Vildirect: IncomeTax-caselaws-1981-VIL-30-SC-DT

1981-VIL-30-SC-DT

Equivalent Citation: [1981] 130 ITR 244 (SC)

Supreme Court of India

Date: 08.05.1981

JAMNAPRASAD KANHAIYALAL

COMMISSIONER OF INCOME-TAX, MP

BENCH

Judge(s) : A. P. SEN., E. S. VENKATARAMAIAH. and R. S. PATHAK.

JUDGMENT

2. Inasmuch as we are of the opinion that certain questions of law, on which there is a conflict of judicial opinion among the various High Courts, do arise out of the order of the Appellate Tribunal, we draw up an agreed statement of the case for submission to the Supreme Court of India, New Delhi, under s. 257 of the I.T. Act, 1961, and place the same before the President of the Income-tax Appellate Tribunal for referring the same direct to the Supreme Court.

3. The assessee is a partnership firm which carries on business in cloth at Itarsi. The present reference application relates to the assessment of this assessee for the assessment year 1967-68, for the previous year ending Diwali, 1966. For this year, the assessee returned an income of Rs. 20,137. On scrutiny of the balance-sheet and the accounts of the assessee, the ITO came across the following cash credits in the names of the following five persons, who are all sons of the partner, Kanhaiyalal, and brothers of the other partners of the assessee-firm :

	Rs.
1. Master Sailendra kumar	9,250
2. Master Satish kumar	9,250
3. Master Sunil kumar	9,250
4. Master Swatantra kumar	9,250
5. Master Santosh kumar	9,250
Total	46,250

The ITO called upon the assessee to prove the genuineness and the sources of these credits with necessary evidence. It was explained on behalf of the assessee that the amount credited in the names of these persons represented the amounts disclosed by them or on their behalf under the voluntary disclosure scheme under s. 24 of the Finance (No. 2) Act of 1965. The ITO was of the opinion that under s. 24 of the Finance (No. 2) Act of 1965, what was to be disclosed was the business income of any person chargeable to income-tax which he failed to do under s. 22(1) of the Indian I.T. Act, 1922, or under s. 139(1) of the I.T. Act, 1961, or which he had failed to disclose in the return of income filed earlier. In the instant case, the ITO noticed that the age of the five creditors as on the dates of assessment and in the year 1965 were as under:

Names of creditors	Age in 1971	Age in 1965
1. Master Sailendra kumar	11 years	5 years
2. Master Satish kumar	13 ,,	7 ,,
3. Master Sunil kumar	15 ,,	9 ,,
4. Master Swatantra kumar	22 ,,	16 ,,
5. Master Santosh kumar	24 ,,	18 ,,

In the light of the above mentioned ages of the persons, and their very close relationship to the partners of the assessee-firm the ITO requested the assessee to adduce evidence in support of its argument that any business was ever carried on by any of these minors, the income from which could have been available for disclosure. He also examined on oath Shri Kanhaiyalal, who was the father of these five persons and a partner in the assessee-firm. He found that Kanhaiyalal could not satisfactorily explain the income allegedly earned by the minors. On a consideration of the evidence of Shri Kanhaiyalal and of the facts mentioned above, and the fact that the minors did not carry on any business of their own, the ITO concluded that the money could not but be the undisclosed income of the assessee-firm which it had credited in the names of the sons of its main partner, Shri Kanhaiyalal, to avoid higher rate of taxation. He held that the source and genuineness of the above credits amounting to Rs. 46,250 was not proved by the assessee-firm and that it should be treated as the income of the assessee from undisclosed sources. He, accordingly, added this sum of Rs. 46,250 as the income of the assesseefirm from undisclosed sources and determined the total income of the assessee at Rs. 79,112 under section 143(3) of the Act.

4. The assessee appealed to the AAC objecting, inter alia, to the said addition of Rs. 46,250 as its income.

5. Accepting the contentions of the assessee, the AAC held that the ITO was not right in ignoring the voluntary disclosures made by these five creditors under the Finance (No. 2) Act of 1965. He also relied on the order of the Appellate Tribunal, Delhi Bench 'C', in the case of Indian Book Depot v. ITO, Dist. V(7), N. Delhi, reported in [1972] Tax. XXXII (6)-103. In this view, he deleted the entire addition of Rs. 46,250 from the income of the assessee.

