1981 (12) TMI 73 - AT - Income Tax

Tribunal includes disclosed amount in total income for surtax calculation

The Tribunal held that the amount disclosed under section 14 of the Voluntary Disclosure Act should be included in the assessee's total income for surtax ... Voluntarily disclosed income under section 3 - declaration under section 14 (search and seizure) - immunity under section 8 - inclusion in total income for purposes of surtax - distinction between voluntary disclosure and disclosure under compulsionVoluntarily disclosed income under section 3 - declaration under section 14 (search and seizure) - immunity under section 8 - inclusion in total income for purposes of surtax - Whether an amount declared under section 14(1) of the Voluntary Disclosure of Income and Wealth Act, 1976, is excludable from total income for computation of chargeable profits under the Companies (Profits) Surtax Act, 1964 by operation of section 8 of the Voluntary Disclosure Act. - HELD THAT: - The Tribunal held that the expressions 'voluntarily disclosed income' and 'declarant' are defined by section 3 and denote income declared under section 3(1) and persons making such declarations. Section 8 grants immunity and non-inclusion in total income only in respect of the income declared in accordance with section 4 (i.e., declarations under section 3). Although section 14(3) and (5) incorporate procedural elements of sections 4 and 5 respectively, that incorporation is limited to procedure for signing and payment and does not convert a section 14 declaration into a section 3 declaration. The scheme of the Act treats declarations under section 3 (voluntary, without compulsion) and under section 14 (following search and seizure, made under compulsion) differently; broader immunities are provided for section 3 declarants and narrower, specific immunities are provided in section 14 itself, including the Explanation to section 14 which contemplates aggregation of the declared amount with total income for assessment. To construe section 8 as applying to section 14 declarations would produce an inconsistent result whereby an amount is included in total income for Income-tax purposes but excluded for surtax, contrary to the scheme and language of the Act. Accordingly section 8 does not apply to declarations under section 14 and the amount declared under section 14 must be included in total income for surtax computation. [Paras 7, 8, 9, 10, 11]Amount declared under section 14(1) is not 'voluntarily disclosed income' within section 8 and therefore cannot be excluded from total income for computation of surtax; the ITO's order is restored and the Commissioner (Appeals) order on this point is set aside.Final Conclusion: The Tribunal allows the revenue's appeal, holds that the Rs. 2,50,000 declared under section 14(1) must be included in the assessee's total income for computation of chargeable profits under the Companies (Profits) Surtax Act, 1964, and restores the ITO's order. Issues Involved:1. Whether the amount disclosed by the assessee under the Voluntary Disclosure of Income and Wealth Act, 1976, should be excluded from the income for purposes of computing chargeable profits for levying surtax under the Companies (Profits) Surtax Act, 1964.Issue-wise Detailed Analysis:1. Contention of the Revenue:The primary contention of the revenue was that the Commissioner (Appeals) erred in directing the ITO to exclude Rs. 2,50,000, disclosed by the assessee under the Voluntary Disclosure of Income and Wealth Act, 1976, from the total income of Rs. 15,96,160 for the purpose of computing chargeable profits for surtax. The revenue argued that section 8 of the Voluntary Disclosure Act, which the Commissioner (Appeals) relied upon, was not applicable to disclosures made under section 14 of the Act, which was the case here. The revenue emphasized that section 8 applies only to disclosures under section 3, and the amount disclosed under section 14 should be included in the total income for surtax purposes.2. Assessee's Argument:The assessee contended that section 8 of the Voluntary Disclosure Act did not explicitly exclude declarations under section 14 from its scope. The assessee argued that both section 3 and section 14 disclosures are termed 'voluntary disclosures' in the prescribed forms, and hence, the disclosed amount should be treated as 'voluntarily disclosed income' under section 8. The assessee further argued that ambiguities in tax laws should be resolved in favor of the taxpayer, as held by the Supreme Court in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192.3. Analysis and Findings:The Tribunal analyzed the definitions and provisions of the Voluntary Disclosure Act. It noted that the term 'voluntarily disclosed income' is defined in section 3 and pertains to income declared under section 3(1). Section 8, which provides that voluntarily disclosed income shall not be included in the total income for surtax purposes, specifically applies to income declared under section 3. The Tribunal pointed out that section 14 disclosures are made under different circumstances, often following a raid, and are not covered by the same immunities as section 3 disclosures. The Tribunal emphasized that the legislative intent was clear in distinguishing between the two types of disclosures, and the broader immunities of section 8 were not meant for section 14 disclosures.4. Conclusion:The Tribunal concluded that the Commissioner (Appeals) was incorrect in excluding the amount disclosed under section 14 from the assessee's total income for surtax purposes. The Tribunal restored the ITO's order, which included the disclosed amount in the total income.Judgment:The appeal filed by the revenue was allowed, and the order of the Commissioner of Income-tax (Appeals) was set aside. The Tribunal restored the ITO's order, thereby including the Rs. 2,50,000 disclosed under section 14 in the total income for the purpose of computing chargeable profits for surtax.