2011 (2) TMI 1244 - HC - Income Tax

Court validates appellant's income disclosure, deems tax payment timely. Notice under sec. 148 deemed illegal. Appeal successful.

The court validated the appellant's declaration under the Voluntary Disclosure of Income Scheme, 1997, considering it as made on the required date. The ... Voluntary Disclosure of Income Scheme, 1997 – Held that:- respondent declined to grant the certificate contemplated under section 68(2) by his communication dated May 15, 1998, on the ground that the payment was not made within the period permitted by the law. Such a communication is unsustainable, second respondent directed to issue the necessary certificate to the appellant, during the pendency of the litigation before this court, an assessment on the basis of exhibit P3 notice has already been made by order, initiation of such proceedings itself is not permissible under the Scheme, assessment also to be illegal, judgment under appeal is set aside and the appeal is accordingly disposed of Issues Involved:1. Validity of the declaration under the Voluntary Disclosure of Income Scheme, 1997.2. Timeliness of tax payment under the Scheme.3. Legality of the notice issued under section 148 of the Income-tax Act.4. Entitlement to the certificate under section 68(2) of the Scheme.Detailed Analysis:1. Validity of the Declaration:The appellant made a declaration on December 30, 1997, under the Voluntary Disclosure of Income Scheme, 1997. The declaration was initially filed before the Assistant Commissioner of Income-tax and then forwarded to the Commissioner of Income-tax. The receipt from the Commissioner's office was dated December 31, 1997, but noted as received on December 30, 1997. The court emphasized that the declaration must be made to the Commissioner of Income-tax by December 31, 1997, as per section 64 of the Scheme. The court concluded that the declaration should be construed as made on December 31, 1997, thus validating the declaration.2. Timeliness of Tax Payment:The appellant paid the tax on March 31, 1998, with interest as required under section 67 of the Scheme. The court examined the definition of 'month' as per section 3(35) of the General Clauses Act and relevant Supreme Court judgments. It concluded that the period of three months should be reckoned from December 31, 1997, to March 31, 1998. Therefore, the payment made on March 31, 1998, was within the permissible period under section 67(2) of the Scheme.3. Legality of the Notice under Section 148:The second respondent declined to grant the certificate under section 68(2) on the ground that the payment was not made within the permitted period. Consequently, the Assessing Officer issued a notice under section 148 of the Income-tax Act to reopen the assessment for the year 1989-90. The court found this notice to be illegal, considering the appellant's entitlement to the certificate under section 68(2) and the declaration under section 68(1) that the voluntarily disclosed amount should not be included in the total income for any assessment year.4. Entitlement to the Certificate under Section 68(2):The court held that the second respondent's refusal to issue the certificate under section 68(2) was unsustainable. It directed the second respondent to issue the necessary certificate to the appellant. The court also declared the subsequent assessment order dated January 1, 2002, based on the illegal notice, to be invalid.Conclusion:The court set aside the impugned order of the second respondent dated May 15, 1998, and directed the issuance of the certificate under section 68(2). It also declared the notice under section 148 and the subsequent assessment order to be illegal. The appeal was disposed of accordingly.