6. Aggrieved by this order of the AAC, the department filed an appeal to the Appellate Tribunal.

7. On behalf of the revenue, reliance was placed on the statement of Shri Kanhaiyalal who was the main partner of the assessee-firm as well as the father of the five creditors, mentioned above. It was further contended that the declarations made by the five creditors before the Commissioner of Income-tax under s. 24 of the Finance (No. 2) Act of 1965, would be of no avail to the assessee to claim immunity from taxation, if it was found by the department that the impugned credits were not genuine. It was, therefore, argued that the AAC was not justified in deleting the addition of Rs. 46,250 made by the ITO and that the order of the AAC deserved to be reversed in this regard and that the addition made by the ITO ought to be restored.

8. On behalf of the assessee, the learned counsel, Shri B. M. Gupta, relied on a number of decisions of this Bench and of the Indore Bench of the Income-tax Appellate Tribunal and also on a decision of the Madhya Pradesh High Court in the case of Surajben Patel v. CIT reported in January, 1973, Part of M. P. L. J. (Short Notes). It was further contended that since the department had accepted the voluntary disclosures in the case of the five creditors and since the deposits were made by them after paying the taxes on such declarations, the assessee had discharged its onus of proving the source as well as the genuineness of the credits in question and that there was no justification for the department to disbelieve the said declarations and rely on the oral testimony of Kanhaiyalal who had no locus standi to give evidence in the way he did. The learned counsel, therefore, contended that the order of the AAC was correct and in conformity with the various decisions of the Appellate Tribunal and, that, therefore, it should be upheld.

9. The Appellate Tribunal held that the assessee was a partnership firm consisting of Kanhaiyalal and his major sons, Rajkumar, Swatantrakumar and Santoshkumar and one minor son, Satishkumar, who was admitted to the benefits of the said partnership. After considering the relevant portion of the statement of Shri Kanhaiyalal, the Tribunal held that the said statement conclusively established that none of his sons in whose names the impugned deposit appeared in the firm's books had any source of income at any time and that actually Shri Kanhaiyalal had stated that he did not know how these amounts came to his children. The Appellate Tribunal, therefore, concluded that it was clear that the assesseefirm had failed to prove the nature and source of the credits amounting to. Rs. 46,250 appearing in its books in the names of these five persons. The Appellate Tribunal also repelled the distinction sought to be drawn by the learned counsel for the assessee between the deposits in the name of Shri Swatantrakumar and Shri Santoshkumar as of no substance. The Tribunal pointed out that Shri Kanhaiyalal was examined with reference to the genuineness of the credits appearing in the firm's books, that he was the senior partner and that taking the evidence as a whole, it was clear that the assessee-firm failed to discharge the burden of proof cast on it by s. 68 of the I.T. Act, 1961, in regard to the nature and source of the impugned credits. The Tribunal accepted the contention of the revenue that the declarations made by the five creditors under the Voluntary Disclosure Scheme under s. 24 of the Finance (No. 2) Act of 1965, would not stand in the way of the department assessing the impugned credits in the hands of the assessee-firm. In support of their conclusion, the Appellate Tribunal relied on the decision of the Gujarat High Court in .Manilal Gafoorbhai Shah v. CIT reported in [1974] 95 ITR 624. The Tribunal further pointed out that the decision of the Madhya Pradesh High Court relied on by the assessee did not touch the point at issue and as such did not apply to the facts of the present case. The Tribunal also declined to entertain the alternative plea of the counsel of the assessee for remanding the case to the AAC, to consider whether the unexplained cash credits, even if considered as the assessee's own income, could be deemed to be fully covered by the intangible additions made to the income of the assessee in the earlier assessments, as the assessee did not take any such plea in the grounds of appeal before the AAC, and as it was sought to be urged for the first time before the Appellate Tribunal. The Tribunal pointed out that it was not permissible for the assessee to raise such a plea in an appeal filed by the department, without even filing a cross-objection raising the alternative plea for set-off of past intangible additions against the impugned credits. In this view, the Appellate Tribunal allowed the revenue's appeal and restored the addition of Rs. 46,250 made by the ITO.

