Civil Appeal Nos
1217 1222 of 1973
Appeals by certificate from the Judgment and order dated 2112 1972 of the Gujarat High Court in Wealth Tax Reference No 2 of 1969
V section Desai Shardul section Shroff and H section Parihar for the Appellant
section T Desai P A Francis and Miss A Subhashini for the Respondent
The Judgment of the Court was delivered by VENKATARAMIAH J
On the basis of a certificate granted under section 291 of the hereinafter referred to as the Act  the appellant has filed these appeals against the judgment and order dated December 21 1972 of the High Court of Gujarat in Wealth tax Reference No 2 of 1969
The questions referred to the High Court under section 27 of the Act by the In come tax Appellate Tribunal Ahmedabad Bench read thus 1 Whether on the facts and in the circumstances of the case the liability in respect of income tax payable on the concealed income disclosed by the assessee pursuant to section 68 of the Finance Act 1965 is deductible under section 2m of the in computing the net wealth of the assessee for the 405 assessment years 1959 60 1960 61 1961 62 1962 63 A 1963 64 and 1964 65
2 Whether the Tribunal was right in holding that the liability to pay tax on the amount disclosed under section 68 of the Finance Act 1965 arose not under that Finance Act but under section 3 of the Indian Income tax Act 1922
Having regard to the assessment years in question the second question should be read as including within its scope also the question whether the Tribunal was right in holding that the liability to pay tax on the amount disclosed under section 68 of the Finance Act 1965 arose not under that Finance Act but under section 4 of the Income tax Act 1961
The assessee who is the appellant in these appeals had been assessed on the basis of his returns of net wealth and the statements filed therewith in the status of an individual to wealth tax under section 163 of the Act during the assessment years 1957 58 t 1964 65 on various dates between January 15 1960 and July 14 1964
Subsequently the assessee made a disclosure under section 68 of the Finance Act 1965 hereinafter referred to as the Finance Act of Rs700000 which had been shown as having been covered by some hundi transactions with a concern known as Ms Abdul Razack  Co in his books of account at the Bombay branch of his business
Alongwith the declaration the assessee filed a statement that this concealed income had been earned by him during the assessment years 1957 58 to 1964 65
He however did not allocate the total sum disclosed amongst different assessment years but showed it in a lump sum
The amount of income tax was computed at 60 of the total concealed income and it was paid as contemplated under section 68 of the Finance Act
The Wealth tax officer thereafter reopened the assessments or the assessee to wealth tax for assessment years 1957 58 to 1964 65 on the ground that he had reason to believe that certain wealth of the assessee had escaped assessment during the said years and that his belief was founded on the disclosure made by the assessee under section 68 of the Finance Act
We are concerned in these appeals only with the assessment years 1959 60 to 1964 65
On scrutiny it was found on the basis of peak cash credits in each assessment year that the amounts covered by hundies were as under 406 Assessment years Peak cash credits 1959 60 RS
457465 1960 61 RS
5598231 1961 62 RS
638325 1962 63 RS
682974 1963 64 RS
701578 1964 65 RS
701578 As can be seen from the above statement the assessee had substantial sums with him in the years in question which had not been disclosed earlier
Since these amounts constituted the wealth which was liable to tax on the respective valuation dates the assessee filed returns of wealth for the above mentioned years in compliance with the notices issued to him and in the course of the assessment proceedings he claimed the deduction for income tax payable by him in respect of the sums which had been progressively earned by him from year to year and which were liable to income tax under the relevant income tax law in force during the years relying upon the decision of this Court in Kesoram Industries and Cotton Mills Ltd vs Commissioner of Wealth tax Central Calcutta
The Wealth tax officer however held that since in his balance selects the assessee had not shown the liability to pay income tax the deduction of the amounts claimed could not be allowed in any of the assessment years and accordingly the orders of reassessment were passed by him after disallowing the claim made by the assessee
He however included the sums mentioned in the above statement in the net wealth of the respective assessment years and determined the wealth tax payable by the assessee
The appeals filed by the assessee against the orders of the Wealth tax officer before the Appellate Assistant Commissioner were dismissed
On further appeal to the Income tax Appellate Tribunal the Tribunal held that the deduction claimed in respect of each assessment year was in truth and substance a liability under the Indian Income tax Act 1922 or the Income tax Act 1961 as the case may be and not a new liability created by the Finance Act and therefore it constituted a debt owed by the assessee on the respective valuation dates within the meaning of section 2m of the Act and that the deduction claimed should be allowed while computing the net wealth 407 of the assessee
Accordingly the Tribunal allowed the appeals of the assessee
Thereafter at the instance of the Commissioner of Wealth tax the Tribunal referred under section 27 of the Act the two questions mentioned above to the High Court
After hearing the parties the High Court answered both the questions in the negative and in favour of the Revenue by its judgment dated December 21 1972
