COMMISSIONER OF WEALTH TAX Vs. AHMED IBRAHIM SAHIGARA

JUDGEMENT

(1.) THIS reference raises a short but interesting question of law relating to the construction of S. 68 of the Finance Act, 1965.

(2.) THE question is not free from difficulty and it has caused us some anxiety to reach our conclusion. To appreciate the question, it is necessary to state a few facts giving rise to the reference. The assessee is an individual and during the account years relevant to the asst. yrs. 1959 60 to 1964 65, the assessee carried on business at Bombay, Dhoraji, Veraval and several other places. The assessments of the assessee to wealth tax for the asst. yrs. 1959 60 to 1964 65 were completed by the WTO in due course on the basis of the returns submitted by the assessee. Now, it appears that there was a considerable amount of unaccounted income in circulation which was concealed from revenue authorities and this unaccounted income was a source of great mischief in the economy. The question as to how to mitigate this evil was a difficult and baffling question and it was seriously engaging the attention of the Government. The legislature had taken several measures to encourage voluntary disclosures of concealed income and these measures were partially successful in inducing voluntary disclosures particularly by persons having comparatively small and medium incomes to disclose. But they were not enough. The legislature, therefore, introduced S. 68 in the Finance Act, 1965, with a view to encouraging voluntary disclosures of concealed income on a large scale. That section, omitting portions immaterial, provide :

(3.) THE assessee contended before the WTO that the peak cash credits, which were sought to be included in the net wealth as concealed wealth of the assessee which had escaped assessment, represented concealed income which had been voluntarily disclosed by the assessee and if this concealed income was to be included in the computation of net wealth, the liability for income tax in respect of such concealed income which was settled and paid at the rate of sixty percent under s. 68 must be deducted in arriving at the real wealth of the assessee. This claim was, however, negatived by the WTO and, on appeal, the AAC also rejected it. The assessee thereupon carried the matter higher in appeal to the Tribunal. The Tribunal took the view that the liability to pay income tax on the concealed income arose by reason of the charging provision contained in S. 3 of the Indian IT Act, 1922, or S. 4 of the IT Act, 1961, and the latest date on which it must be said to have arisen was the last day of the relevant accounting year in which the concealed income was earned. There was nothing in S. 68 of the Finance Act, 1965, said the Tribunal, which displaced this liability under S. 3 of the Indian IT Act, 1922, or S. 4 of the IT Act, 1961, or created a new liability for payment of income tax which does not exist prior to the enactment of the Finance Act, 1965. The Tribunal pointed out that the liability to pay income tax was always there by reason of S. 3 of the Indian IT. Act, 1922, or S. 4 of the IT Act, 1961, and it was only in order to induce assessees to come forward to make voluntary disclosures of concealed income so that this existing liability to pay income tax could be realised, that the legislature gave certain concessions to the assessees by enacting S. 68 of the Finance Act, 1965. No new liability to pay income tax was created by S. 68 of the Finance Act, 196 : it merely provided for a concessional quantification of the existing tax liability with a view to bringing black money representing concealed income on the surface. The Tribunal accordingly accepted the contention of the assessee and held that "in computing the net wealth of the assessee, income tax paid by him on the disclosed income should be deducted from his total wealth during the respective previous years". This view taken by the Tribunal is challenged in the present reference at the instance of the Revenue.