10. On the above facts, the assessee has raised the following questions, as questions of law, arising out of the order of the Appellate Tribunal :

" 1. Whether, on the facts and in the circumstances of the case, and the declarations made by Sailendrakumar, Satishkumar, Sunilkumar, Swatantrakumar and Santoshkumar under the Finance (No. 2) Act of 1965, and accepted as such by the Commissioner of Income-tax, there is justification in law in holding that the sums amounting to Rs. 46,250 credited to their accounts existing in the books of the applicant-firm was income of the applicant-firm from undisclosed sources ?

2. Whether, on the facts and in the circumstances of the case, it was open to the revenue authority to investigate into the genuineness of the deposits aggregating to Rs. 46,250 and record a finding in regard thereto when the disclosure petition made by the five depositors referred to in para. 2 of the order u/s. 24 of the Finance Act (No. 2) of 1965 has been acted upon and accepted by the revenue authorities ?

3. Whether there is material and evidence on record to come to the conclusion that the amount of Rs. 46,250 was the income of the applicant-firm from undisclosed sources ?

4. Whether, on the facts and in the circumstances of the case, there is justification in law to hold that the applicant-firm had failed to prove the nature and source of the credits amounting to Rs. 46,250 in the accounts of the aforesaid five parties ?

5. Whether on the evidence on record there is justification and material to come to the inference that the aforesaid credits of Rs. 46,250 were the income of the applicant-firm ?

6. Whether the Appellate Tribunal committed an error in not relying on the decision of the Madhya Pradesh High Court in the case of Surajben Patel v. CIT reported in January, 1973 Part of M. P. L. J. ?

7. Whether the Tribunal committed an error of law in not acceding to the request of the applicant for sending the case back to the Appellate Assistant Commissioner for further investigation on the point ? "

11. At the time of hearing of this reference application, Shri B. L. Nema, the learned counsel for the assessee, brought to our notice the following three decisions :

1. Rattanlal v. ITO, C. W. No. 927 of 1973, decided on 1-3-1974, by the High Court of Delhi and reported in [1975] 98 ITR 681.

2. Badri Pd. and Sons v. CIT (I.T.R. No. 40 of 1972, dated 12-9-1973) reported in [1975] 98 ITR 657 (All).

3. Aminchand Payarilal v. ITO reported in [1973] 87 ITR 305 (Cal).

The learned counsel pointed out that the decisions of the Delhi and Calcutta High Courts were in favour of the assessee, while the decisions of the Gujarat High Court and Allahabad High Court were against the assessee. In view of this conflict of decisions of the various High Courts, he contended that the questions raised by him in the reference application are questions of law which should be referred for the decision of the Madhya Pradesh High Court.

12. We have carefully looked into these decisions. The Calcutta High Court decision reported in [1973] 87 ITR 305 (Aminchand Payarilal v. ITO) dealt with a case of Voluntary Disclosure of Income under s. 68 of the Finance Act of 1965. The other three decisions dealt with cases of Voluntary Disclosure of Income under s. 24 of the Finance (No. 2) Act, 1965. We agree with the learned counsel for the assessee that there is a conflict of decisions of the various High Courts as pointed out by him. Though the full text of the judgment of the Allahabad High Court is not made available to us, the said decision appears to have been considered in detail by their Lordships of the Delhi High Court. In view of the abovementioned conflict in the decisions of the four High Courts, we consider it expedient that a reference should be made direct to the Supreme Court under s. 257 of the I.T. Act, 1961. Accordingly, we refer the following two questions of law which bring out the real points at issue for the decision of the Supreme Court:

" 1. Whether, on the facts and in the circumstances of the case, it was open to the revenue authorities to investigate into the genuineness of the five credits aggregating to Rs. 46,250 and record a finding in regard thereto, when the disclosure petitions made by the five creditors under s. 24 of the Finance (No. 2) Act, 1965, had been acted upon by the revenue authorities ?

2. If the answer to the first question is in the negative and in favour of the assessee, whether the addition of Rs. 46,250 to the income of the assessee as representing its income from undisclosed sources, for the assessment years 1967-68, is valid and justified in law ?"

13. Copies of the draft statement of the case were sent to the assessee and the Commissioner. Both sides agree that the facts have been correctly set out in the statement of the case.

14. The learned counsel for the applicant agreed to produce certified copies of the judgments of the High Courts of Delhi and Allahabad , to furnish the requisite number of copies for the reference of the Supreme Court, if these decisions are not reported in any of the official law reports, by the time this reference comes up for hearing before the Supreme Court.