On a certificate granted by the High Court under section 291 of the Act the assessee has come up in appeal to this Court
The relevant part of section 2m of the Act reads 2
m net wealth means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets wherever located belonging to the assessee on the valuation date including assets required to be included in his net wealth as on that date under this Act is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than In the case of Kesoram Industries and Cotton Mills Ltd supra this Court has held that income tax other than that falling under clause iii of section 2m of the Act payable on the valuation date is a debt owed by the assessee and hence is deductible from the total wealth of the assessee while determining the net wealth for the purpose of levying wealth tax
The principal question which arises for consideration in these appeals relates to the true character of the tax paid by the assessee in the proceedings under section 68 of the Finance Act and the applicability of the ratio of the decision of this Court in the case of Kesoram Industries and Cotton Mills Ltd supra
Since it is contended by the assessee that the tax so paid was the tax which he was liable to pay under the relevant income tax law in force during the assessment years in question and it is urged by the Department that the said payment was in discharge of a liability created for the first time by the Finance Act it is necessary to examine the provisions of section 68 of the Finance Act in some detail in so far as they relate to the question involved in this case
The relevant part of section 68 of the Finance Act which came into force on March 1 1965 reads 408 68
Voluntary disclosure of income 1 Where any person makes a declaration in accordance with sub section 2 in respect of the amount representing income a which he has failed to disclose in a return of income for any assessment year filed by him before the first day of March 1965 under the Indian Income tax Act 1922 Xl of 1922 or the Income tax Act 1961 XLIII of 1961 or b which has escaped assessment for any assessment year for which an assessment has been made before the 1st day of March 1965 under either of the said Acts or c for the assessment of which no proceeding under either of the said Acts has been taken before the 1st day of March 1965 he shall notwithstanding anything contained in the said Acts be charged income tax at the rate specified in sub section 3 in respect of the amount so declared if he i pays the amount of income tax as computed at the said rate or ii furnishes adequate security for the payment there of in accordance with sub section 4 and under takes to pay such income tax within a period not exceeding six months from the date of the declaration as may be specified by him therein or iiiOn or before the 31st day of May 1965 pays such amount as is not less than one half of the amount of income tax as computed at the said rate or furnishes adequate security for the payment there of in accordance with sub section 4 and in either case assigns any shares in or debentures of a joint stock company or mortgages any immovable property in favour of the President of India by way o f security for the payment of the balance and undertakes to Fay such balance within the period referred to in clause ii
409 2 The declaration shall be made to the Commissioner and shall specify the period required to be specified under clause ii of sub section 1 contain the name address and signature of the person making the declaration and also full information in respect of the following matters namely B a Whether he was assessed to income tax or not and if assessed the name of the Income tax Circle in which he was assessed
b The amount of income declared giving where available details of the financial year or years in which the income was earned and the amount pertaining to each such year
c Whether the amount declared is represented by cash including bank deposits bullion investments in shares debts due from other persons commodities or any other assets and the name in which it is held and location thereof Provided that the declaration shall be of no effect unless it is made after the 28th day of February 1965 and before the Ist day of June 1965
F 3 The rate of income tax chargeable in respect of the amount referred to in sub section 1 shall be sixty per cent of such amount Provided that if before the Ist day of April 1965 the tax on the amount declared is paid by the declarant at the rate of fifty seven per cent of such amount he shall not be liable to pay any further tax on such amount
4 A person shall not be considered to have furnished adequate security for the payment of the tax for the purposes of sub section I unless the payment is guaranteed by a scheduled bank or the person makes an assignment in favour of the President of India of any security of the Central or State Government
Explanation For the purposes of this sub section where an assignment of Government securities is made in 410 favour of the President the amount covered by such assignment shall be the market value of the securities on the date of the assignment
5 Any amount of income tax paid in pursuance of a declaration made under this section shall not be refundable in any circumstances and no person who has made the declaration shall be entitled i n respect of any amount so declared or any amount of tax so paid to reopen any assessment or reassessment made under the Indian Income tax Act 1922 XI of 1922 or the Income tax Act 1961 XLIII of 1961 or the Excess Profits Tax Act 1943 XV of 1940 or the Business Profits Tax Act 1947 XXI of 1963 or the Companies Profits Surtax Act 194 VII of 1964 or claim any set off or relief in any appeal reference revision or other proceeding in relation to any such assessment or reassessment
