KHANDELWAL OIL INDUSTRIES VS COMMISSIONER OF INCOME-TAX, 1998 PTD-MADHYA-PRADESH-HIGH-COURT-INDIA 3437 (1996)

Income-tax--.

----Voluntary disclosure of income---Scope of scheme ---Assessee's choice about quantum, date and year of assessment should normally be accepted-- Indian Voluntary Disclosure of Income and Wealth Ordinance, 1975.

Under the voluntary disclosure scheme., as the disclosure is voluntary in nature and intended to confer benefit on the person making the disclosure, the disclosure should be applied according to the wishes of the person disclosing the same. The Voluntary Disclosure of Income and Wealth Ordinance, 1975, does not confer any discretion on the Department. The Ordinance begins with the expression "Voluntary disclosure". The choice of the person concerned should, therefore, reign supreme. This choice about the quantum, date and year of assessment should normally be accepted.

The assessee was a registered firm. For the assessment year 1974-75, it filed its return on June 30, 1974, disclosing a total income of Rs.55,702. While proceedings for assessment were pending before the Income-tax Officer, the assessee made a disclosure of income of Rs.31,600 on December 31, 1975, under the Voluntary Disclosure of Income and Wealth Ordinance, 1975, in respect of the assessment years 1972-73 to 1975-76. During the course of assessment, the Income-tax Officer discovered that the assessee had inflated his purchases to the extent of Rs.33,566. He added the above amount in the income of the assessee. On appeal, the assessee demanded set-off of Rs.31,600 disclosed by it under the aforesaid scheme. The Commissioner of Income-tax (Appeals) set aside the assessment and remanded the case. The Income-tax Officer refrained the assessment and allowed benefit of Rs.7,900, i.e., one-fourth of the declared amount of Rs.31,600. The declared amount was, thus, treated as applicable to four assessment years 1972-73 to 1975-76, as the assessee had not given any bifurcation of the amount year wise. At a later stage, the assessee came forward with a specification and contended that a sum of Rs.31,597 out of the disclosed amount of Rs.31,600 be taken as relating to the assessment year 1974-75. This was not accepted by the Income-tax Officer or the Tribunal. On a reference:

Held accordingly, that the Tribunal was not justified in holding that the assessee could not claim set off at his option and in dividing the amount into four equal parts and considering each part as the income disclosed in respect of the particular assessment year. The date of disclosure logically made the disclosure applicable to the assessment year 1974-75.

Cabell v. Markhan (1945) 148 F 2d 737 ref.

G.M. Chaphekar with Smt. Meena Chaphekar for the Assessee.

D.D. Vyas for the Commissioner.

JUDGMENT

A.R. TIWARI, J.---In compliance with the directions issued by this Court, the Tribunal has stated the case and referred the under noted questions of law arising out of the order passed by the Tribunal in I.T.A. No.21/(Ind) of 198'2, decided on August 2, 1983. connectible with R.A. No.88/(Ind) of 1983 for the assessment year i 974-75 for our consideration and opinion:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee could not claim to set off the entire disclosed income pertaining to the assessment years 1972-73 to 1975-76 against the addition to the income for the assessment year 1974-75?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in dividing the disclosed income of Rs.31,600 into four equal parts and considering each part as the income disclosed in respect of a particular assessment year ?"

The facts lie in a narrow compass.

The assessee is a firm registered under the Partnership Act and under the Income Tax Act for the assessment year 1974-75 for which the accounting year ended on Diwali, 1973. In respect of the assessment year in question, the assessee filed its return on June 30, 1974, disclosing a total income of Rs.55,702. While proceedings for assessment were pending before the Income-tax Officer, the assessee made a disclosure of income o1 Rs.31,600 on December 31, 1975, under the Voluntary Disclosure of Income and Wealth Ordinance, 1975, in respect of the assessment years 1972-73 to 1975-76. During the course of assessment, the Income-tax Officer discovered that the assessee had inflated his purchases to the extent of Rs.33,566. He added the above amount in the income of the assessee. On appeal, the assessee demanded set-off of Rs.31,600 disclosed by it under the aforesaid scheme. The Commissioner of Income-tax (Appeals) set aside the assessment and remanded the case. The Income-tax Officer refrained the assessment and allowed benefit of Rs.7,900, i.e., one-fourth of the declared amount of Rs.31,600. The declared amount was, thus, treated as applicable to four assessment years 1972-73 to ' 975-76, as the assessee had not given any bifurcation of the amount year wise. The assessee contended that credit is required to be given for any one of the four years. The assessee eventually made the bifurcation as noted below:

