by him under the Income-tax Act before 8-10-1975; or
            ( c)        income which has been under-assessed or has escaped assessment by reason of the omission or failure on the part of the person concerned to furnish a return under the Indian Income-tax Act, 1922 or the Income-tax Act, 1961 or to disclose fully and truly all material facts necessary for his assessment or otherwise.
The provisions of section 3(1) do not, however, apply in relation to—
            ( a)       income for any assessment year which has not been disclosed in a return of income furnished on or after 8-10-1975;
            ( b)       income for any assessment year for which a notice under section 139 or section 148 of the Income-tax Act has been served on the declarant but the return for that year has not been filed by him before 8-10-1975;
            ( c)        in a case where any books of account, other documents, money, bullion, jewellery or other valuable articles or things belonging to the declarant have been seized as a result of any search under section 132 of the Income-tax Act, or under section 37A of the Wealth-tax Act, the income in respect of the previous year in which such search was made or any earlier previous year.
It will be seen that in a case where any books of account, other documents, money, bullion, jewellery or other valuable articles or things have been seized, there is no bar on the declaration of undisclosed income for any previous year falling after the previous year in which the search was made and, accordingly, a person whose books of account, other documents, etc., have been seized, will be entitled to declare under section 3(1) his undisclosed income for any such previous year. [The undisclosed income in respect of the previous year in which the search was made or any earlier previous year can be declared separately under section 14(1) of the Ordinance as explained in paragraphs 20 to 25 of this circular].
Voluntary Disclosure of Income and Wealth Ordinance, 1975
7. It may be noted that any income which has already been declared by the assessee in any return furnished by him or which has already been assessed for any assessment year cannot be disclosed under section 3(1) of the Ordinance. In a case where an assessment made under section 143(3) has been set aside in any proceeding by way of appeal or revision, the provisions of section 3(1)(b) of the Ordinance will apply and, accordingly, the assessee will be entitled to make a declaration in respect of the income in excess of the amount that was returned at the time of the original assessment.
[Section 3 (Part) of the Ordinance]
Voluntary Disclosure of Income and Wealth Ordinance, 1975
Rates of income-tax
8. The voluntarily disclosed income will be treated as a separate block, irrespective of the number of years over which it may have been earned and will be charged to tax at the following rates:
            ( a)        In the case of assessees, other than companies—
Slab of income declared
Rate of tax
Up to Rs. 25,000
25 per cent.
Rs. 25,001 – Rs. 50,000
Rs. 6,250 plus 40 per cent of the excess over Rs. 25,000.
Over Rs. 50,000
Rs. 16,250 plus 60 per cent of the excess over Rs. 50,000.
(b)       In the case of companies
60 per cent.
                                    
