Holding

Section 24 of the Finance (No. 2) Act, 1965 grants immunity only to the declarant and does not preclude the Income Tax Officer from assessing the same amount as income of another person, so the addition of Rs.46,250 to the assessee’s income is justified.

Summary

The assessee, a partnership firm, was found to have cash credits of Rs.46,250 in its books in the names of five minor sons of the managing partner. The Income Tax Officer treated these as unexplained cash credits and added them to the firm's income under section 68 of the Income Tax Act, 1961. The firm argued that the amounts had been disclosed under the Voluntary Disclosure Scheme of section 24 of the Finance (No. 2) Act, 1965, and that the disclosures, once accepted and taxed, conferred immunity on the creditors and barred further investigation. The Supreme Court held that section 24 confers immunity only on the declarant himself, not on any other person, and that the legal fiction in sub‑section 3 of that provision is limited to the declarant’s own assessment. Consequently, the Income Tax Officer could investigate the true nature of the credits and tax them in the hands of the assessee, and the addition of Rs.46,250 was upheld.

Issues considered

Whether acceptance of a disclosure statement made under section 24 of the Finance (No. 2) Act, 1965 confers immunity on a person other than the declarant from tax liability.
Whether the Revenue may investigate and assess the cash credits in the assessee’s books despite the disclosures having been accepted and taxed under the voluntary disclosure scheme.
Whether the addition of Rs.46,250 to the assessee’s income as undisclosed income is valid.

Legislation cited

Finance (No. 2) Act, 1965s. 24
Income Tax Act, 1961s. 256, s. 257, s. 68
Voluntary Disclosures of Income and Wealth Act, 1976s. 18

Subjects

Voluntary Disclosure SchemeSection 24ImmunityDouble taxationIncome Tax ActSection 68Burden of proofBenami transactionTax assessment

Judgment

849 A

JAMNAPRASAD KANHAIYALAL
v.
COMMISSIONER OF INCOME-TAX,
M.P., BHOPAL B

May 8, 1981

( R.S. PATHAK, A.P. SEN AND E.S. VENKATARAMIAH, JJ.]
--"--,-- Voluntary Disclosure Scheme under section 24 of the Finance (No. 2) Act,
1965, Scope and effect of-Whether the acceptance of a disclosure statement made c
by a declarant under section 24 of the Finance Act, 1965 confers immunity on ano-
ther person from tax liability in respect of the same sum of money-Whether
section 24 has an overriding effect over section 68 of the Income Tax Act, 1961-Bar
of double taxation-Section 18 of the Voluntary Disclosures of Income and Wealth
Act, 1976 (Act 8of1976).

During the course of the assessment proceedings of the assessee-firm for the D
assessment year 1967-68, the Income Tax Officer"noticed cash credits of Rs. 9,250
each in the names of five sons of the Managing Partner, in the books of the
assessee. The Income Tax Officer found that these creditors, who were minors,
had no independent source of income. The assessee contended before the ITO
that the five creditors had voluntarily disclosed the credits under section 24 of
the Finance (No. 2) Act, 1965 and that the disclosures were accepted by the
Commissioner. The ITO rejected the contention of the assessee and held that E
the cash credits in question were unexplained cash credits, that they represented
the income of the assessee from undisclosed source, and accordingly made an
addition of Rs. 46,250. The Appellate Assistant Commissioner held that the
acceptance of the voluntary disclosures under section 24(3) of the Act and the
payment of tax thereon precluded the Department from disputing the fact that
the income belonged to the creditors, and, as the same income could not be taxed
twice once in rhe hands of the creditors and again in the hands of the assesseee, F
set aside the order of the ITO. The Tribunal disagreed with the Appellate
Assistant Commissioner and upheld the order of the ITO. Hence the reference
at the instance of the assessee under section 257 of the Income Tax Act,
1961.