S. T. Desai, Senior Advocate (B. L. Nema and K. J.John, Advocates, with him), for the assessee.

V. S. Desai, Senior Advocate (Champat Rai and Miss A. Subhashini, Advocates, with him), for the Commissioner.

JUDGMENT

[PATHAK J. delivered a separate judgment. The judgment of SEN and VENKATARAMIAH JJ. was delivered by SEN J.]

SEN J.-This is a direct reference under s. 257 of the I.T.. Act, 1961, made by the I.T. Appellate Tribunal, Jabalpur (for short, the Appellate Tribunal), at the instance of the assessee. The reference is necessitated due to divergence of opinion, as reflected in the various decisions of different High Courts, with respect to the scope and effect of the Voluntary Disclosure Scheme under s. 24 of the Finance (No. 2) Act, 1965 (" the Act for short).

The assessee, M/s. Jamnaprasad Kanhaiyalal, is a partnership firm. The firm consists of 4 partners, namely, Kanhaiyalal and his 3 major sons, Rajkumar, Swatantrakumar and Santoshkumar with his Minor son, Satishkumar, admitted to the benefits of the partnership. In the course of assessment proceedings for the assessment year 1967-68, the relevant accounting year of which was the year ending Diwali, 1966, the Income-tax Officer (ITO, for short) noticed in the books of account of the assessee five cash credits of Rs. 9,250 each, in the names of the five sons of Kanhaiyalal, as detailed below:

		Rs.
Sailendra kumar	5 yrs	9,250
Satish kumar	9 yrs	9,250
Sunil kumar	7 yrs	9,250
Swatantra kumar	16 yrs	9,250
Santosh kumar	18 yrs	9,250
		46,250

The ITO, accordingly, called upon the assessee to explain the genuineness as well as the source of the cash credits. On being questioned, Kanhaiyalal, the managing partner, disavowed all knowledge as to the capacity of the creditors to advance the amounts in question. On the contrary, he admitted that the creditors had no independent source of income of their own. In fact, he further stated that he could not explain the source of the cash credits.

It was contended before the ITO that the creditors having made voluntary disclosures under the Voluntary Disclosure Scheme and the disclosures made by them having been accepted by the Commissioner and tax paid thereon, the amount of Rs. 46,250 could not be treated as income of the assessee from undisclosed sources. The ITO, however, held that the disclosures made under the scheme granted immunity from further taxation only to the declarant, and not to a person to whom the income actually belonged. He further held that the assessee having failed to prove the genuineness and source of the cash credits, the amount of Rs. 46,250 credited in the books of account of the assessee in the names of the creditors, who had no income of their own, must be treated as the assessee's income from undisclosed sources. According to him, such cash credits were created in their names after making false declarations under the scheme, with a view to avoid a higher rate of taxation. He, accordingly, made an addition of Rs. 46,250 as the assessee's income from undisclosed sources.

The AAC disagreed with the ITO, holding that when an amount was disclosed by a person under s. 24 of the Act, there was an immunity not only as regards the declarant, but there was also a finality as to the assessment. In his view, the entire, statement of Kanhaiyalal had to be ignored, as it was not clear in what capacity the questions were put to him and the answers elicited because any investigation into the source of the deposits was prohibited and illegal under the Act. He accordingly held that the acceptance of the voluntary disclosures made by the creditors in question to the Commissioner and the payment of tax thereon precluded the department from disputing that the income belonged to the said creditors and as the same income cannot be taxed twice, once in the hands of the creditors and again in the hands of the assessee, the order passed by the ITO in that behalf was unsustainable. The AAC, therefore, directed the deletion of Rs. 46,250. The department went up in appeal before the Appellate Tribunal.

The Appellate Tribunal, however, disagreed with the AAC and upheld the decision of the ITO. It was of the opinion that the ITO was justified in treating the cash credits appearing in the books of account of the assessee in the names of the creditors as unexplained cash credits, since it was found that the income declared by the creditors did not belong to them, and there was nothing to prevent the same being taxed in the hands of the assessee to which it actually belonged. According to the Tribunal, the immunity under s. 24 of the Act was conferred on the declarant only, and there was nothing to preclude an investigation into the true nature and source of the credits. The Appellate Tribunal, after taking into consideration the statement of Kanhaiyalal, and having regard to the age of the creditors and the fact that none of them had any independent source of income at any time, held that the ITO was justified in holding that the assessee failed to discharge the burden of proof under s. 68 of the I.T. Act, 1961, in regard to the nature and source of the cash credits and, therefore, it had to be treated as the assessee's income from undisclosed sources. Thereupon, the assessee applied to the Appellate Tribunal under s. 256 of the I.T. Act, 1961, to refer the question of law arising out of its order, to the Madhya Pradesh High Court for its opinion.