[Section 3 (Part) and the Schedule to the Ordinance]
Voluntary Disclosure of Income and Wealth Ordinance, 1975
Investment in notified Government securities
9. In addition to the income-tax payable as stated in the preceding paragraph, the declarant will be required to invest 5 per cent of the disclosed income in notified Government securities proceeds of which will be utilised by Government for projects of high social priority.
[Section 3 (Part) of the Ordinance]
Voluntary Disclosure of Income and Wealth Ordinance, 1975
Particulars to be furnished in declaration
10. The declaration under section 3(1) of the Ordinance is required to be made to the Commissioner of Income-tax concerned. It should be made in Form A prescribed under the Voluntary Disclosure of Income and Wealth Rules, 1975 and should be verified in the manner prescribed therein. The verification includes a solemn declaration by the declarant that income of other persons in respect of which he is chargeable to tax, as also income accruing or arising from assets held by him through other persons, has been shown in the declaration in respect of the year or years for which the declaration is made, to the extent such income was not disclosed or assessed earlier. The declarant has to further declare that income of any other person in respect of which he is not chargeable to tax has not been included in the declaration. The underlying object is to secure that while income from assets held by the declarant in benami names, as also any income of other persons in respect of which he is chargeable to tax, does not escape assessment, the declarant does not declare income of other persons in respect of which he is not chargeable to tax. The declaration has to be signed by the person who is empowered under section 140 of the Income-tax Act, 1961, as amended by the Taxation Laws (Amendment) Act, 1975, to sign the return of income in the case of the declarant.
[Section 4 (Part) of the Ordinance]
Voluntary Disclosure of Income and Wealth Ordinance, 1975
Only one declaration permitted
11. The Ordinance provides that a declarant will be entitled to make only one declaration under section 3(1) and that any subsequent declaration filed by a person who has already made one declaration will be void.
[Section 4(3) of the Ordinance]
Voluntary Disclosure of Income and Wealth Ordinance, 1975
Time for payment of income-tax
12. Income-tax payable in respect of the voluntarily disclosed income will ordinarily be paid before the declaration is made and the proof of payment of such tax will be enclosed with the declaration. The Commissioner has, however, been empowered to extend the time of payment or to grant instalments, in suitable cases where he is satisfied that the declarant was unable, for good and sufficient reasons, to pay the full amount of income-tax before the declaration was made. The declarant will, however, be required to pay at least one-half of the income-tax payable in respect of the voluntarily disclosed income on or before 31-3-1976 and the balance, if any, on or before 31-3-1977. The declarant will also be required to furnish adequate security for the payment of the amount remaining unpaid. For this purpose, at least one-half of the unpaid amount should be guaranteed by a scheduled bank or secured by an assignment of Government securities by the declarant in favour of the President of India, and the balance, if any, should be secured against such security as the Commissioner may, in his discretion, direct. Where any Government securities are assigned as security for the payment of income-tax, the amount covered by such assignment will be the market value of the securities on the date of the assignment.
[Section 5 (Part) of the Ordinance]
Voluntary Disclosure of Income and Wealth Ordinance, 1975
Time for investment in notified securities
13. The investment in notified Government securities will have to be made in all cases within 30 days from the date of making the declaration and no relaxation in this behalf will be permitted.
[Section 5(4) of the Ordinance]
Voluntary Disclosure of Income and Wealth Ordinance, 1975
Interest payable by the declarant
14. Where any part of the income-tax in respect of the voluntarily disclosed income is not paid by the declarant uptill 31-3-1976, the declarant will be liable to pay simple interest at 12 per cent per annum on the unpaid amount from 1-4-1976 to the date of payment, and the provisions of the Income-tax Act and the Income-tax Rules, relating to interest payable under section 220(2) will be applicable in relation to such interest. Accordingly, the provisions of section 288B (relating to rounding off of interest) and rules 118, 119 and 119A (relating to levy and calculation of interest) of the Income-tax Rules, will apply in relation to the interest payable under the Ordinance as they apply in relation to the interest payable under section 220(2) of the Income-tax Act.
[Section 6 of the Ordinance]
Voluntary Disclosure of Income and Wealth Ordinance, 1975
Concessions and immunities
15. The declarant will be entitled to the following concessions and immunities in respect of the voluntarily disclosed income:
1. There will be no assessment proceedings in respect of the voluntarily disclosed income and the tax liability in respect of such income will be finally settled on payment of the tax under the Scheme and investment in notified Government securities.
2. The voluntarily disclosed income will not be included in the total income of the declarant for the purpose of assessment for any year under the Indian Income-tax Act, 1922, the Income-tax Act, 1961, the Excess Profits Tax Act, 1940, the Business Profits Tax Act, 1947, the Super Profits Tax Act, 1963 or the Companies (Profits) Surtax Act, 1964. Since such income is altogether excluded from the total income, it follows that it will not be taken into account for the purposes of determining the rate of income-tax chargeable on the other income of the declarant or, where the declarant is a closely-held domestic company its “distributable income” for the purposes of the levy of additional income-tax under section 23A of the 1922 Act or section 104 of the 1961 Act.
These concessions will be available only in cases where the declarant has paid income-tax in respect of voluntarily disclosed income and has also invested the requisite amount in notified Government securities as required by section 3(3) of the Ordinance. The declarant will also be required to credit the amount of such income in his books of account or any other record and to intimate the Income-tax Officer about it. The declarant will be entitled to obtain a certificate from the Commissioner stating the particulars of the voluntarily disclosed income, the amount of income-tax paid in respect of the same, the date on which such tax was paid, the amount of investment made in notified Government securities and the date of such investment. The certificate will be issued only after the full amount of income-tax has been paid and the requisite amount has been invested in notified Government securities.
3. Particulars contained in the declaration will not be admissible as evidence against the declarant for the purposes of any proceeding relating to imposition of penalty or for the purpose of prosecution under the Acts mentioned in (2) above and the Wealth-tax Act, 1957.
4. No wealth-tax will be payable by the declarant for any assessment year up to and including the assessment year 1975-76 in respect of the assets specified in the declaration made under section 3(1) of the Ordinance as representing his voluntarily disclosed income. Where the value of the assets acquired out of the voluntarily disclosed income has been understated by the declarant in any wealth-tax return the amount of understatement, to the extent the voluntarily disclosed income has been utilised for acquiring such asset, will not be included in the net wealth of the declarant for the said assessment year or years. Where the value of the assets has already been correctly shown in a return of net wealth for any assessment year, such value will, however, not be excluded from such assessment.
The above concession will be available only if the requirements as to payment of tax, investment in the notified Government securities, and making of entries in the books of account referred to in (2) above are complied with.
5. All particulars contained in the declaration under section 3(1) of the Ordinance shall be treated as confidential and no court or any other authority will be entitled to require any public servant or the declarant to produce before it any such declaration or any part thereof or to give any evidence in respect thereof. This provision will override any other provision in any other law for the time being in force. Public servants will also be debarred from disclosing any particulars contained in such declaration except to income-tax and wealth-tax authorities and officers appointed by the Board or the Comptroller and Auditor-General of India to audit income-tax receipts or refunds.
Voluntary Disclosure of Income and Wealth Ordinance, 1975
16. It should be noted that the immunities provided under the Ordinance will be available only in relation to the voluntarily disclosed income and do not cover any other income which may have escaped assessment. Income declared under section 3(1) of the Ordinance will be accepted without any investigation or questions being asked and the declarant will have to pay tax and to make investment in notified Government securities on the basis of the income disclosed. It is expected that persons who have any undisclosed income would declare it in full. If, subsequently, it is found that any part of undisclosed income has not been declared, it will be open to the Income-tax Department to pursue investigations and take usual steps for unearthing it.
[Sections 8,11,12 and 13 of the Ordinance]
Voluntary Disclosure of Income and Wealth Ordinance, 1975
Voluntarily disclosed income not to affect the finality of completed assessment
17. The declarant will not be entitled to reopen any assessment or reassessment made under the Indian Income-tax Act, 1922, the Income-tax Act, 1961, the Excess Profits Tax Act, 1940, the Business Profits Tax Act, 1947, the Super Profits Tax Act, 1963, or the Companies (Profits) Surtax Act, 1964 on the ground that he has made a declaration under section 3(1) of the Ordinance and paid income-tax on the income declared therein. No claim will also lie for any set off or relief in any appeal, reference or other proceedings in relation to any assessment or reassessment made under any of the aforesaid Acts.
[Section 9 of the Ordinance]
Voluntary Disclosure of Income and Wealth Ordinance, 1975
Income-tax in respect of voluntarily disclosed income not refundable
18. No claim will be entertained for refund of any part of the tax paid in pursuance of declaration made under section 3(1) of the Ordinance under any circumstances.
[Section 10 of the Ordinance]
Voluntary Disclosure of Income and Wealth Ordinance, 1975
Mode of recovery
19. Where the declarant fails to pay income-tax in respect of the voluntarily disclosed income or to invest the amount required to be invested in Government securities within the time allowed, he will be deemed to be in default. It will be open to the Income-tax Officer to levy penalty under section 221 for failure to pay income-tax on the voluntarily disclosed income or interest under section 6 and to proceed to recover the arrears of income-tax, interest or penalty under the Ordinance in accordance with the provisions of the Income-tax Act, relating to the recovery of arrears of tax and other sums due under that Act. Any arrear of the amount required to be invested by the declarant in notified Government securities will also be recoverable under the Income-tax Act, as if it were an arrear of tax under that Act. No penalty under section 221 of the Income-tax Act, will, however, be exigible for default in making investment in notified Government securities.
[Section 7 of the Ordinance]

Provisions relating to Disclosure of Income in cases of Search and Seizure

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Income which can be declared

20. Where any books of account, other documents, money, bullion, jewellery or other valuable articles or things belonging to a person have been seized as a result of any search made under section 132 of the Income-tax Act or under section 37A of the Wealth-tax Act, such a person can make a declaration under section 14(1) of the Ordinance in respect of the income of the previous year in which such search was made or any earlier previous year, where such income falls under any of the following categories :

(a) income for which he has failed to furnish a return under section 139 of the Income-tax Act; or

(b) income which he has failed to disclose in a return of income filed by him under the Income-tax Act before 8-10-1975; or

(c) income which has been under assessed or has escaped assessment by reason of the omission or failure on the part of the person concerned to furnish a return under the 1922 Act or the 1961 Act or to disclose fully and truly all material facts necessary for his assessment or otherwise.