The aforesaid bifurcation was not accepted and adverse orders were passed. Dissatisfied, the assessee then filed an application under section 256(I) of the Income Tax Act, 1961 (for short, "the Act"). The case was not stated. It, then, filed an application under section 256(2) of the Act. This Court, then, directed the Tribunal to state the case and refer the aforesaid questions. The Tribunal then stated the case and referred the questions.

We have heard Shri G.M. Chaphekar, learned Senior Advocate, with Smt. Meena Chaphekar for the applicant and Shri D.D. Vyas, learned counsel for the non applicant Department.

The Commissioner of Income-tax, Bhopal, issued a certificate in favour of the assessee showing a disclosure of the amount as Rs.31,600. This amount is built up of Rs.21,130 as cash, Rs.8,890 as tax paid and RS.1,58Q as security (Annexure "D"), In this certificate, dated October 5, 1976, the assessment years are mentioned as 1972-73 to 1975-76. No effort was made to ask the assessee to specify a particular year or to state whether credit is sought in respect of all these four years. At a later stage, the assessee came forward with a specification and contended that a sum of Rs.31,597 out of the disclosed amount of Rs.31,600 be taken as relating to the assessment year 1974-75. As the disclosure is voluntary in nature and is intended to confer benefit on the person making the disclosure, the disclosure should be applied according to the wishes of the person disclosing the same. The Ordinance does not seem to "confer any different discretion on the Department". As it is luculent, the Ordinance begins with the expression like "Voluntary disclosure". That being so, it cannot be permitted to be applied contrary to the wishes of the person disclosing the same.

The dictionary meaning of the word "voluntary" is---"acting by choice, able to will: proceeding from the will: spontaneous free: done or made without compulsion or legal obligation: designed, intentional, freely given: or supported by contributions freely given: free from state control: subject to the will: of or pertaining to voluntarism: one who does anything of his own free-will: In our view, the choice of the person concerned should, therefore, reign supreme. This choice about the quantum, date and year of assessment should normally be accepted. The Department has shown nothing to show as to why the choice indicated by the assessee should be spurned.

It is not shown to us that the Department has any right to divide the amount by the number of assessment years to take such amount for the purpose of adjustment. When the assessee intended it to be substantially--for the assessment year 1974-75, then, a different yardstick as--used in impermissible in law.

It is in the area of legislative ambiguities, yet not receding, the Courts have to fill gaps, clear doubts and mitigate hardships. In the words of judge Leered Hand, spoken in Cabell v. Markhan (1945) 148 F 2d 737, 739, we get enough light to locate the correct path:

"It is one of surest indexes of a , mature and developed jurisprudence ...to remember the statutes always have some purpose or object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning."

In view of the aforesaid position, we answer questions Nos. l and 2 in the negative, i.e., in favour of the assessee and against the Department. It is thus, clear that the Tribunal was not justified in holding that the assessee could not claim set off as per his option and the Tribunal was not justified in dividing the amount into four equal parts and consider each part as the income disclosed in respect of the particular assessment year. The date of disclosure logically makes the disclosure applicable to the assessment year.

This miscellaneous civil case is thus, decided in favour of the assessee and against the Department but without any orders as to costs. Counsel fee is, however, fixed at Rs.750 for each side, if certified.

Transmit a copy of this order to the Tribunal for further action, if necessary, in conformity with law.

M.B.A./1602/FC Order accordingly.