There being a conflict of opinion between the different High Courts as to the true nature of the immunity granted under s. 24 of the Act, the Appellate Tribunal has made a reference under s. 257 of the I.T. Act, 1961, to this court, of the following questions of law, for its opinion, namely:

" 1. Whether, on the facts and in the circumstances of the case, it was open to the revenue authorities to investigate into the genuineness of the five credits aggregating to Rs. 46,250 and record a finding in regard thereto, when the disclosure petitions made by the five creditors under section 24 of the Finance (No. 2) Act, 1965, had been acted upon by the revenue authorities ?

The main question in controversy lies within a narrow compass. The question, in fact, is whether the provisions of s. 24 of the Act can be construed as conferring any benefit, concession or immunity on any person other than the person making the declaration under the provisions of the Act. It may be mentioned that to avoid any room for doubt, the Legislature has introduced s. 18 in the Voluntary Disclosure of Income and Wealth Act, 1976 (Act No. 8 of 1976), which specifically provides that save as otherwise provided in the Act, nothing contained in the Act shall be construed as conferring any benefit, concession or immunity on any person other than the person making the declaration under the provisions of the Act. The question for consideration is whether the absence of such a provision as is found in Act No. 8 of 1976 leads to the consequence that acceptance of a declaration under s. 24 of the Act confers a benefit which is not provided by the Act on a person other than the declarants and takes away the power of the ITO under s. 68 of the I.T. Act, 1961, to make an investigation as to the nature and source of a cash credit appearing in the books of the assessee to reject the explanation offered by the assessee as unsatisfactory and to treat it as his income from undisclosed sources.

Section 24 of the Finance (No. 2) Act, 1965, provided for the making of voluntary disclosures in respect of amounts representing income chargeable to tax under the Indian I.T. Act, 1922, or the I.T. Act, 1961, for any assessment year commencing on or before April 1, 1964. On such disclosure being made under sub-s. (1) thereof, in the manner provided by subs. (2), the amount was to be charged to income-tax in accordance with subs. (3), which provided by a legal fiction that income-tax shall be charged on the amounts of voluntarily disclosed income at certain specified rates " as if such amount were the total income of the declarant ". There was safeguard provided in sub-s. (4) that the benefit under the scheme would be available only in respect of the voluntarily disclosed income and not in respect of the amount detected or deemed to have been detected by the ITO before the date of declaration. When the Commissioner passed an order under sub-s. (4) there was an appeal provided to the CBR under sub-s. (5) and the Board was empowered under sub-s. (6) to pass such orders thereon as it deemed fit. There was a finality attached to the order of the Board under sub-s. (8).

In support of the reference, learned counsel for the assessee has, in substance, put forth a three-fold contention. It is submitted, firstly, that the ITO could not have treated the cash credits standing in the names of the sons of Kanhaiyalal, the managing partner, as the assessee's income from undisclosed sources, having regard to the fact that each one of them had made a declaration under sub-s. (1) and paid tax thereon under subs. (3). The submission is that it is not permissible for the department to go into the question of the nature and source of the amount so declared in a voluntary disclosure under s. 24 of the Act, and to say that it does not represent the income of the declarant. Secondly, it is urged that sub-s. (1) read with sub-s. (3) of s. 24 of the Act has an overriding effect over s. 68 of the I.T. Act, 1961, and, therefore, the ITO could not make any investigation as to the nature and source of the cash credits, and, thirdly, it is submitted that there cannot be double taxation of the same income, once in the hands of the creditors and again in the hands of the assessee. These submissions proceed on a wrongful assumption that there is a finality attached under sub-s. (8) to the legal fiction, created by sub-s. (3) for which there is no basis whatever. The contentions cannot, in our opinion, prevail.