The provisions of section 14(1) do not, however, apply in relation to—

(i) income for any assessment year which has not been disclosed in a return of income furnished on or after 8-10-1975;

(ii) income which has been included in the total income of the declarant in any assessment made by the Income-tax Officer before the date on which the declaration is made.

[As explained in paragraph 6 of this circular, a person whose books of account, other documents, etc., have been seized as a result of a search, is entitled to disclose under section 3(1) of the Ordinance his income for any previous year or years falling after the previous year in which the search was made.]

[Section 15(1) (Part) of the Ordinance]

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Immunity provided in respect of declared income

21. The amount of income disclosed in the declaration or, as the case may be, the value of the assets representing such income, will not be taken into account for the purposes of :

(a) payment of the interest by the declarant under section 139(8) of the Income-tax Act for delay or default in not furnishing the return of income;

(b) payment of interest by the declarant under section 215 (for shortfall in payment of advance tax) or section 217 (for failure to file estimate of advance tax) of the Income-tax Act, 1961 or the corresponding provisions of the Indian Income-tax Act, 1922;

(c) imposition of penalty on the declarant under the provisions of the Indian Income-tax Act, 1922, the Income-tax Act, 1961, the Excess Profits Tax Act, 1940, the Business Profits Tax Act, 1947, the Super Profits Tax Act, 1963, the Companies (Profits) Surtax Act, 1964 or the Wealth-tax Act, 1957, other than a penalty imposable under section 221 of the Income-tax Act, 1961 for default in payment of tax or under the corresponding provisions of any of the other Acts mentioned above;

(d) prosecution of the declarant under the provisions of any of the Acts mentioned in (c) above.

The immunity provided under the Ordinance in respect of the above matters will not be available to the declarant unless the tax chargeable in respect of the income declared has been paid by the declarant in accordance with the provisions of section 5 of the Ordinance.

[Section 14(1), (5) (Part) and (7) of the Ordinance]

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Particulars to be furnished in the declaration

22. The declaration under section 14(1) of the Ordinance is required to be made to the Commissioner of Income-tax concerned. It should be made in duplicate in Form B prescribed under the Voluntary Disclosure of Income and Wealth Rules, 1975 and should be verified in the manner prescribed therein. The verification includes a solemn declaration by the declarant on the lines mentioned in paragraph 10 of this circular. The declaration has to be signed by the person who is empowered under section 140 of the Income-tax Act, 1961, as amended by the Taxation Laws (Amendment) Act, 1975, to sign the return of income in the case of the declarant.

[Sections 14(2) and (3) of the Ordinance]

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Copy of declaration to be forwarded to Income-tax Officer

23. A copy of the declaration will be forwarded by the Commissioner of Income-tax to the Income-tax Officer and the information contained therein may be taken into account for the purposes of proceedings relating to the assessment or reassessment of the income of the declarant under the provisions of the various enactments mentioned in paragraph 21(c) above. The income declared under section 14(1) of the Ordinance will thus be included in the total income of the declarant in the assessment to be made by the Income-tax Officer and charged to tax at normal rates applicable for the relevant assessment year or years.

[Section 14(4) of the Ordinance]

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Payment of income-tax on declared income

24. The tax chargeable in respect of the income of any previous year for which a declaration has been made by the declarant will have to be paid in accordance with the provisions of section 5 of the Ordinance which have been explained in paragraph 12 of this circular. The expression “tax chargeable in respect of the income of any previous year for which the declaration is made” has been defined to mean :

(a) where the declarant has not furnished a return in respect of the total income of that year and no assessment has been made in respect of the total income of that year, the tax payable on the income declared under section 14(1) of the Ordinance as if such income were the total income;

(b) where the declarant has furnished a return in respect of the total income of that year and no assessment has been made in pursuance of such return, the tax payable on the aggregate amount of the total income returned and the income declared as if such aggregates were the total income, as reduced by the tax payable on the basis of the total income returned;

(c) where an assessment in respect of the total income of the previous year has been made, the tax payable on the aggregate amount of the total income as assessed and the income declared as if such aggregates were the total income, as reduced by the tax payable on the basis of the total income as assessed.

Voluntary Disclosure of Income and Wealth Ordinance, 1975

25. The declarant will be given credit in respect of the tax paid by him in the assessment made under the 1922 Act or the 1961 Act in respect of his total income of the relevant previous year or years.

[Sections 14(5) and (6) of the Ordinance]
Provisions relatinG to Voluntary
Disclosure of Wealth

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Wealth, etc., which can be declared

26. Under section 15(1) of the Ordinance, a person can make a declaration in respect of:

(a) the net wealth chargeable to wealth-tax for any assessment year for which he has failed to furnish a return under section 14 of the Wealth-tax Act, 1957, provided no notice under that section or under section 17 has been served on him before 8-10-1975 for furnishing the return of net wealth for that year; or

(b) the value of the assets which has not been disclosed, or the value of the assets which has been understated, in any return of net wealth for any assessment year.

The provisions of (b) above will not, however, apply in relation to so much of the value of assets as has been assessed in any assessment for the relevant assessment year made by the Wealth-tax Officer before the date on which the declaration is made.

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Immunity provided in respect of declared net wealth, etc.

27. The net wealth or, as the case may be, the value declared in a declaration under section 15(1) of the Ordinance will not be taken into account for the purposes of any proceedings relating to imposition of penalty on the person making the declaration or for the purposes of his prosecution under the Wealth-tax Act, 1957. This immunity is conditional on the fulfilment of the conditions regarding payment of wealth-tax on the amount declared and the investment of the requisite amount in notified Government securities. The relevant provisions contained in this behalf in the Ordinance have been explained in paragraphs 28, 29 and 31 of this circular.

[Section 15(1) (Part) of the Ordinance]

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Payment of wealth-tax

28. The wealth-tax chargeable in respect of the net wealth for any assessment year for which the declaration is made will have to be paid by the declarant in accordance with the provisions of section 5 of the Ordinance which have been explained in paragraph 12 of this circular. The expression “wealth-tax chargeable in respect of the net wealth for any assessment year for which the declaration is made” has been defined to mean—

(a) in a case where the declaration has been made in respect of the net wealth chargeable to wealth-tax for any assessment year for which the declarant has failed to furnish a return, the wealth-tax payable in respect of the net wealth declared;

(b) where the declaration has been made in respect of the value of the assets which has not been disclosed, or the value of the assets which has been understated, in any return of net wealth, the wealth-tax chargeable shall be calculated as under :

(i) where no assessment has been made in pursuance of the net wealth furnished by the declarant, the wealth-tax payable on the aggregate of the net wealth returned and the value declared for that year as if such aggregates were the net wealth, as reduced by the wealth-tax payable on the basis of the net wealth returned;

(ii) where an assessment has been made in pursuance of the return of net wealth furnished by the declarant, the wealth-tax payable on the aggregate of the net wealth as assessed and the value declared for that year as if such aggregates were the net wealth, as reduced by the wealth-tax payable on the net wealth as assessed.

