Reassessment scope and voluntary disclosure income: concluded issues cannot be reopened, and disclosed income must be excluded from tax.

Income validly disclosed under the Voluntary Disclosure of Income Scheme, 1997 could not be treated as ordinary taxable income in reassessment, so it had to be excluded from the assessed total income. However, that exclusion did not justify annulling the reassessment itself, as the proper consequence was only deletion of the disclosed amount. On low household withdrawals, reopened assessment could not revisit an issue that had already attained finality in the original assessments absent escaped income material relating to that issue; the additions were therefore unsustainable and deleted. The reassessment jurisdiction remained confined to escaped income within the recorded reasons.

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Issues: (i) Whether income declared under the Voluntary Disclosure of Income Scheme, 1997 could be added in reassessment proceedings, and whether the reassessments could be annulled on that ground; (ii) Whether additions made in reopened assessments on account of low household withdrawals were sustainable.

Issue (i): Whether income declared under the Voluntary Disclosure of Income Scheme, 1997 could be added in reassessment proceedings, and whether the reassessments could be annulled on that ground.

Analysis: The scheme provisions provided that voluntarily disclosed income was not to be included in the declarant's total income if the statutory conditions were fulfilled. Once the competent authority issued certificates accepting the declarations, the assessing authority could not question the validity of those declarations. However, the scheme did not authorise annulment of the reassessment as a whole. The proper consequence was exclusion of the declared income from the assessed total income.

Conclusion: The reassessments were not liable to be annulled, but the income declared under the scheme had to be excluded from the total income assessed.

Issue (ii): Whether additions made in reopened assessments on account of low household withdrawals were sustainable.

Analysis: The household withdrawal issue had attained finality in the original assessments. Reopening under section 147 did not permit review or reconsideration of concluded issues in the absence of escapement material connected with that issue. The reassessment jurisdiction was confined to escaped income and did not extend to reopening matters already concluded.

Conclusion: The additions on account of low household withdrawals were not sustainable and were deleted.

Final Conclusion: The appeals were allowed to the extent that the scheme-declared income was directed to be excluded from the reassessments, while the additions for low household withdrawals were set aside.

Ratio Decidendi: In reassessment proceedings, the assessing authority may proceed only on escaped income within the scope of the recorded reasons and cannot reopen or revise finally concluded issues; separately, income validly disclosed under the statutory disclosure scheme must be excluded from the assessed total income and cannot be treated as ordinary taxable income.

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