For an appreciation of the contentions raised, it is necessary to set out the relevant provisions of s. 24 of the Act. Sub-s. (1), in so far as relevant, reads :

(1) Subject to the provisions of this section, where any person makes, on or after the 19th day of August, 1965, and before the 1st day of April, 1966, a declaration in accordance with sub-section (2) in respect of the amount representing income chargeable to tax under the Indian Incometax Act, 1922 (11 of 1922), or the Income-tax Act, 1961 (43 of 1961), for any assessment year commencing on or before the 1st day of April, 1964

(a) for which he has failed to furnish a return within the time allowed under section 22 of the Indian Income-tax Act, 1922 (11 of 1922), or section 139 of the Income-tax Act, 1961 (43 of 1961), or

(b) which he has failed to disclose in a return of income filed by him on or before the 19th day of August, 1965, under the Indian Incometax Act, 1922 (11 of 1922), or the Income-tax Act, 1961 (43 of 1961), or

(c) which has escaped assessment by reason of the omission or failure on the part of such person to make a return under either of the said Acts to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment,

he shall, notwithstanding anything contained in the said Acts, be charged income-tax in accordance with sub-section (3) in respect of the amount so declared or if more than one declaration has been made by person the aggregate of the amounts declared therein, as reduced by any amount specified in any order made under sub-section (4) or, if such amount is altered by an order of the Board under sub-section (6), then, such altered amount ............"

Sub-section (3), containing the legal fiction, reads as follows

" (3) Income-tax shall be charged on the amount of the voluntarily disclosed income (a) where the declarant is a person other than a company, at the rates specified in Paragraph A, and

(b) where the declarant is a company, at the rates specified in Paragraph F,

of Part I of the First Schedule to the Finance Act, 1965 (X of 1965), as if such amount were the total income-of the declarant..."

Sub-section (8), on which strong reliance is placed, runs thus:

" (8) An order under sub-section (6) shall be final and shall not be called in question before any court of law or any other authority. "

The crux of the matter is whether the provisions of s. 24 of the Act can be construed as conferring any benefit, concession or immunity on any person other than the person making the declaration under the provisions of the Act. The question is whether the non obstante clause contained in sub-s. (1) of s. 24 of the Act precludes the department from proceeding against the person to whom the income actually belonged. The contention that there was an immunity not only as regards the declarant, but there was also a finality as to the assessment under s. 24 of the Act, stems from a misconception of the nature and scope of the Voluntary Disclosure Scheme.

Under sub-s. (1) of s. 24, a person was required to make a voluntary disclosure in respect of the amount representing the income chargeable to tax under the Indian I.T. Act, 1922, or the I.T. Act, 1961, for any assessment year commencing on or before April 1, 1964. Sub-section (1) makes it clear that the declarations, which were expected to be made in the manner provided by sub-s. (2), were with regard to the income which was chargeable to tax under the I.T. Act of 1922 or 1961, but which was not disclosed at the proper time. Neither under the Act of 1922 nor under the Act of 1961, was a person required to submit a return with regard to the income which was either not earned or deemed to have been earned by him. It, therefore, follows that the declarations under sub-s. (2) of s. 24 had to relate to income actually earned by him. The scheme only permitted the bringing forward of income to tax; it did not require investigation of the claim of the declarant. If a person made a declaration the Commissioner was under an obligation to assess him to tax.

In respect of the voluntary disclosures made, a declarant acquired an immunity from further investigation as to the nature and source of the income. He also acquired certain benefits. One of the distinctive features of the scheme was that tax was chargeable on the whole of the disclosed income taken as a single block at rates prescribed for personal income or for corporate income under the Act, and not at an ad hoe concessional rate. Further, facilities were allowed for payment of tax in appropriate instalments extending over a period not exceeding four years, subject to a down payment of not less than 10% of the tax due and furnishing a security in respect of the balance. Income which had already been detected on the material available prior to the date of disclosure was, however, to be assessed under the regular provisions of the I.T. Act and not under the scheme. Any admissions made by a person in the declarations filed by him under the scheme in respect of such income were not to be used in assessing that income under the I.T. Act. Under the scheme, the disclosed income was not to be subjected to any further proceedings of assessment. The identity of the declarant was not to be revealed and he was also immune from penalty and prosecution for the past concealment of the disclosed income. It is, therefore, obvious that the Act granted immunity only to the declarant alone and not to other persons to whom the income really belonged.

