Voluntary disclosure scheme: accepted earlier-year declarations carry forward as opening balances absent proof of exhaustion.

Acceptance of disclosure under a voluntary disclosure scheme for earlier years must be given consequential effect in a later assessment year, and the declared stock, cash and sundry debtors may be treated as opening balances unless the Revenue shows sale, exhaustion or some other basis for cessation within a reasonable period. The Court applied the presumption of continuation to reject the view that the accepted disclosure could be ignored as involuntary. A separate claim for a further 5% reduction in stock value for damaged or outdated goods was held to be a factual question, and no general question of law arose on that point.

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Issues: (i) Whether, after acceptance of disclosure under the Voluntary Disclosure Scheme, the declared stock, cash and sundry debtors relating to earlier previous years could be given effect in the subsequent assessment year and be treated as opening balance for that year; (ii) whether reduction of 5% in stock value on account of damaged or outdated goods was allowable as a question of law.

Issue (i): Whether, after acceptance of disclosure under the Voluntary Disclosure Scheme, the declared stock, cash and sundry debtors relating to earlier previous years could be given effect in the subsequent assessment year and be treated as opening balance for that year.

Analysis: The Scheme barred disclosure only for the previous year in which survey under section 133A was carried out, while permitting disclosure for earlier and later years. Circulars issued by the CBDT clarified that the bar was confined to that previous year alone. Once the Revenue accepted the disclosure for earlier years, the consequent existence of stock, cash and sundry debtors could not be treated as extinguished within a short period of time without material showing sale or exhaustion. The principle of presumption of continuation for a reasonable period applied to such intangible assets, and the Tribunal erred in treating the disclosure as involuntary and in denying the consequential effect of the accepted disclosure.

Conclusion: This issue was answered in favour of the assessee.

Issue (ii): Whether reduction of 5% in stock value on account of damaged or outdated goods was allowable as a question of law.

Analysis: The claim for further reduction in stock value depended on the facts of the particular case. The Court held that the allowance of a 5% reduction was a factual matter and no general question of law arose on that aspect.

Conclusion: This issue was answered against the assessee.

Final Conclusion: The assessment was interfered with on the principal issue relating to the effect of the accepted disclosure, but the separate claim for additional 5% reduction in stock value was not accepted.

Ratio Decidendi: Where a disclosure under a voluntary disclosure scheme is validly accepted for earlier years, its accepted effect cannot be denied in a later year absent evidence that the disclosed assets had been exhausted or otherwise ceased to exist within a reasonable period.

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