Answering the reference against the itssessee, the Court
G
HELD : Per Sen, J.

l. Section 24 of the Finance (No. 2) Act, 1965 cannot be construed as
conferring any benefit, concession or immnnity on any ,person other than the per-
son making the qeclaration under the provisions of the· Act. The scheme of the
Act makes it abundantly clear that it was to protect only those who preferred H
to disclose the income they themselves bad earned in the past and which they ·had
failed to disclose at the proper time. The scheme only permitted the bringing
850 SUPREME COURT REPORTS [1981] 3 s.c.~.

A forward or income to tax; it did not require investigation of the claim of the
declarant. The Act granted immunity only to the declarant and not to other
persons to whom the income really belonged. [859 G-H, 860 A]

2. The legal fiction created by sub-s. (3) or s. 24 of the Finance (No. 2)
Act, 1965 by virtue of which the amount declared by the declarant had to be
charged to income-tax "as if such amount were the totalincome of the declarant",
was limited in scope and it cannot be invoked in assessment proceedings rela-
B ting to any person other than the person making the declaration, and did not
take away the power vested in the ITO under section 68 of the Income Tax
Act, 1961 to reject the explanation of an assessee for a cash credit on the
ground that the explanation was not satisfactory in the case of such other
person. (861 F-G]

c 3. The finality under sub-s. (8) of section 24 or the Act was to the order
of the Central Board of Revenue under sub-s. (6) thereof and not to the assess-
ment of tax made on the basis of a declaration made by the creditors under the
scheme. There was, therefore, nothing to prevent an investigation into the true
nature and source of the cash credits. (861 B, DJ

4. The acceptance or voluntary disclosures under s 24 of the Act and the
payment of tax thereon by the creditors could not, in law, justify the deletion of
D the amount of Rs. 46,250 as_it represented the assessee's income from undisclo-
sed sources. In a case of this description, there was no question of double taxa-
tion which was a situation of assessee's own making in getting false declarations
made in the names ot the creditors with a view to avoid 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 acrnally belonged. [ 861 H, 862 A-B, 863 CJ
E
Manila! Gafoorbhai Shah v. Commissioner of Income Tax, (1974) 95 I.T.R.
624 Gujarat; Badri Prasad & Sons v. Commissioner of Income Tax, (1975) 98
I.T.R. 657 Allahabad; Pioneer Trading Syndicate v. Commissioner of Income Tax,
Lucknow, (1979) 120 J.T.R. 5 (Full Bench Allahabad) and Additional Commissio-
ner of Income Tax v. Sa111arathmal Santoshchand, (1980) 124 I.T.R. 297 Madhya
Pradesh, approved.
F Rattan Lal & Ors. v. Income Tax Officer, 98 IT.R. 681 Delhi; Shakunta/a
Devi & Ors. v. C.I.T., (1980) 125 I.T.R. 18 Delhi and Mohd. Ahsan Wani v. C.I.T.,
(1977) 106 I.T.R. 84 Jammu & Kashmir, overruled.

5. The declaration marle under sub-s. (2) of s.24 of the Income Tax Act,
1961 bad to relate to income actually earned by the assessee. It did not require
any investigation into the correctness of the declarations or any determination
G of the amounts belonging to the declarant. The mere charge to tax on the
amounts under the Voluntary Pisclosure Scheme could not have the effeet or con-
verting the money from the deductions from the books of the assessee into the
income of the declarants if it did not belong to it. It was, therefore, open to
the Income Tax Officer to investigate into the source of the cash credit amoun-
ting to Rs. 46,250 standing in the books of the assessee in the names or the
H sons of the Managing Partner. (859 C-D, 860 F-G]
JAMNAPRASAD V. CIT, M.P: 851

A
Per Pathak. J.

l. The making of an assessment against a declarant on his disclosure
atatement under section 24 of the Finance (No. 2) Act, 1965 caMot d~prive
f Income Tax Officer of jurisdiction to assess the same receipt in the hands of
another person if, in a properly constituted assessment l'roceeding under the
Income Tax Act, the receipt can be reg~rded as the taxable income of such
other person. [852 G-H, 853 A] 8