The scheme of the Act makes it abundantly clear that it was to protect only those who preferred to disclose the income they themselves had earned in the past and which they had failed to disclose at the appropriate time.. It is undoubtedly true that the Act was brought on the statute book to unearth the unaccounted money. But there is no warrant for the proposition that by enacting the same, the Legislature intended to permit, or connive at, any fraud sought to be committed by making benami declarations. If the contentions were to be accepted, it would follow that an assessee in the higher income group could, with impunity, find out a few near relatives who would oblige him by filing returns under s. 24 of the Act disclosing unaccounted income of the assessee as their own and claiming that the said income was kept by them in deposit with the assessee.

That takes us to the contention based on the legal fiction contained in sub-s. (3) of s. 24 of the Act and the finality of the assessment by virtue of sub-s. (8) thereof. The legal fiction contained in sub-s. (3) of s. 24 of the Act, construed in the light of the other provisions, must mean that the income voluntarily disclosed shall be deemed to be the income of the declarant. The words " as if such income were the total income of the declarant " can only mean that even though the income did not actually belong to the declarant it would be treated to be his income for purposes of payment of income-tax under the scheme. If, therefore, a person made false declaration with regard to income not earned by him, it is difficult to comprehend how the department could be prevented from proceeding against the person to whom the income actually belonged and during the course of whose assessment the concealed income is detected. It, therefore, logically follows that on a disclosure being made, the amount was not to be charged to income-tax in accordance with sub-s. (3) of s. 24 of the Act, taking the disclosed income as the taxable income of the declarant.

The immunity under s. 24 of the Act was conferred on the declarant only, and there was nothing to preclude an investigation into the true nature and source of the credits. The ITO was, therefore, justified in treating the cash credits in the books of account of the assessee in the names of the creditors as unexplained cash credits. The finality under sub-s. (8) is to the order of the CBR under sub-s. (6). Under sub-s. (4), the Commissioner was required, within thirty days, if satisfied that the whole or any part of the income declared had been detected or deemed to have been detected by the ITO prior to the date of declaration, to make an order in writing to that effect and forward a copy thereof to the declarant. Any person who objected to such an order could appeal under sub-s. (5) to the CBR stating the grounds for such an objection. The Board was empowered to pass such orders as it thought fit under sub-s. (6). This order of the Board under sub-s. (6) was final and conclusive by reason of sub-s. (8). Thus, the finality under sub-s. (8) was to the order of the Board under sub-s. (6) of s. 24 and not to the assessment of tax made on the declarations furnished by the creditors under the scheme, by virtue of the legal fiction contained in sub-s. (3) of s. 24 of the Act.

The next question that calls for determination is whether the non obstante clause contained in sub-s. (1) of s. 24 of the Act precludes the department from proceeding against the person to whom the income actually belonged. Under sub-s. (1) of s. 24, the declaration was required to be made in respect of the amount which represented the income of the declarant. The declaration could not be made in respect of an amount which was not the income of the declarant. If, therefore, a person made a false declaration with respect to an amount which was not his income, but was the income of somebody else, then there was nothing to prevent an investigation into the true nature and source of the said amount. There was nothing in s. 24 of the Act which prevented the ITO, if he was, not satisfied with the explanation of an assessee about the genuineness or source of an amount found credited in his books, in spite of its having already been made the subject of a declaration by the creditor and then taxed under the scheme. We find no warrant for the submission that s. 24 had an overriding effect over s. 68 of the I.T. Act, 1961, in so far as the persons other than the declarants were concerned.

In our judgment, the legal fiction created by sub-s. (3) of s. 24 of the Act by virtue of which the amount declared by the declarant was to be charged to income-tax " as if such amount were the total income of the declarant " was limited in its scope, and it cannot be invoked in assessment proceedings relating to any person other than the person making the declaration under the Act so as to rule out the applicability of s. 68 of the I.T. Act, 1961.

The last question that remains is whether the same income cannot be taxed twice, once in the hands of the creditors and again in the hands of the assessee. In a case of this description, there is no question of double taxation. The situation is of the assessee's own making in getting false declarations filed in the names of the creditors with a view to avoid a higher slab of taxation. Once it was found that the income declared by the creditors did not belong to them, there was nothing to prevent the same being taxed in the hands of the assessee to which it actually belonged.