6 a Any amount declared by any person under this section in respect of which the tax referred to in subsection 3 is paid shall not be included in his total income for any assessment under any of the Acts mentioned hl sub section 5 if he credits in the books of account if any maintained by him for any source of income or in any other record the amount declared as reduced by the tax paid thereon under this section
Section 681 of the Finance Act provides that where any person makes a declaration in accordance with section 682 in respect of any amount represent n g income which he has failed to disclose in his return or which has escaped assessment for any assessment year for which an assessment has been made before March 1 1965 under either of the two Acts namely the Indian Income tax Act 1922 and the Income tax Act 19 1 or for the assessment of which no proceeding is taken before March 1 1965 he shall notwithstanding anything contained in the said Acts be charged income tax at the rate specified in sub section 3 thereof in respect of the amount so declared
If he pays the amount of income tax as computed at the said rate or furnishes adequate security for the payment thereof in accordance with sub section 4 thereof and undertakes to pay such income tax within the period specified in the section he would be absolved from the liability under the relevant law of in 411 come tax
The declaration should however be filed with the particulars mentioned in section 682
Section 683 provides that the rate of income tax chargeable in respect of the amount referred to in the declaration shall be sixty percent of such amount provided that if the tax is paid within April 1 1965 the tax payable would be fifty seven percent
Sub section 5 of section 68 of the Finance Act provides that any amount of income tax paid in pursuance of a declaration made under that section shall not be refundable in any circumstances nor a declarant is entitled in respect of any amount declared or tax paid thereon to reopen any assessment or reassessment made under the Indian Income tax Act 1922 or Income tax Act 1961 or any other Act mentioned therein
He cannot also claim any set off or relief in any appeal reference revision or other proceeding in relation to any such assessment or reassessment
Clause a of sub section 6 of section 68 grants immunity from proceedings under the Acts mentioned in section 685 to the assessee by providing that any amount declared by any person under section 68 in respect of which the tax referred to hl sub section 3 thereof is paid shall not be included in his total income for any assessment under any of the assessments made under any of the Acts mentioned in section 685 if he credits in the books of account if any maintained by him for any source of income or hl any other record the amount declared as reduced by the tax paid thereon under section 68
On an examination of the several provisions contained in section 68 of the Finance Act it becomes clear that they had been enacted as a part of the measures adopted with a view to unearthing unaccounted money in possession of the members of the public on which income tax had not been paid and also to create an incentive to such persons to make disclosure of their unaccounted incomes and to pay tax thereon at the specified rate without the liability to pay any interest thereon or penalties for non compliance with the law of income tax
The declaration to be riled by a person under section 68 is about an amount representing his income earned in an earlier accounting period which has not been subjected to tax in the ordinary course although income tax was payable hl respect of it
If the declarant pays tax at the rate specified in sub section 3 of section 68 he would be absolved from any further liability to tax on such income
The declaration has to be made before the Commissioner of Income tax and it should contain full information namely whether he was assessed to income tax or not and if assessed the name of the Income tax circle in which he was assessed the 412 amount of income declared giving w ere available details of the financial year or years in which the income was earned and the amount pertaining to each such year and whether the amount declared is represented by cash including bank deposits bullion investment in shares debts due from other persons commodities or any other assets and the name in which it is held and the location thereof
Section 68 also states at more than one place that what is payable pursuant to a declaration is income tax
Section 68 1 contains words such as he shall notwithstanding anything contained in the said Acts be charged income tax at the rate specified in sub section 3 
if he pays the amount of income tax at the said rate and undertakes to pay such income tax 
Section 683 contains the words the rate of income tax chargeable
Section 685 refers to a any amount of income tax paid and section 687 contains the words paid the income tax under this section 
These words show that Parliament was of the view that what was payable under section 68 was income tax
The points of difference between any Finance Act that may be passed annually fixing the rates of income tax and section 68 of the Finance Act however relate to i the time within which and the manner in which information in regard to the income is to be furnished ii the method of computation of taxable income and Eiii the rate of tax payable on such income
The declaration which is equivalent to a return to be filed under the Indian Income tax Act 1922 or Income tax Act 1961 need not contain all the particulars that have to be furnished in such return
The declaration can be filed during the period mentioned in proviso to section 682
There is no provision to claim various deductions exemptions set off etc
in respect of the income disclosed in the declaration as in the case of income shown in an ordinary return