2. The liability imposed under section 24 of the Finance (No. 2) Act,
J965 is identifiable with the income tax liability under the Income Tax 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 Income Tax
Act would, except for provision to the contrary, be applicable to assessments c
m;,de under section 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 particuler person assessed. [852 B-D]

3. The finality enacted by sub·s. (8) of section 24 of the Finance (No. 2)
Act, 1965 attaches to the assessment of the declarant only. It cannot in law D
operate in favour of or against any' other person. [852 F]

3:1. The jurisdidion of an Income Tax Officer when making an assess-
ment is concerned primarily with the issue whether the receipt under conside:
ration constitutes the income of the assessee before him. Any finding reached
by the Income Tax Officer touching a person not the assessee in the process of
determining that issue cannot be regarded as an operative finding in favour E
of or against such person. The only exception of this rule centres on the
limited class, and for the limited purpose, defined by the Supreme Court in
Income Tax Officer, A-Ward, Sitapur v. Mur/idhur Bhagwan Das, 52 I.T.R. 335
at 346. [852 D-F]

Ahmed Ibrahim S. Dhoraji v. The Commissioner of Wealth Tax Gujarat,
[1981] 3 SCR p. 402 and Income Tax Officer, A-Ward, Sitapur v. Murlidhar
F
Bhagwan Das, 52 ITR 335 at 346, applied.

C1vIL APPELLATE JURISDICTION: Tax Reference Case No. 19
of 1975.
G
Tax Reference u/s. 256 of the Income Tax Act, 1961 made by
the Income Tax Appellate Tribunal, Jabalpur Bench, Jabalpur in
R.A. No. 221/Jab/73-74 arising out ofl.T.A. No. 1560 (Jab)/1972-73
decided on IO-l-1974; Aseessment Year 1957-68.
H
S. T. De.•ai, B.L, Noma and K.J. John for the Petitioner.
852 SUl'REME COURT REPORTS (1981] 3 s.c.R.

A V.S. Desai, Champat Rai and Miss A. Subhashtni for the Res-
pondent.

The Judgment of A.P. Sen and E. S. Venkataramiah, JJ. was
delivered by Sen, J~ R.S. Pathak, J. gave a separate Opinion.

B PATHAK, J: I agree. The acceptance of a disclosure state-
ment 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 S. Dhoraji v. The Commissioner of Wealth Tax
Gujarat (1) the liability imposed under s.24 of the Finance (No. 2)
c Act, 1965 is identifiable with the income tax liability under the
Income-tax 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 Income-Tax Act would
except for the provision to the contrary, be applicable to assess-
D ments made under s.24 of the Finance (No. 2) Act, 1965. Accor-
dingly, 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 Income Tax Officer when making an assessment
is concerned primarily with the issue whether the receipt under consi-
E deration constitutes the income of the assessee before him. Any
finding reached by the Income Tax Officer 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
F limited purpose, defined by this Court in Income-Tax Officer, A-
Ward Sitapur v. Murl.d/wr Bhagwan Das.\') Viewed in the light of
that principle it is apparent that the finality enacted by sub-section
(8) of section 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.
G
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 Income Tax Officer of jurisdic-
tion to assess the same receipt in the hands of another person if, in

H (I) (1981] 3 S.C.R. 402.
(2) 52 T.T.R. 335, 346.
JAMNAPRASAD v. CIT, M.P. (Sen, J.) 853

a properly constituted assessment proceeding under the Income Tax A
Act, the receipt can be regarded as the taxable mcome 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 of
Income-Tax is entitled to his costs of the reference.
B
SEN, J. This is a direct reference under s. 257 of the
Income Tax Act, 1961 made by the Income Tax . 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 Discosure Scheme under s. 24 of the Finance (No. 2) c
Act, 1965 (the 'Act', for short).