[Section 15(5) of the Ordinance]

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Investment in notified Government securities

29. In addition to the wealth-tax payable as stated in the preceding paragraph, the declarant will be required to invest in notified Government securities a sum calculated as under:

(a) where the declaration has been made in respect of one assessment year, a sum equal to two and a half per cent of the amount of net wealth declared under section 15(1)(a) of the Ordinance or, as the case may be, the value declared under section 15(1)(b);

(b) where the declaration has been made in respect of more than one assessment year, a sum equal to two and a half per cent of the net wealth declared under section 15(1)(a) of the Ordinance, or, as the case may be, the value declared under section 15(1)(b) of the Ordinance in respect of the last of such assessment year.

[Section 15(6) of the Ordinance]

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Particulars to be furnished in declaration

30. The declaration under section 15(1) of the Ordinance is required to be made to the Commissioner of Wealth-tax concerned. It should be made in duplicate in Form C prescribed under the Voluntary Disclosure of Income and Wealth Rules, 1975 and should be verified in the manner prescribed therein. Where a declaration is made in respect of net wealth, or includes any declaration in respect of net wealth, for any assessment year or years, the declaration has to be accompanied by a return of net wealth for such year or years in the form of return prescribed under section 14 of the Wealth-tax Act. The verification in Form C includes a solemn declaration by the declarant that the value of all assets held by him through other persons, as also the value of assets held by other persons which are to be included in computing his net wealth has been shown in the declaration. The declarant has to further declare that the value of assets held by any other person which is not includible in his net wealth has not been shown in the declaration. The declaration has to be signed by the person who is empowered under section 140 of the Income-tax Act, as amended by the Taxation Laws (Amendment) Act, 1975, to sign the return of income in the case of the declarant.

[Sections 15(2) and (3) of the Ordinance]

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Copy of declaration to be forwarded to Wealth-tax Officer

31. A copy of the declaration will be forwarded by the Commissioner to the Wealth-tax Officer and the information contained therein may be taken into account for the purposes of proceedings relating to the assessment or reassessment of the net wealth of the declarant for the relevant assessment year or years. The wealth declared under section 15(1) of the Ordinance will thus be included in the net wealth of the declarant in the assessment to be made by the Wealth-tax Officer and charged to tax at the normal rates applicable for the relevant assessment year or years.

[Section 15(4) of the Ordinance]

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

32. The declarant will be given credit in respect of the wealth-tax paid by him in the assessment made under the Wealth-tax Act in respect of his net wealth of the relevant assessment year or years.

[Section 15(7) of the Ordinance]

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Time for payment of wealth-tax and for investment in notified Government securities

33. Wealth-tax payable in respect of the net wealth declared under section 15(1)(a) or, as the case may be, the value declared under section 15(1)(b) will have to be paid in accordance with the provisions of section 5 of the Ordinance which have been explained in paragraph 12 of this circular. The investment in notified Government securities will have to be made within thirty days from the date of making the declaration and no relaxation in this behalf will be permitted.

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

34. As explained in paragraph 15(4) of this circular, no wealth-tax is payable by a declarant for any assessment year up to and including the assessment year 1975-76 in respect of any assets specified in the declaration made under section 3(1) of the Ordinance as representing his voluntarily disclosed income. Assets which are so exempt from wealth-tax are, therefore, not required to be shown in the declaration under section 15(1) of the Ordinance.

Miscellaneous Provisions

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Representative assessees

35. The provisions of Chapter XV of the Income-tax Act, and Chapter V of the Wealth-tax Act, relating to liability in the case of representative-assessees will apply in relation to the proceedings under this Ordinance as they apply in relation to the proceedings under the respective Acts.

[Section 16 of the Ordinance]

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Scope of benefits, etc., under the Ordinance

36. It has been specifically provided that nothing contained in the Ordinance will be construed as conferring any benefit, concession or immunity on any person other than the person making the declaration. Accordingly, where any income or wealth is disclosed by a person under the Ordinance and subsequently it is found that the income or, as the case may be, the wealth disclosed by the declarant did not, in fact, belong to him, there will be no bar to the inclusion of the income or the wealth in the assessment of the real owner.

[Section 17 of the Ordinance]

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Power to remove difficulties

37. The Central Government has been empowered to remove any difficulty which may arise in giving effect to the provisions of the Ordinance.

[Section 18 of the Ordinance]

Voluntary Disclosure of Income

and Wealth Ordinance, 1975

Power to make rules

38. The Board has been empowered to make rules for carrying out the provisions of the Ordinance. In exercise of this power, the Board has already notified the Voluntary Disclosure of Income and Wealth Rules, 1975 which, inter alia, prescribe the forms of declaration under section 3(1), section 14(1) and section 15(1) of the Ordinance.

[Section 19 of the Ordinance]

 FURTHER CLARIFICATIONS

                                 1. CIRCULAR NO. 181, DATED 25-10-1975
                                 2. CIRCULAR NO. 183, DATED 11-11-1975
                                 3. CIRCULAR NO. 184, DATED 14-11-1975
                                 4. PRESS NOTE, DATED 27-11-1975
                                 5. INSTRUCTION NO. 1269 [F. NO. 15(4)/79-TPL],
                                 DATED 25-7-1979

1

Clarifications on certain points raised

VOLUNTARY DISCLOSURE OF INCOME

 AND WEALTH ORDINANCE, 1975

1. The Voluntary Disclosure of Income and Wealth Ordinance, 1975 offers an opportunity to persons who have evaded tax in the past, to declare their undisclosed income and wealth, pay tax thereon on a reasonable basis and return to the path of rectitude. The provisions of this Ordinance have been explained in the Board’s Circular No. 180 [F. No. 131(19)/75-TPL], dated 15-10-1975.

VOLUNTARY DISCLOSURE OF INCOME

 AND WEALTH ORDINANCE, 1975

2. In respect of certain provisions of the Ordinance, clarifications have been sought and these are given below :

Question : Disclosure may be made by minors and ladies or by Hindu undivided families with no nucleus funds of their own. Will any enquiries be made as to the real person whose income has been declared by one or more persons falling in these three categories?

