TaxTMI 
TaxTMI 
2006 (1) TMI 159
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.... Rs. 1,93,42,629 while working out the undisclosed income, the assessee pointed out that it made disclosure under section 65 of the VDIS, 1997 before the CIT for a sum of Rs. 150 lakhs in respect of various income relating to the assessment years 1989-90 to 1996-97. This declaration was filed before the CIT on 21-7-1997. The CIT has duly accepted the declaration vide Certificate No. CIT-I-VDIS-97/6605 and has issued the Certificate dated 24-7-1997 and, therefore, the Assessing Officer excluded the sum of Rs. 1,50,00,000 from the total undisclosed income and determined the net undisclosed income at Us. 43,42,629 in the following manner:- "10.0 On considering all the different seized material and the working given by the assessee-company in respect of the disclosure under VDIS '97, in view of the discussion in para-8 above, I find that the correct amount of the gross application on the basis of working submitted based on different annexures, 'Statements and assets up to the period 31-3-1996 works out to Rs. 267.67 lakhs, which is duly shown in the working of VDIS '97 and the notes to the declaration made by the Assessee Company under VDIS '97. Out of the above total application of....
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....nce the taxes have been paid on such income and the Hon'ble CIT has issued certificate; to him with reference to the declaration made. Hence, such income I cannot form part of the total income of the Assessee Company. Therefore, exclude such income of Rs. 1,50,00,000 from the total income in para 10.1 above. Therefore, the balance amount of Rs. 43,42,629 will be charged to tax under section 158BD of the Income-tax Act." 3. The Assessing Officer subsequently issued notice under section 154 of the Act and after noting that there was search and seizure at the residential and office premises of the Directors of the assessee and simultaneously survey under section 133A of the Income-tax Act, 1961 in the case of assessee-company on 23-6-1996 rectified the assessment order passed under section 158BD read with section 158BC withdrawing deduction of Rs. 1.5 crores holding that the deduction from the undisclosed income of Rs. 1.5 crores declared by the assessee under the VDIS was wrongly allowed as the sum was subject-matter of search under section 132 of the Act. The reliance was placed on the decisions of Hon'ble Madras High Court in the case of CIT v. Peirce Leslie & Co. Ltd. [1997] 22....
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....egard, our attention was drawn towards paragraph No. 3.3 of the impugned order which reads as under:- "3.3.......It may be pointed out that provisions of section 158BD of the Act lay mechanism through which a person who has not been searched, can be brought under the purview of Chapter XIV-B if undisclosed income has been detected in his case. Therefore, once a notice under section 158BD has been issued upon an assessee, the other provisions of Chapter XIV-B of the Income-tax Act dealing with search and seizure cases will apply accordingly. Further, the assessee was surveyed under section 133A on the date of search, therefore, even on that count also he is hit by the provisions of section 64(2)(ii) of the VDIS, 1997." 6. It was vehemently submitted that the cases under section 158BD of the Act cannot be treated as cases in which the search and seizure taken place. Therefore, provisions of VDIS, 1997 are applicable to an assessee in whose case action under section 132 or under section 132A of the Act is not taken, but an order under section 158BD is passed. It cannot be regarded a person who had been subject to proceedings under section 132 or section 132A. Section 158BD state....
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....le. In view of the clarification issued by the Board and the fact that the Assessing Officer himself has accepted, the income as disclosed under the VDIS after applying its mind to the facts and circumstances of the case. Thus, there cannot be a mistake apparent on record and order passed under section 154 of the Act must be quashed. 7. On the other hand, the ld. DR contended that the VDIS was not applicable to the assessee as the assessee was subject to the assessment under section 158BD of the Act under Chapter XIV-B of the Act. Chapter XIV-B applies to the assessment relating to the search cases. Thus, mistake was crept in the order. The Assessing Officer rightly rectified the order, under section 154 of the Act when he noted the mistake apparent on record. The material found during the course of search, was directly related to the assessee and, therefore, the assessee was not competent to make disclosure under the VDIS, 1997. Reliance was placed on the order of the Assessing Officer, especially to the Circular No.755 issued by the CBDT dated 25-7-1997, question No. 29 of this Circular states as under:- "Q.No. 29: A search under section 132 of the Income-tax Act bars a per....
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.... reside at the same premises where the search has taken place in the case of the Directors. Whether any statement has been recorded during the course of the search on behalf of the assessee-company. Since the word 'and' had been used in Question No.29, therefore, both the conditions that 'the other persons in whose case search warrant is not issued must reside at the same premises' and 'their statements must be recorded during the course of search' must be complied with only then question No. 29 can be applied. 10. Now coming to the question No.6, which relates to the clarification made by the CBDT to the ASSOCHAM in the meeting held on 23-7-1997, at New Delhi, this question-answer is directly related to the VDIS. For the clarity, this question-answer is reproduced as under:- "Q.6 Section 64(2)(ii) prohibits disclosure of income in respect of the previous year in which a search under section 132 was initiated or in respect of earlier previous years. This implies restriction in the case of a person in whose case search proceedings are initiated under section 132 by issue of search warrant. Keeping this in view, can disclosure be made for the earlier years, in a case which is i....