The assessee, Messrs. Jamnaprasad Kanhaiyalal, is a partner-
ship firm. The firm consists of 4 partners, namely, Kanhaiyalal and
his 3 major sons, Rajkumar, Swatantrakumar and Santoshkumar D
with his minor son Satishkumar admitted to the benefits of the
partnership. In the course of assessment proceedings for the assess-
ment 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 asssesee five Cash credits
of Rs. 9,250 each in the names of five sons of Kanhaiyalal, as E
detailed br,low :

Rs.
Sailendrakumar 5 yrs. 9,250/-
Satishkumar _9 yrs. 9,250:'- F
Sunilkumar 7 yrs. 9,250/-
Swatantrakumar 16 yrs. 9,250/-
Santoshkumar 18 yrs. 9,250/-
---- G
46,250/-
----

The ITO accordingly called upon the assessee to explain the genui11e-
ness as well as the source of the cash credits. On being questioned,
Kanhaiyalal the Managing Partner, disavowed all knowledge as to
H
the capacity of the creditors to advance the amounts in question.
854 SUPREME COURT REPORTS (1981] 3 S.C.R.

A 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
B and the disclosures made by them having been accepted by the
Commissioner of Income Tax 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 frutper taxation only
to the declarant, and not to person to whom the income actually --,.- ·- -

c 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 treated in their names
f) after making false declarations under the Scheme, with a view to
avoid a higher rate of taxation. He accordingly made an addition
of Rs. 41;,250 as assessee's inpome from undisclosed sources.

The Appellate Assistant Commissioner 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
F 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
G in that behalf was unsustainable. The Appellate Assistant Commis-
sioner, therefore, directed the deletion of Rs. 46,250. The Depart-
ment went up in appeal before the Appellate Tribunal.

The Appellate Tribunal, however, disagreed with the Appellate
Assistant Commissioner and upheld the decision of the ITO. It was
H
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
JAMNAPRASAD v. CIT, M.P. (Sen, J.) 855

the creditors as unexplained cash credits, since it was found that the A
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, B
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 jus tilled in holding that the assse-
ssee failed to discharge the burden of proof under s. 68 of the
Income Tax Act, 1961 in regard to the nature and source of c
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 Income Tax Act, l96l
to refer the question of law arising out of its order, to the Madhya
Pradesh High Court for its opinion.
D
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 Income Tax Act, 1961 to this Court, of the following ques-
tions of law, for its opinion, namely:
E
I. Whether on the facts and in the circumstances of the
case, it was open to the Revenue authorities to investi-
gate into the genuineness of the five credits aggregating
to Rs. 46,250 and records a finding in regard thereto,
when the Disclosure petitions made by the five credi-
F
tors under Section 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 repre- G
senting its income from undisclosed sources, for the
assessment years 1967-68, is valid and justified in
law?

The main question in controversy lies within a narrow com-
II
pass. The question, in fact, is whether the provisions of s. 24 of
the Act can be construed as conferring any benefit, concession or
856 SUPREME COURT REPORTS (1981) 3 S.C.R.

A immunity on any person other than the person making the declara-
tion 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 Disclosures 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 con-
B strued as conferring any benefit, concession or immunity on any
person other than the person making the declaration under the pro-.
visions 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
c person other than the declarants and takes away the power of the
ITO under s. 68 of the Income Tax Act, 1961 to make an investiga-
tion as to the nature and source of a cash credit appearing in the
books of the assesssee to reject the explanation offered by the
assessee as unsatisfactory and to treat it as his income from un-
disclosed sources.
D
Section 24 of the Finance (No. 2) Act, 1965 provided for the
making of voluntary disclosures in respect of amounts rep·
resenting income chargeable _to tax under the Income Tax Act,
1922 or the Income tax Act, 1961, for any assessment year
commencing on or before April 1, 1964. On such disclosure
E being made under sub-s. (1) thereof, in the manner provided
by sub-s. (2) the amount was to be charged to Income tax in accor-
dance with sub-s. (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 a safeguard provided in sub-s. (4)
F 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 of Income
Tax passed an order under sub-s. (4) there was an appeal provided
to the Central Board of Revenue under sub-s. (5) and the Board was
G 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 su b-s. (8)

