The importance of making a complete and truthful disclosure under the Income Declaration Scheme, 2016, and the authority of the Principal Commissioner of Income Tax to declare declarations void under Section 193 of the Finance Act, 2016.

JUDGMENT :

S. Muralidhar, J.

1. These are two writ petitions arising out of a similar set of facts and are being disposed of by this common judgment.

The issue

2. The short issue involved here is whether the Principal Commissioner of Income Tax-4 (‘PCIT-4’) was justified in passing the impugned order dated 9th June, 2017 under Section 183 of the Finance Act, 2016 (‘FA, 2016’) in respect of the Income Declaration Scheme, 2016 (‘IDS’), holding the declaration made by each of the Petitioners under the IDS to be void under Section 193 of the FA, 2016 on the ground that it was made both by misrepresenting and suppressing facts.

The IDS

3. The facts in brief are that, the IDS became operational in terms of Chapter-IX of the FA, 2016 with effect from 1st June, 2016. The object of the IDS was to encourage disclosure of hitherto undisclosed income and payment of surcharge and penalty on such undisclosed income. This was provided for in terms of Sections 183, 184, 185 of the FA, 2016. Section 183 (1) of the FA, 2016 reads as under:

“Declaration of undisclosed income.

183. (1) Subject to the provisions of this Scheme, any person may make, on or after the date of commencement of this Scheme but before a date to be notified by the Central Government in the Official Gazette, a declaration in respect of any income chargeable to tax under the Income-tax Act for any assessment year prior to the assessment year beginning on the 1st day of April, 2017-

(a) for which he has failed to furnish a return under section 139 of the Income-tax Act;

(b) which he has failed to disclose in a return of income furnished by him under the Income-tax Act before the date of commencement of this Scheme;

(c) which has escaped assessment by reason of the omission or failure on the part of such person to furnish a return under the Income-tax Act or to disclose fully and truly all material facts necessary for the assessment or otherwise.

(2) Where the income chargeable to tax is declared in the form of investment in any asset, the fair market value of such asset as on the date of commencement of this Scheme shall be deemed to be the undisclosed income for the purposes of subsection (1).

(3) The fair market value of any asset shall be determined in such manner, as may be prescribed.

(4) No deduction in respect of any expenditure or allowance shall be allowed against the income in respect of which declaration under this section is made."

4. The declaration had to be made to the Principal Commissioner or the Commissioner in Form-1 as per Rule 4 (1) of the Income Declaration Scheme Rules, 2016 (‘IDS Rules, 2016’). After the issuance of acknowledgement in Form 2 that the declarant had paid the tax, surcharge and penalty, the Principal Commissioner or the Commissioner had to grant the declarant a Certificate in terms of Form-4. Rule 4 of the IDS Rules reads as under:

“Declaration of income or income in the form of investment in any asset.

4. (1) A declaration of income or income in the form of investment in any asset under section 183 shall be made in Form-1.

(2) The declaration shall be furnished:

(a) electronically under digital signature; or

(b) through transmission of data in the form electronically under electronic verification code; or

(c) in print form, to the concerned Principal Commissioner or the Commissioner who has the jurisdiction over the declarant.

(3) The Principal Commissioner or the Commissioner shall issue an acknowledgement in Form-2 to the declarant within fifteen days from the end of the month in which the declaration under section 183 has been furnished.

(4) The proof of payment of tax, surcharge and penalty made pursuant to the acknowledgement issued by the Principal Commissioner or the Commissioner shall be furnished by the declarant to the such Principal Commissioner or Commissioner in Form 3.

(5) The Principal Commissioner or the Commissioner shall grant a certificat