Answer : While minors, ladies, and Hindu undivided families are competent to make declarations on their account, they cannot make declarations to help another person. This is evident from item (c) of the Verification to the Declaration Forms A, B and C wherein the declarant has to solemnly declare that the income/wealth in respect of which he is not chargeable to tax is not included in his declaration. Section 17 of the Ordinance makes it clear that any benefit, concession or immunity conferred under the Ordinance will be available only to the declarant.

A declaration made by a minor, lady or Hindu undivided family will not be a starting point for making enquiries. However, subsequently,on evidence available, if it is found that the income/wealth, in fact, belongs to a person other than the declarant, it will be open to the Income-tax Officer to assess the former and take further proceedings against him in accordance with law.

Question : Whether an assessee already on the registers of the Income-tax Department can make a declaration for a year for which no notice under section 139(2) of the Income-tax Act has been issued and no return has been furnished?

Answer : Yes.

Question : If a firm had concealed income, can the partners file declaration in respect of such concealed income?

Answer : Yes.

Question : If a firm had concealed  income, can the partners file declaration in respect of such concealed income?

Answer : If the firm had concealed its income, it is the firm which should make the declaration. The partners need not make declarations regarding their respective shares of the undisclosed income and pay tax on the shares of income in respect of which declaration has been made. The registration of the firm will not be affected by the fact of such a declaration having been made.

Question : Whether in a case where no payment has been made before the declaration the Commissioner can grant instalments or extend time for payment ?

Answer : Section 5 of the Ordinance requires some payment of tax before making a declaration if the declarant, for any good and sufficient reason, is unable to make full payment.

Question : How many declarations can be made by one person ?

Answer : As regards the voluntarily disclosed income, a person is entitled to make only one declaration under section 3(1) of the Ordinance. Any subsequent declaration filed by him under section 3(1) will be void. The aforesaid restriction does not apply to the declarations that may be made under sections 14(1) and 15(1) of the Ordinance.

Question : Whether a declaration under section 3(1) of the Ordinance can be filed by a person who has not submitted a return, but on whom a notice under section 139(2) or 148 has been served on or after 8-10-1975 ?

Answer : Yes.

Question : Whether a declaration can be made in respect of the undisclosed income for an assessment year where a return had been filed and assessment made before 8-10-1975, but which has been set aside on or after that date ?

Answer : Yes.

Question : Is it necessary for any assessee who is maintaining account books to credit the amount in his books ? Can he credit it in any other record ?

Answer : An assessee who maintains account books may at his option credit the amount in his books or any other record.

Question : Will declarations under section 3(1) of the Ordinance made by some of the owners of flats in a multi-storeyed building admitting payment of on-money be used in evidence in the cases of the alleged recipients/owners of other flats who have not admitted such payments ?

Answer : In view of the stipulation in section 12(1) of the Ordinance that all particulars contained in a declaration made under section 3(1) of the Ordinance shall be treated as confidential, the declarations will not be used in evidence against the alleged recipients/owners of other flats who have not admitted such payment.

Question : Whether an assessee, whose premises were searched after 1-4-1975 resulting in the seizure of certain assets, can file a declaration in respect of his undisclosed income as represented by the seized assets ?

Answer : If the seized assets represent the undisclosed income of 1975-76 or an earlier assessment year, he can make a declaration under section 14(1) of the Ordinance subject to the other conditions of the Ordinance being satisfied.

Question : In a search and seizure case, the assessee is willing to offer undisclosed income represented by seized cash, etc., under section 14(1) of the Ordinance. As regards payment of tax thereon, he wants the Department to adjust the amount held in deposit by order under section 132(5) against the tax payable as per the declaration. Is this possible ?

Answer : In respect of seizures made prior to 1-10-1975, under section 132(5), seized assets can be retained to satisfy the existing liability under the specified Acts as well as the tax calculated on the undisclosed income estimated in a summary manner. In a case where an order under section 132(5) has been passed, and after satisfaction of the existing liability, there remains some amount retained under section 132(5), the latter may be adjusted against the tax chargeable in respect of the declaration under section 14(1) of the Ordinance to the extent the declared income corresponds to undisclosed income estimated earlier under section 132(5) and the declarant makes a specific request in this behalf.

It is to be noted that on account of such an adjustment there will be no release of any assets retained under section 132(5). The above course of action will also be in accordance with section 14(6) of the Ordinance.

Question : Whether the Department can compute the concealed income more than what has been declared in a declaration made under section 14(1) of the Ordinance and whether the Department can assess it for assessment years different from those shown in the declaration ?

Answer : The Income-tax Officer will make the assessment in the normal manner and give credit for the tax paid under the Ordinance. Immunity will be available in respect of the declared income, irrespective of the assessment year(s) for which it is assessed. Similarly, tax paid under the Ordinance will be given credit irrespective of year(s) for which it has been paid.

Question : An assessee discloses some assets under section 15(1) of the Ordinance and states that he had inherited/purchased the same several years back at a price which was only a fraction of the present value of the assets. Will it be permissible to enquire into the source of funds actually utilised in the acquisition thereof ?

Answer : A declaration under section 15(1) of the Ordinance in respect of net wealth or value of assets not disclosed or understated does not debar the income-tax authorities from enquiring into the source of funds actually utilised in the acquisition thereof and the year in which the assets were acquired and to assess the unexplained investment, if any, to income-tax in the appropriate assessment year(s).

Question : Whether the declaration in Form C should be accompanied by a return of net wealth in respect of an assessment year for which there is no default in furnishing the return of net wealth under section 14 of the Wealth-tax Act, but the value of any assets had not been disclosed or had been understated ?

Answer :  No. A declaration in Form C should be accompanied by return(s) of net wealth only in respect of an assessment year(s) for which the declarant had failed to furnish a return under section 14 of the Wealth-tax Act.

 

2

Clarification on some further points raised

VOLUNTARY DISCLOSURE OF INCOME

 AND WEALTH ORDINANCE, 1975

1. The provisions of the Voluntary Disclosure of Income and Wealth Ordinance, 1975 have been explained in the Board’s Circular No. 180 [F. No. 131(19)/75-TPL], dated 15-10-1975. Clarifications in respect of certain provisions of the Ordinance have been given in the Board’s Circular No. 181 [F. No. 283/1/75-IT (Inv.)], dated 25-10-1975.

VOLUNTARY DISCLOSURE OF INCOME

 AND WEALTH ORDINANCE, 1975

2. Clarifications in respect of some further points raised are given hereunder :

Question : Whether under section 3(1) of the Ordinance, it is necessary to disclose the nature and source of income and wealth declared ?

