2025 (12) TMI 544 - HC - Income Tax

Reassessment of VDIS 1997 declared income u/s147 upheld; tax notice allowed where higher undisclosed income emerged later

A reassessment initiated under s.147 was challenged on the ground that income disclosed under the Voluntary Disclosure of Income Scheme, 1997 was immune ... Reopening of assessment u/s 147 - income disclosed under the Voluntary Disclosure of Income Scheme, 1997 - main contention of the petitioner is that under the Voluntary Disclosure Scheme of Income Scheme, 1997 cannot be subject to the tax under the Income Tax Act; therefore, the notice u/s 143(2) is liable to be quashed, which contravenes the very Scheme, 1997 itself HELD THAT:- As per the proviso attached to sub-Section 1 of Section 151, the petitioner may raise all these objections in the assessment proceedings. Therefore, after examining the record, the Assessment Officer would determine whether the sanction is there or not. Since this petition has been filed, therefore, the respondent has had no occasion to conclude the proceedings. The main contention of the petitioner is that under the Voluntary Disclosure Scheme of Income Scheme, 1997 cannot be subject to the tax under the Income Tax Act; therefore, the notice under Section 143(2) is liable to be quashed, which contravenes the very Scheme, 1997 itself. Under Section 64 of the Finance Act, the minor would be entitled to make voluntary disclosure for his income under the Scheme and the Authorities are not entitled to make any enquiry from the sources from where he has earned the income, but if it comes to the knowledge of the department that the higher amount is there, then Section 64 nowhere provides that the declaration relating to the extended income would also be taken to be correct. The assessee is only protected from disclosing the source of income, but as per the Scheme, the correct income is also liable to be disclosed. So far, the violation of instruction number 1984 is concerned, the instructions came into operation w.e.f. 09.06.2000, but the notice had already been issued under Section 147 of the Income Tax Act, 1961, before 09.06.2000. After passing the final order, the petitioner shall have a remedy to file an appeal before the Commissioner of Appeals, and thereby, before the Central Board of Direct Taxes. Therefore, the petitioner is not remedy-less, and even after the order passed by the CBDT, the petitioner can still approach the High Court. Hence, no case is made out to interfere with the impugned orders. Issues: (i) Whether notices issued under Section 143(2) and the order under Section 144A in respect of years covered by a declaration under the Voluntary Disclosure of Income Scheme, 1997 (VDIS) are liable to be quashed; (ii) Whether CBDT Instruction No.1984 (and related board instructions) prohibit initiation or continuation of scrutiny/reassessment proceedings in the facts of this case; (iii) Whether procedural requirements including sanction under Section 151 and availability of alternate remedies preclude interference by the High Court.Issue (i): Whether notices under Section 143(2) and the order under Section 144A are invalid insofar as income disclosed under VDIS is concerned.Analysis: The Court examined the effect of a declaration under the VDIS and the scope of assessment/reassessment provisions (Sections 147, 148 and Section 143(2)). It noted that VDIS affords protection as to disclosure of source but does not equate to an absolute bar against enquiry where discrepancies or escaped income are discovered. The respondent found differences between income declared under VDIS and that in returns, which justified scrutiny/reassessment steps under the Act.Conclusion: The notices under Section 143(2) and the order under Section 144A are not liable to be quashed on the ground of VDIS declaration; the proceedings may continue.Issue (ii): Whether CBDT Instruction No.1984 (and other board instructions) operate to invalidate the impugned notices or bar proceedings.Analysis: The Court considered the timing and scope of the instructions and observed that Instruction No.1984 came into effect w.e.f. 09.06.2000 while notices under Section 147/148 had been issued earlier. The Court also noted that compliance with statutory conditions and availability of appellate remedies remain relevant and that board instructions do not oust statutory powers where reasons for reassessment exist.Conclusion: The invocation of Instruction No.1984 does not warrant quashing the impugned notices or order in the facts of this case.Issue (iii): Whether absence or challenge to sanction under Section 151 and existence of alternate remedies preclude exercise of writ jurisdiction.Analysis: The Court observed that objections regarding sanction under Section 151 and other procedural defenses can be raised in the assessment proceedings and that appellate remedies (Commissioner of Appeals and further forums) remain available. The availability of effective alternate remedies militates against extraordinary interference at the writ stage.Conclusion: Procedural objections including those under Section 151 do not justify writ relief at this stage; the petition is not maintainable for the relief sought.Final Conclusion: The Court dismissed the petition, holding that the tax authorities were entitled to proceed with scrutiny/reassessment in the circumstances and that the statutory and procedural safeguards and appellate remedies provide adequate recourse; no interference by the High Court was warranted.Ratio Decidendi: A declaration under the Voluntary Disclosure of Income Scheme, 1997 does not confer absolute immunity from scrutiny or reassessment where the tax authorities, upon examination, find discrepancies or escaped income; statutory provisions governing reassessment (Sections 147151 and related provisions) and available appellate remedies determine the correctness of proceeding rather than the VDIS declaration per se.