RATTAN LAL Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) The question that has been raised in this petition is whether the Income-tax officer can reject the explanation of an assessee in respect of any sums found credited in his books, on the ground that the nature and source of the said sum in the hands of the depositors in whose names the credit stands, has not been satisfactorily explained merely by the said depositor, having declared it as his income in pursuance to the voluntary disclosure scheme set out in Finance (No. 2) Act of 1965 (Act'No. XV of 1965).

(2.) The petition has been filed by three petitioners. Messrs Jain Brothers, a partnership firm, is petitioner No. 3 and consists of two partners, Rattan Lal, petitioner No. 1, and Khazanchi Lal, petitioner N'o- 2. The firm is being assessed in the status of a registered firm under section 184 of the Income-tax Act, 1961, herein called 'the 1961 Act", while petitioners Nos. I and 2 are being assessed in the status of individuals. The Income-tax officer has been impleaded as respondent No. I, while the Additional Commissioner of Income-tax is respondent No. 2. The Commissioner of Income-tax is respondent No. 3, and the Chairman, Central Board of Direct Taxes is respondent No. 4.

(3.) During the assessment year ending on March 31, 1967. the petitioners filed returns of their income under section 139 of the 1961 Act. The Income-tax officer, respondqnt No. 1, completed the assessments under section 143 of the 1961 Act and while framing the assessment of petitioner No. 3 added back a sum of Rs. 30,000.00 as income from undisclosed sources. This sum related to three credits standing in the firm's books in the names of Narinder Kumar Jain, son of Rattan Lal, petitioner No. 1 (Rs. 10,000.00), Smt. Dil Bahari Jain, wife of Rattan Lal, (Rs. 15,000.00) and Smt. Chandravati Jain, wife of Khazanchi Lal, petitioner No. 2 (Rs. 5,000.00), as loans advanced to the firm. On being asked the petitioner explanied that these amounts belonged to the aforesaid three creditors or depositors, which had been duly declared by them under the voluntary disclosure scheme under the Finance Act and income-tax had been paid in respect thereof and that these amounts were later deposited by the aforesaid depositors with respondent No. 3. The Income-tax officer was, however, of the opinion that the aforesaid depositors were not in a position to earn the said amounts and that the purpose of the voluntary disclosure scheme was to enable the persons who had earned some income prior to March 31, 1964, but had not paid the tax thereon to come forward to get the tax liabilities settled. The immunity under section 24 of the Finance Act was conferred on the declarants only. If it was found that the income was declared by a person to whom it did not belong, there was nothing, according to the Income-tax Officer, to prevent it being taxed in the hands of the person to whom it actually belonged. The onus, according to him, rested entirely on the assessee under section 68 of the 1961 Act. The explanation offererd by the petitioners in this case was, therefore, held to be unsatisfactory and the credits standing in the aforesaid names were treated as unexplained cash credits and were charged to tax as income of the firm (petitioner No. 3) from undisclosed sources. Petitioner No. 3 filed a revision application under section 264 of the 1961 Act against the order of the Income-tax Officer. The Additional Commissioner of Income-tax Delhi, however, agreed with the Income-tax Officer and held that the disclosures granted immunity from further taxation only to the persons who disclosed the income. He was of the opinion that the credits represented concealed income of the petitioner firm and rejected the revision application. It is under these circumstances that the petitioners have filed this writ petition praying for the issue of a writ, order or direction in the nature of mandamus or certiorari, inter alia, setting aside the aforesaid additions to the total incomes of the firm. petitioner No. 3, as its income from undisclosed sources and in the alternative declaring that the said sum was taxable, if at all, in the assessment year prior to March 31, 1964 and not in the assessment year 1967-68.