In support of the reference, learned counsel for the assessee
H has, in substance, put forth a three-fold contention. It is submitted,
firstly, that the ITO could not have treated the cash credits standing
JAMNAPRASAD v. CIT, M.P. (Sen, J.) 857

in the names of the sons of Kanhaiyalal, the Managing Partner as A
the assessee's income from undisclosed sources, having regard to the
fact that each one of them had made a declaration under sub-s. (I)
and paid tax thereon under sub-s. (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 disclo-
sure under s.24 of the Act, and to say that it does not represent the B
income of the declarant. Secondly, it is urged that sub-s. (I) read
with sub-s. (3) of s.24 of the Act has an overriding effect over s.68
of the Income Tax 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 c
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 i~ no basis what-
ever. The contentions cannot, in our opinion, prevail.

For an appreciations of the contentions raised, it is necessary D
to set out the relevant provisions of s.24 of the Act. Sub-s. (I),
insofar as relevant reads :

(I) 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 declara- E
tion in accordance with sub-section (2) in respect of
the amount representing income chargeable to tax
under the Indian Income-tax Act, 1922 (11 of 1922),
or the Income-tax Act; 1961 (43 of 1961), for assew
ment year commencing on or before the 1st day of
April, 1964- F

(a) for which he has failed to furnish a retlirn within
the time allowed under section 22 of the Indian
Income-tax Act, 1922 (IJ of 1922), or section 139
of the Income-tax Act, 1961 (43of1961), or
G
(b) which he has failed to disclose iri a return of in-
come filed by him on or before the 19th day of
August, 1965, under the Indian Income Tax Act,
1922 (I I of 1922) or the Income Tax Act, 1961
(43 of 1961), or H
858 SUPREME COURT REPORTS [1981] 3 S.C.R.

A (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
B 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 a person the aggregate of the amounts declared therein, as
reduced by any amount specified in any order made under sub-sec-
tion (4) or, if such amount is altered by an order of the Board under
sub-section (6), then such altered amount .............. .
c
Sub-s. (3) containing the legal fiction reads as follows :

(3) Income-tax shall be charged on the amount of the volun-
tarily disclosed income-

D (a) where the declarant is a person other than a com-
pany, 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 First Schedule to the Finance Act (X of 1965) as if
E such amount were the total income of the declarant ........ .

Sub-s. (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
F 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 immu-
nity on any person other than the person making the declaration
G under the provisions of the Act. The question is whether the non-obs-
tente clause contained in sub-s. (I) 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
H assessment under s.24 of the Act stems from a misconception of the
nature and scope of the Voluntary Disclosure Scheme.
JAMNAPRASAD v. CIT, M.P. (Sen, J.) 859

Under sub-s. ( 1) of s.24, a person was required to make a A
voluntary disclosure in respect of the amount representing the in-
come chargeable to tax under the Indian Income Tax Act, 1922 or
the Income Tax Act, 1961 for any assessment year commencing on
or before April l, 1964. Subs. (I) makes it clear that the declara-
tions, which were expected to be made in the manner provided by
sub-s. (2), were with regard to the income which was chargeable to B
tax under the Income Tax Acts 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 c
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 obliga-
tion to assess him to tax.

In respect of the voluntary disclosures made, a declarant D
acquired an immunity from further investigation as to the nature
and source of the income. He also acquired certain benefits. One
of the distinct.ive 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 hoc concessional rate. Further, facilities E
were allowed to payment of tax in appropriate instalments extend-
ing over a period not exceeding four years, subject to a down pay-
ment 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 Income Tax Act
and not under the scheme. Any admissions made by a person in
F

the declarations filed by him under the scheme in respect of such
income were not to be used in assessing that income under the In-
come Tax Act. Under the scheme, the disclosed i~come was not to
be subject to any further proceedings of assessment. The identity
of the declarant was not to be revealed and he was also immune G
from penalty and prosecution for the past concealment of the dis-
closed income. It is, therefore, obvious that the Act granted immu-
nity only to the declarant alone and not to other persons to whom
the income really belonged.
H
The scheme of the Act makes it abundantly clear that it was
to protect only those who preferred to disclose the income they
860 SUPREME COURT REPORTS (1981] 3 S.C.R.

