2004 (6) TMI 276 - AT - Income Tax

Tribunal Validates Reassessment Based on VDIS Declarations, Highlights Compliance Requirements

The Tribunal upheld the validity of reassessment proceedings based on declarations under the Voluntary Disclosure of Income Scheme (VDIS), emphasizing the ... Reassessment Issues:Validity of reassessment proceedings under section 148 based on declarations under Voluntary Disclosure of Income Scheme (VDIS) and the withdrawal of declarations.Analysis:The judgment addresses the common issue of the validity of reassessment proceedings based on declarations under the Voluntary Disclosure of Income Scheme (VDIS). The assessees made disclosures of income under VDIS but failed to pay the tax as required by the scheme. The Assessing Officer (AO) issued notices under section 148 for the years under consideration. The assessees filed returns disclosing nil income, claiming that the declarations were withdrawn. The AO assessed the income based on the declarations. The validity of assessments under section 148 was challenged, arguing that declarations under VDIS did not constitute material for issuing notices under section 148. The CIT(A) upheld the assessments, stating that the declarations and affidavits were relevant material for assessment purposes.The Tribunal considered the provisions of the Finance Act, 1997, related to VDIS. Section 67(2) of the Act stated that if tax was not paid within the specified period, the declaration would be deemed never to have been made under the scheme. The Tribunal emphasized that the consequences of non-compliance with payment requirements were mandatory. The Tribunal also referred to a Supreme Court case highlighting the strict compliance required under VDIS. The Tribunal held that the deeming provisions under section 67(2) applied only to the scheme and not to the Income Tax Act. Therefore, the defaulting declarant could not argue against taxation under section 147 based on the non-existence of declarations under VDIS.The Tribunal further noted that the declarations and affidavits of the assessees constituted material for initiating reassessment under section 147. The argument that the declarations were withdrawn was rejected, as there was no evidence of withdrawal and no provision for withdrawal under the scheme. Additionally, an additional ground regarding the non-service of a notice under section 148 for a specific assessment year was raised. The Tribunal set aside the order for that year, directing verification of the service from the assessment record. Ultimately, most appeals were dismissed, except for one allowed for statistical purposes.In conclusion, the Tribunal upheld the validity of reassessment proceedings based on declarations under VDIS, emphasizing the relevance of the declarations and affidavits as material for assessment purposes. The judgment highlighted the strict compliance requirements under VDIS and the limited scope of deeming provisions under the scheme. The Tribunal's decision was based on a thorough analysis of the statutory provisions and legal principles governing the VDIS scheme and reassessment proceedings under the Income Tax Act.