Answer : It is not necessary to disclose the nature and source of income. Only the assets representing the income declared are to be shown in Form A.

Question : Whether a public servant as defined in section 21 of the Indian Penal Code can declare his income/wealth under the Ordinance ? Whether secrecy provisions of section 12 of the Ordinance would be applicable to such case(s) ?

Answer : Any person can make a declaration under the Ordinance. Section 12 will apply in respect of all declarations made under section 3(1) of the Ordinance.

Question : Whether section 4(3) is a bar to the same individual filing separate declarations under section 3(1) in different capacities, e.g., as karta of a Hindu undivided family, managing partner of a firm, trustee of a trust and managing director of a company?

Answer : There is no bar to the same individual filing more than one declaration provided the various declarations are in respect of different taxable entities.

Question : Whether a trustee can make a declaration under section 3(1) of the Ordinance on behalf of a beneficiary of a trust of which he is a trustee and whether the beneficiary can also make a separate declaration in respect of other income under section 3(1) ?

Answer : Only one declaration should be made in respect of the undisclosed income of a person.

Question : Whether a declaration under section 3(1) of the Ordinance can be made by an assessee whose books of account or assets have been seized in the course of a search in respect of another assessee ?

Answer : A declaration under section 3(1) of the Ordinance cannot be made in respect of the income of the previous year in which such search was made or any earlier previous year. However, such declaration can be made in respect of the undisclosed income for any previous year subsequent to the previous year in which the search was made.

Question : If a company makes a declaration under sections 3(1) and 14(1) and it states that the income declared is held for the company by the directors or shareholders (having substantial interest), can any assessment proceedings be taken against such directors or shareholders on the ground that it represents dividend as defined under section 2(22 ) of the Income-tax Act ?

Answer : The provisions of section 2(22) will not be attracted in cases where income declared by the company is represented by assets held on behalf of the company by its directors/shareholders.

Question : Whether in search and seizure cases the cash seized can be adjusted on the declarant’s specific request towards tax payable according to the declaration under section 14(1) of the Ordinance, if the time for passing order under section 132(5) is not yet over or is available beyond 31-12-1975 ?

Answer : An order under section 132(5) has to be passed before any portion of the seized cash can be considered for adjustment. If on passing an order under section 132(5) some cash is left to be released the same can be adjusted. Regarding adjustment of cash retained under section 132(5) please refer to item (xi) of the Board’s Circular No. 181, dated 25-10-1975.

Question : What is the tax to be paid by a firm along with declaration under section 14(1) of the Ordinance if search and seizure has taken place in the case of the firm? Is it only the firm’s tax, or does it include tax payable by partners ? If only firm’s tax, what is the procedure for collecting tax payable by partners ?

Answer : Only the tax on the firm. In the cases of partners, normal assessment procedure will apply. A declaration by a firm under section 14(1) stands on a different footing from a declaration made by a firm under section 3(1) dealt with in item (iii) of the Board’s Circular No. 181, dated 25-10-1975.

Question : If a person pays one-half of the tax in cash, is it necessary for him to produce a bank guarantee or assign Government securities for half of the balance of the tax ?

Answer : Yes.

Question : What are the Government securities in which investment is to be made by declarants and procedure to be followed ?

Answer : The Government of India have notified [G.O.I., Ministry of Finance (Department of Economic Affairs) Notification No. GSR 533(E), dated 20-10-1975] 5 ¾% Bonds, 1985 for the purpose. The application for these Bonds will be received at :

     –  Offices of the Reserve Bank of India at Ahmedabad, Bangalore, Bombay (Fort and Byculla), Calcutta, Hyderabad, Kanpur, Madras, Nagpur, New Delhi and Patna.

     –  Branches of the subsidiary banks of the State Bank of India conducting Government treasury work except at Hyderabad ; and

     –  Branches of the State Bank of India at other places in India.

Applications to be made in the prescribed form (available at all the receiving offices) should be accompanied by the necessary payments in the form of cash or cheque or draft. Cheques/Drafts tendered at the office of the Reserve Bank of India, the State Bank of India or its subsidiary banks should be drawn in favour of the bank concerned at the place at which the application is tendered.

Question : Whether the restriction on sale of securities in which the declarant is required to invest for a period of ten years can be removed, i.e., can securities be made negotiable? Whether it will be competent for declarant to donate the notified securities purchased out of the declared income and; if so, whether a deduction under section 80G of the Income-tax Act, 1961, would be permissible in respect of such a deduction in the regular assessment of the declarant ?
Answer : Government of India 5 ¾% Bonds, 1985 notified under section 3(3) of the Ordinance are non-negotiable and cannot be sold, transferred, assigned or otherwise disposed of by the holder, but, subject to the provisions of any law, which is for the time being in force, may pass to the legal heir(s) or successor(s) of the holder, as the case may be.

 

3

Immunity to a company from prosecution – No penal
provisions to be invoked

VOLUNTARY DISCLOSURE OF INCOME

 AND WEALTH ORDINANCE, 1975

1. Enquiries have been made about the immunity to a company from prosecution, etc., under the Companies Act in a case a disclosure is made by the company in respect of its undisclosed income. An apprehension has been expressed that in the event of a disclosure by a company, some action may be taken against it by the Company Law Administration for furnishing false statements of profit and loss accounts.

VOLUNTARY DISCLOSURE OF INCOME

 AND WEALTH ORDINANCE, 1975

2. It is clarified that the Department of Company Affairs will not invoke the penal provisions of the Companies Act in regard to the matters arising out of a declaration in respect of voluntarily disclosed income made under section 3(1) of the Voluntary Disclosure of Income and Wealth Ordinance, 1975. Similarly, provisions of the Companies Act will not be invoked to collect information in regard to the periods, to which income so disclosed, relates.

 

4

Proceedings of acquisition of properties when to be dropped

Chapter XX-A of the Income-tax Act provides for acquisition of immovable properties in certain cases of transfer. The question whether the acquisition proceedings initiated under this Chapter could be dropped in cases where declarations in relation thereto are made under the Voluntary Disclosure of Income and Wealth Ordinance, 1975, has been examined.

It is clarified that the acquisition proceedings would be dropped in cases where :

Either

Only the transferee makes a declaration under the Ordinance disclosing income equal to the difference between :

  (i)  the apparent consideration plus 15 per cent thereof; and

 (ii)  the fair market value estimated by the competent authority ; and also files an affidavit to the effect that—

 (a)  he had paid the extra money as admitted, by way of purchase consideration, to the transferor;

 (b)  he undertakes to give evidence as may be in his possession and to co-operate fully in the matter of assessment of the transferor; and

  (c)  he agrees that the affidavit may be utilised in the assessment of the transferor.