A themselves had earned in the past and which they had failed to dis-
close 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
B contentions were to be accepted, it would follow that an assessee in
the higher income group could, with imunity, 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.
c
That takes us to the contention based on the legal fiction con-
tained in sub-s. (3) of s.24 of the Act and the finality of the assess-
ment, 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 pro-
visions; must mean that the income voluntarily disclosed shall be
D 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 in-
come tax under the scheme. If, therefore, a person made a false
declaration with regard to income not earned by him, it is difficult
E to comprehend how the Department c;:iuld be prevented from pro-
ceeding 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 accor-
dance with sub-s. (3) of s.24 of the Act, taking the disclosed income
F 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, there-
fore, justified in treating the cash credits in the books of account of
G of the assessee in the names of the creditors as unexplained
cash credits. The finality under sub-s. (8) is :o the order of the
Central Board of Revenue under sub-s. (6). Under sub-s. (4) the
Commissioner of Income Tax was required, within thirty days, if
satisfied that the whole or any part of the income declared had been
H
detected or deemed to have been detected by the ITO prior to the
IAMNAPRASAD V. CIT, M.P. (Sen, J.) 861

date of declaration, to make an order in writing to that effect and A
forward a copy thereof to the declarant. Any person who objected
to such an order could appeal under sub-s. (5) to the Central Board
of Revenue stating the grounds for such an objection. The Board
was empowered to pass suc_h orders as it thought fit under sub·s.
(6). This order of the Board under sub-s. (6) was final and con-
. elusive by reason of sub-s. (8) •. Thus, the finality under sub-s. (8) B.
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 c
non-obstante clause contained in sub-s. (I) of s. 24 of the Act pre-
cludes the Department from proceeding against the person to whom
the income actually belonged. Under sub-s. (1) of s. 24 the declara-
tion 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 D
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 investiga-
tion into the true nature and sources 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 genuine- E
ness 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
Income Tax Act, 1961, insofar as the persons other than the declar-
'· ants were concerned. F
In our judgment, the legal fiction created by sub-s." (3) of s. 24
of the Act by virtue of which the 'amount dclared 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 procedings relating to· any person other than G
the person making the delcaration under the Act so as to rule out
the applicability of s. 68 of the Income Tax 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 H
in the hands of the assessee. In a case of this description, there is
862 SUPREME COURT REPORTS [1981] 3 S.C.R.

A 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 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.
B
It follows that the decisions of the Gujarat High Court in
Manila{ Gafoorbhai Shah v. Commissioner of Income Tax (1), of the
Allahabad High Court in Badri Prasad & Sons v. Commissioner of
Income Tax, (2) and Poineer Trading Syndicate v. Commissioner of
Income Tax, Lucknow (3) and of the Madhya Pradesh High Court
c in Addi. Commissioner of Income Tax v. Samrathmal Santoshchand(4 J
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 & Ors v. Income Tax Officer (5) and
Shakuntala Devi & Ors. v. C.I.T. (6 ) and of the Jammu & Kashmir
High Court in Mohd. Ahsan Wani v. C.I.T. (7), taking a view to the
D contrary, are overruled.

The Income Tax Officer 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 Income
E Tax 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
F 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 Income Tax Officer 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

. (1) [I 674] 95 ITR 624.
G
..f.2) (1975] 98 !TR 657.
(3) (1979] 120 ITR 5 (FB. All).
(4) (1980] 124 !TR 297.
(5) [1975] 98 ITR 681.
(6) [1980] 125 ITR 18.
H (7) [I 977] ITR I 06 ITR 84.
JAMNAPRASAD v. CIT, M.P. (Sen, J.) 863

the sums belonged to the persons who had made declarations about A
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
B
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 con·
struction placed on sub·s. (3) of s. 24 of the Act, it must also be
c
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 him under s. 68
of the Income Tax Act, 1961. The Commissioner of Income Tax
D
shall be entitled to his costs of the reference.

S.R.