Voluntary disclosure under VDIS could not be rejected for lack of ownership on declaration date where capital gains were disclosed.

Under the Voluntary Disclosure of Income Scheme, 1997, a declaration covering capital gains from the sale of gold, silver articles and utensils could not be rejected merely because the declarant no longer held the assets on the date of declaration. Clause 64(1)(b) permitted disclosure of income not shown in an earlier return, and clause 68 protected voluntarily disclosed income from inclusion in total income. The court distinguished CBDT clarification on declared jewellery, noting that this declaration concerned sale proceeds and capital gains rather than undisclosed assets themselves. In the absence of any express scheme condition requiring continued ownership on the declaration date, rejection of the declaration was held unlawful.

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Issues: Whether a declaration made under the Voluntary Disclosure of Income Scheme, 1997 could be rejected as invalid on the ground that the declarant was not holding the assets on the date of declaration, when the declaration related to capital gains arising from assets already sold and there was no express condition requiring continuance of ownership on the date of declaration.

Analysis: Clause 64(1)(b) of the Voluntary Disclosure of Income Scheme, 1997 permitted a declaration in respect of income not disclosed in an earlier return, and clause 68 provided that voluntarily disclosed income would not be included in total income. The declaration in question was not a declaration of undisclosed jewellery or assets as such, but a computation of capital gains arising from the sale of gold, silver articles and utensils. The CBDT clarification relied upon by the Revenue applied to cases where jewellery was declared but alleged to have been sold prior to the declaration, whereas the present case involved disclosure of sale proceeds and capital gains. In the absence of any enabling provision in the Scheme requiring the declarant to hold the asset on the date of declaration, rejection of the declaration as invalid was contrary to the Scheme.

Conclusion: The rejection of the VDIS declaration was unlawful, and the declaration was required to be accepted in accordance with law.

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