It follows that the decisions of the Gujarat High Court in Manilal Gafoorbhai Shah v. CIT [1974] 95 ITR 624, of the Allahabad High Court in Badri Pd. and Sons v. CIT [1975] 98 ITR 657 and Pioneer Trading Syndicate v. CIT [1979] 120 ITR 5 [FB] and of the Madhya Pradesh High Court in Addl. CIT v. Samrathmal Santoshchand [1980] 124 ITR 297, which lay down the true scope of the Voluntary Disclosure Scheme under s. 24 of the Act, must be upheld. The decisions of the Delhi High Court in Rattan Lal v. ITO [1975] 98 ITR 681 and Shakuntala Devi v. CIT [1980] 125 ITR 18 and of the Jammu & Kashmir High Court in Mohd. Ahsan Wani v. CIT [1977] 106 ITR 84, taking a view to the contrary, are overruled.

The ITO was entitled to determine whether the amount disclosed was or was not the income of the declarant, while dealing with the case of another assessee under s. 68 of the I.T. Act, 1961. The legal fiction created by sub-s. (3) of s. 24 was restricted to the voluntary disclosure scheme itself. The protection enjoyed by the declarant under that scheme extended only to the amounts so declared being not liable to be added, in any assessment, of the declarant. There was no absolute finality attached to the declaration especially when the nature and source of the sum declared was being determined for the purpose of its inclusion in the income of an assessee other than the declarant. There was, therefore, nothing which prevented the ITO from investigating into the nature and source of the sums credited in the books of account of an assessee and reject his explanation to the effect that the sums belonged to the persons who had made declarations about them under s. 24 of the Act.

Accordingly, the reference must be answered in favour of the revenue and against the assessee. Our answer to the first question is that the legal fiction created by sub-s. (3) of s. 24 of the Finance (No. 2) Act, 1965, by virtue of which the amounts disclosed by the declarants had to be charged to income-tax " as if such amount were the total income of the declarants " was limited in its scope and could not be invoked in the assessment proceedings relating to the assessee in whose books of account the cash credits appear. The answer to the first question is sufficient to dispose of the second. On the construction placed on sub-s. (3) of s. 24 of the Act, it must also be held that the ITO was justified in treating the cash credits appearing in the books of account of the assessee, amounting to Rs. 46,250, as the assessee's income from undisclosed sources, since the assessee failed to discharge the burden of proof placed upon it under s. 68 of the I.T. Act, 1961. The Commissioner shall be entitled to his costs of the reference.

PATHAK J.-I agree. The acceptance of a disclosure statement made by a declarant under s. 24 of the Finance (No. 2) Act, 1965, cannot confer immunity on another person from tax liability in respect of the same sum of money. As was held by this court in Ahmed Ibrahim Sahigra Dhoraji v. CWT (Civil Appeals Nos. 1217-1222 of 1973, decided on 7-4-1981), [1981] 129 ITR 314, the liability imposed under s. 24 of the Finance (No. 2) Act, 1965, is identifiable with the income-tax liability under the I.T. Act. The scheme for voluntary disclosure of income and its taxation is only another mode provided by law for imposing income-tax and recovering it. Consequently, the general principles which apply to assessments made under the I.T. Act would, except for provisions to the contrary, be applicable to assessments made under s. 24 of the Finance (No. 2) Act, 1965. Accordingly, when the assessment to income-tax is made under the latter enactment, it will be governed by the general principle that a finding recorded therein governs only the particular person assessed. The jurisdiction of an ITO when making an assessment is concerned primarily with the issue whether the receipt under consideration constitutes the income of the assessee before him. Any finding reached by the ITO touching a person, not the assessee, in the process of determining that issue, cannot be regarded as an operative finding in favour of or against such person. The only exception to this rule centres on the limited class, and for the limited purpose, defined by this court in ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335, 346. Viewed in the light of that principle it is apparent that the finality enacted by sub-s. (8) of s. 24 of the Finance (No. 2) Act, 1965, attaches to the assessment of the declarant only. It cannot in law operate, in favour of or against any other person.

I am of opinion that the making of an assessment against a declarant on his disclosure statement under s. 24 of the Finance (No. 2) Act, 1965, cannot deprive an ITO of jurisdiction to assess the same receipt in the hands of another person if, in a properly constituted assessment proceeding under the I.T. Act, the receipt can be regarded as the taxable income of such other person. I would answer the first question in the affirmative, in favour of the revenue and against the assessee. That being so, no answer is necessary to the second question. The Commissioner is entitled to his costs of the reference.

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