Or

Both the transferor and the transferee admit payment of consideration approximating the fair market value of the property estimated by the competent authority and each of them makes a declaration under the Ordinance disclosing an amount equal to the difference between—

  (i)  the apparent consideration plus 15% thereof ; and

 (ii)  the fair market value estimated by the competent authority.

 

5

Investments by legal representatives in 5 ¾% Bonds, 1985

I am directed to refer to this Department’s Letter F. No. 10(19)/66-TPL, dated 16-6-1967 enclosing a copy of the Department of Economic Affairs, Letter No. F. 16(1)-W&M/66, dated 12-5-1967 regarding repayment of instalments of annuity deposits made under the annuity deposit scheme on behalf of the estate of the deceased person and to say that a similar situation has arisen in relation to investments in 5 ¾% Bonds, 1985 under the Voluntary Disclosure of Income and Wealth Act inasmuch as investments in such Bonds have been made in some cases by the legal representative on behalf of the estate of a deceased person and the persons who had signed the application in this behalf have not yet furnished documentary proof to the effect that they are legal representatives of the deceased named in the application. It has been decided that the decision taken on the question of waiving of the requirement to produce legal representation for determining the title to the annuity deposit certificates referred to in the above- mentioned letter should be extended to 5 ¾% Bonds, 1985 purchased under the
Voluntary Disclosure of Income and Wealth Act in the name of a deceased person.
Accordingly, in a case where investment in 5 ¾% Bonds, 1985 has been made under the Voluntary Disclosure of Income and Wealth Act on behalf of the estate of a deceased person, the Income-tax Officer exercising jurisdiction over the case of the deceased should grant a certificate, under his signature and official seal, showing the name(s) of the person(s) recognised by him  as legal representatives of the deceased for the purpose of assessment under the Act. The deposit office will recognise the title to the Bonds issued in favour of the executor/legal heirs to the estate of the deceased person so named by the Income-tax Officer without insisting on production of legal representation.

 

JUDICIAL ANALYSIS

VOLUNTARY DISCLOSURE OF INCOME AND WEALTH ACT 1976

Note the following case laws :

u Sub-section (2) of section 3 cannot be construed as if it were a proviso to sub section (1) – Tribhovandas Bhimji Zaveri v. Union of India [1993] 71 Taxman 309/204 ITR 368 (SC).

u Words ‘in respect of a previous year in which a search has been made’ cannot be so read as to mean that, for the provisions of section 3(2) to apply, the search and seizure should have taken place before the Ordinance/Act came into force – Tribhovandas Bhimji Zaveri v. Union of India [1993] 71 Taxman 309/204 ITR 368 (SC).

u To those assessees who have declared concealed income subse­quent to a seizure during a previous year, for that previous year or for any previous year prior thereto the more beneficial provi­sions of section 3 do not apply, for the declaration is not voluntary, and the less beneficial provisions of section 14 do apply – Tribhovandas Bhimji Zaveri v. Union of India [1993] 71 Taxman 309/204 ITR 368 (SC).

u Provisions of section 3 and section 14 under which declaration can be made under the Act are applicable in respect of different fields : various restrictions which are applicable in respect of declaration made under section 3 as provided under sections 8, 9 and 10 are not applicable to a case falling within purview of section 14 – CIT v. Surendra Pal [1993] 70 Taxman 182/203 ITR 963 (Raj.).

u Day on which declaration is forwarded by post cannot be construed as day of making or filing such declaration before Commissioner – M.K. Srikanta Setty v. CIT [1986] 160 ITR 517/24 Taxman 613 (Kar.).

u Where declarant under the Voluntary Disclosure Act was the individual partner and not the firm, disclosure made by partner would not preclude the income-tax authorities from examining the genuineness of the deposit in the firm’s books – Laherchand Dhanji v. CIT [1995] 213 ITR 145 (Bom.).

u A HUF is not entitled to the benefit of set-off in its assess­ment of amounts disclosed by the members of the HUF in their individual capacities under the Voluntary Disclosure of Income and Wealth Ordinance, 1975 – Udham Singh v. CIT [1988] 171 ITR 471 (Ori.).

u  Where entire tax on voluntary disclosure of wealth was not paid before 31-3-1976 but paid before 31-3-1977 without obtaining permission under section 5(2), interest was to be paid by person concerned for delayed payment of tax to get immunity – V.N. Swaminathan v. CIT [1984] 150 ITR 375 (Mad.).

u Scheme under the Act does not vest an implied power in Commis­sioner to review an order or rectify a mistake – Laherchand Dhanji v. Union of India  [1982] 135 ITR 689 (Bom.).

u Concept of income chargeable to tax in the Voluntary Disclosure Scheme in the same as in the Income-tax Act – CIT v. Sumati Kumar Sunil Kumar [1992] 193 ITR 537 (Cal.).

u Assessee is not entitled to benefit of section 14 where it failed to pay tax as contemplated under Act – CIT v. La-Medica [1992] 105 CTR (Delhi) 181.

u Provisions of section 14(1) do not contemplate that search has been carried out against assessee himself and if a person has kept his documents in premises which have been searched under section 132 and same have been seized, such person’s case will be covered by section 14(1) – CIT v. Amber Corpn. [1994] 74 Taxman 302/207 ITR 435 (Raj.).

u Continuing prosecution after the voluntary disclosure is not proper – S. Harnam Singh Suri v. CBDT [1984] 145 ITR 159 (Delhi).

u Disclosure under Income and Wealth Ordinance cannot grant immunity from confiscation under Gold (Control) Act – P.P. Kan­aiah v. ITO [1981] 129 ITR 414 (Mad.).

u The very purpose of sub-section (4) of section 14 of Voluntary Disclosure of Income & Wealth Ordinance, 1975 is to enable the ITO to reopen an assessment on basis of information contained in declaration made under sub-section (1) of section 14 of the Act if he finds that despite the declaration made, any income remains unassessed or under assessed – Smt. Vasantibai N. Shah v. CIT [1995] 213 ITR 805/81 Taxman 348 (Bom.).

u Specific order accepting the disclosure is not necessary – CWT v. Jangi Lal [1986] 157 ITR 119 (All.).

u Where no return had been filed on or before June 30 of corre­sponding assessment year, any return filed subsequently disclos­ing wealth, without issue of notice under section 14 or 17 of Wealth-tax Act, 1957, could not be taken as return filed under section 14 of the Act and, therefore, in view of section 15 of Voluntary Disclosure of Income and Wealth Ordinance, 1975, no penalty for concealment of wealth was imposable in such a case – Lilawati Kapoor Trust v. WTO [1992] 193 ITR 164 (HP).

