BHAWANIDAS BINANI Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) IN this reference the question referred to us for the opinion by the Tribunal under s. 27 (1) of the WT Act, 1957, is as follows :

(2.) THE assessee is an individual and is a regular assessee under the IT Act. He follows the Samvat Year as the previous year for his income-tax assessment. He had been last assessed to tax for the year 1962-63 by the order of the ITO dt. 16th Oct., 1962. For the asst. yr. 1963-64 for which the previous year was S. Y. 2018 (ending of 28th Oct., 1962), the assessee had filed a return of income. Similarly he had filed a return of income for the asst. yr. 1964-65, for which the previous year was S. Y. 2019. THE assessments for these two years were, however, pending. THEreafter Parliament enacted the Finance Act, 1965, which inter alia provided for voluntary disclosure of certain income under s. 68 of the said Act. Taking advantage of the scheme, the assessee first made a voluntary disclosure on 30th March, 1965 (though dt. 27th March, 1965) of an income of Rs. 16,16,193 He made a subsequent disclosure on 19th May 1965 (though dt. 17th May, 1965) of a further income of Rs. 1,75,000. Thus the total disclosure was in the aggregate amount of Rs. 17,91,193 With regard to the amount initially disclosed viz. Rs. 16,16,193, the assessee was liable to pay tax at the flat rate of 57 per cent of the amount disclosed, which was duly paid before the stipulated date. With regard to the further disclosure of Rs. 1,75,000, he was liable to pay income- tax at the flat rate of 60 per cent which was also paid before the stipulated date. THE aggregate tax so paid totalled Rs. 10,26,230. Now, according to the first disclosure, the income of Rs. 16,16,193 was represented by the total assets held by the assessee on the 15th Nov., 1963. Again, according to the second disclosure, the further income disclosed viz., 1,75,000 was represented by further assets, again as on 15th Nov., 1963. In the annexures to the disclosures the assessee gave certain details of the financial year or years in which the income disclosed was earned; this break-up, however, was given only in respect of the initial disclosure of Rs. 16,16,193 and no break-up was given in respect of the further disclosure of Rs. 1,75,000.

(3.) BEFORE us counsel on behalf of the assessee has urged that the tax at the flat rates paid by the assessee under s. 68 (3) of the Finance Act, 1965, is Income-tax which is payable under the IT Act, although at the rate fixed by s. 68 (3) of the Finance Act, and, therefore, the matter would be squarely covered by the decision of Kesoram Industries and Cotton Mills Ltd. case (supra) in which the Supreme Court had held that this was a debt owed which was liable to be allowed as a deduction in computing the net wealth for the purpose of levy of wealth-tax. In other words, it was submitted that s. 68 of the Finance Act, 1965, was not the charging section buy merely prescribed the procedure for assessment of concealed income and the rate of tax. According to this submission, the charging section remains what it was under the IT Acts i.e. s. 3 of the Indian IT Act, 1961. According to this submission, the income-tax liability of the assessee was assessed and quantified in 1965 in the manner provided under s. 68 of the Finance Act which would qualify the amount paid as income-tax under the provisions as a deduction allowable, which deduction fell squarely within the ratio of the Supreme Court decision in Kersorm Industries and Cotton Mills, Ltd.'s case (supra). On the other hand, counsel on behalf of the Revenue strongly urged that the tax at the flat rates paid on concealed income disclosed by the assessee under s. 68 of the Finance Act,1965, was not in satisfaction of any liability under s. 3 of the Indian IT Act, 1922, or s. 4 of the IT Act, 1961, but was in satisfaction of a new liability to tax in respect of a particular item of income viz. concealed income disclosed by the assessee. It was, therefore, submitted that for the purposes of computing the net wealth of the assessee the amount paid as provided under s. 68 (3) of the Finance Act, 1965, could not be deducted as a debt owed by him on the last day of relevant account year in which such concealed income was earned. It may be stated that in support of the respective contentions counsel relied on authorities of different High Courts, the High Courts of Kerala, Delhi, Allahabad and Calcutta having taken the view canvassed for our acceptance by counsel for the assessee, whereas the submissions made on behalf of the Revenue have found favour with the Gujarat High Court. It may be further stated that the decision of the Gujarat High Court, which upheld the contentions advanced on behalf of the Revenue, was subsequently considered by the Delhi, Allahabad and Calcutta High Courts in their decisions which expressly dissented from the Gujarat view.