u If the assessee requires the WTO in course of the assessment proceedings to arrive at a lower value than what has been shown in the declaration, in that event, the WTO would be at liberty to complete the assessment in accordance with the provisions of the Act and the assessee will not be entitled to the benefit or immunity granted by the scheme – CWT v. Smt. Shirin Paul [1994] 205 ITR 596 (Cal.).

u Where gold and jewellery were seized from the assessee in 1972 and he later filed a declaration under section 14 of the Volun­tary Disclosure of Income and Wealth Act, 1976, it was held that the assessee was entitled to the return of the gold and jewellery seized – R. Seshammal v. CIT [1981] 130 ITR 81 (Mad.).

u The petitioner disclosed certain wealth under the Voluntary Disclosure of Income and Wealth Act, 1976 on which a certain amount of wealth-tax was payable. The full amount of tax was not paid by him before making the declaration as required under section 5(1) but the petitioner paid part of the wealth-tax payable along with the return and the balance in two equal in­stalments, one before 31-3-1976 and the other before 31-3-1977. However, permission of the Commissioner had not been sought by the petitioner under section 5(2) for making payment in instal­ments, or for extension of time for making payment. After the insertion of sub-section (5A) in section 15 by the Finance (No. 2) Act, 1977, with retrospective effect from 1-4-1976, the Com­missioner demanded interest from the petitioner on the belated payment of the second instalment as a condition for grant of immunity under the Act. The petitioner challenged this order mainly on the ground that he had complied with the provisions of section 5 and that the new section 15(5A) was not applicable to him.

The Court held that though section 5 applies to the income-tax under the scheme, that provision also applies to wealth-tax in that section 15(5) says that the immunity is not available to a declarant unless the wealth-tax is paid in accordance with section 5.

Admittedly, the petitioner did not pay the wealth-tax before the declaration was made, nor did he file the proof of payment. He also did not file any application seeking permission as required by section 5(2) to pay the amount in two instalments after showing good and sufficient reasons for not paying the full amount of wealth-tax in accordance with that section. Though he paid the tax subsequently in two instalments, one before 31-3-1976 and the other before 31-3-1977, the payment could not be said to be in accordance with section 5(2). The petitioner was not, therefore, entitled to immunity unless he paid the impugned interest under section 15(5A). The demand could not, thus, be said to be ille­gal. Therefore, the Commissioner was justified and the petitioner was required to pay the interest demanded if he wanted immunity under the Act – D.M. Chinnapapaiah Setty v. CIT [1985] 154 ITR 318 (Kar.).

u The two minor daughters of the assessee declared certain income under the Voluntary Disclosure of Income and Wealth Ordinance, 1975. The ITO, while investigating the source of that income, made enquiries from the assessee. The contention of the assessee was that the investigation as to the source of income declared by the minor daughters from the assessee was not permitted in the Disclosure Scheme. The AAC upheld the assessee’s claim, relying on a clarification given by the Central Board of Direct Taxes that on the enquiry made by the Bharat Chamber of Commerce, Calcutta, the Board had clarified that in the Disclosure Scheme, no investigation would be made either from the declarant or from any other person including the guardian of the minors or husband of the lady. The Tribunal upheld the AAC’s order.

The Court held that no question of law arose from the Tribunal’s order – CIT v. Subbash Chander Agarwal [1988] 172 ITR166 (All.).

u The assessee was an unregistered firm. The original order of assessment was passed on March 23, 1974. By this order, the Income-tax Officer directed a sum of Rs. 54,000 to be added to the income of the assessee as undisclosed income representing purchase of 2,013 bags of potatoes during the previous year and an addition of Rs. 64,000 being concealed trading profit during the year. Before the Commissioner of Income-tax (Appeals) passed the order, the Voluntary Disclosure of Income and Wealth Act, 1975, came into force with effect from October 8, 1975. Section 3 of the Disclosure Act requires disclosure to be made on or before December 31, 1975. The assessee made a disclosure paying the tax stipulated under section 8(1)(ii) of the Disclosure Act and making the investment as contemplated under section 8(1)(iii) of the Disclosure Act on December 17, 1975, for the assessment year 1970-71. The amount of income so disclosed was Rs. 60,000. The Commissioner of Income-tax issued a certificate as contemplated in section 8(2) of the Act. The certificate was dated February 27, 1979. During the hearing of the appeal before the Commission­er of Income-tax (Appeals) which ended in his order dated Novem­ber 19, 1983, the assessee argued that the sum of Rs. 54,000 added by the Income-tax Officer for the assessment year 1971-72 came out of the sum of Rs. 60,000 voluntarily disclosed as income by him for the assessment year 1970-71 and, therefore, the sum of Rs. 54,000 could not be regarded as undisclosed income after the above declaration. The Tribunal also referred to the certificate dated February 27, 1979, and held that it was reasonable to accept the assessee’s plea that the above sum of Rs. 54,000 was out of the disclosed income of Rs. 60,000.

The court held  that it was necessary for the assessee to connect the dis­closed income of Rs. 60,000 for the assessment year 1970-71 with the sum of Rs. 54,000 being the concealed transaction in the assessment year 1971-72. The connecting link was absent. Before the appellate authority and the Appellate Tribunal, the assessee failed to place any evidence or material to establish the link. The judgments of the appellate authority and the Appellate Tribunal showed that the finding in favour of the assessee was arrived at merely on the basis of a certificate issued under section 8(2) of the Disclosure Act and without any further evi­dence of the connecting link. The finding, therefore, was based on no evidence. Thus, the appellate authority and the Tribunal were not justified in holding that the investment of Rs. 54,000 representing the price of 2,013 bags of potatoes was from the amount disclosed under the Disclosure Act – CIT v. Assam Cold Storage Co. [1993] 204 ITR 540 (Gauhati).

u As disclosure under Voluntary Disclosure Scheme is intended to confer benefit on person making disclosure, disclosure should be applied according to wishes of person disclosing same and his choice about quantum, date and year of assessment should normally be accepted – Khandelwal Oil Industries v. CIT [1996] 87 Taxman 234 (MP).

u A bare look at sections 3(1)(a)/( b)/ and (c) and 8(1)(i), (ii ) and (iii) would show that no debate is necessary to know that any person keeping books of account, knowing the source of income, cannot be considered to be the person in the mind of the legislative provi­sion of the Voluntary Disclosure of Income and Wealth Act – CIT v. George Jacob [1997] 90 Taxman 69/225 ITR 548 (Ker.).

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