Since the rate of tax is a uniform one and does not vary with the quantum of the income disclosed there is no need to trace it to any specific assessment year
Further the declaration is a voluntary one and it is not pursuant to any notice issued by the Department
The question is whether these distinguishing features make the amount disclosed in a declaration anything different from the income of an assessee and the tax paid under section 68 anything different from a tax on income
In other words does section 68 impose a new charge on the income of the declarant for the first time wholly independent of the levy under section 3 of the Indian Income tax Act 192  or section 4 of the Income tax Act 1961  The High 413 Court has given the following reasons for holding that the tax paid under section 68 is not tax on income payable under the Indian Income tax Act 1922 and Income tax Act 1961 i the charge under the Income tax Act is on the total income of the previous year and not on any particular item of income but that is not so under section 68ii payment of tax under section 68 has no reference to any assessment year and unless it is correlated to an assessment year it can not be ordinary income tax and iii the disclosed income is chargeable to tax without allowing usual deductions and without providing for any procedure for qualification
The High Court proceeded to hold that section 68 enacted a new charge of tax on an ad hoc basis on disclosed income irrespective of the assessment year in which it was earned
The disclosure of concealed income coupled with the payment of tax as contemplated in clause i of sub section 1 according to the High Court not only created a charge of tax but also satisfied it
In its view the disclosure of concealed income coupled with furnishing of security and undertaking as contemplated in clause ii created a new charge of tax and when the undertaking was carried out by payment of tax the liability arising from the charge of tax was satisfied
one basic fallacy underlying the conclusion of the High Court that a new charge is being levied under section 68 appears to be the assumption that the amount in question in respect of which tax is payable under that provision was not liable to income tax earlier
lt should be borne in mind that the declaration contemplated under section 68 is a declaration in respect of income of earlier years which had been concealed and on which tax was payable during the relevant assessment years in the ordinary course
Section 3 of the Indian Income tax Act 1922 and section 4 of Income tax Act 1961 which are couched more or less in the same language state that where any Central Act enacts that inc me tax shall be charged for any year at any rate or rates income tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions of the relevant Act in respect of the total income of the previous year or previous years as the case may be of every person
Now it is well settled by a series of judicial decisions that the liability to income tax arises by virtue of the charging section in the relevant Income tax Act and it arises not later than the close of the previous year even though the rate of tax for the year of assessment may be fixed after the close of the previous year and the assessment has necessarily to be made after the previous year
414 The quality of chargeability of any income to tax is not dependent upon the passing of the Finance Act though its quantification may be governed by the provisions of the Finance Act in respect of any assessment year vide Wallace Brothers and Co Ltd vs Commissioner of Income tax
Messers Chatturam Horilram Ltd vs Commissioner of Income tax and Ors
and Kalwa Devadattam  Ors
vs The Union of India  Ors
In the case of Kesoram Industries and Cotton Mills Ltd supra Subba Rao J as he then was summarised the legal position thus  To summarize A debt is a present obligation to pay an ascertainable sum of money whether the amount is payable in prasenti or in futuro debitum in prsesenti solvendum in futuro
But a Sum payable upon a contingency does not become a debt until the said contingency has happened
A liability to pay income tax is a present liability though it becomes payable after it is quantified in accordance with ascertainable data
There is a perfected debt at any rate on the last day of the accounting year and not a contingent liability
The rate is always easily ascertainable
If tile Finance Act is passe l it is the rate fixed by that Act if the Finance Act has not yet been passed it is the rate proposed in Finance Bill pending before Parliament or the rate in force in the preceding year whichever is more favourable to the assessee
All the ingredients of a debt are present
It is a present liability of an ascertain able amount
It is thus clear that it the assessee had brought to the notice of the Department in the usual course the existence of incomes which were later on declared under section 68 they would have been taxed during the relevant assessment year
Hence merely because they are disclosed in a declaration filed under section 68 they cannot cease to be income not already charged for income tax
It is true that the Finance Act in question merely levied a fixed rate of tax in respect of all the income disclosed without allowing deductions exemptions and set off under the relevant income tax law yet its function was no more than that of a Finance Act passed annually even though it made certain alterations with regard to filing of declaration and computation of taxable income 415 It was however urged on behalf of the Department that the nature of the declaration which was dependent upon the volition of the declarant and the fact that the liability to tax the amount mentioned therein was contingent upon the willingness of the declarant to disclose the amount ought to make a difference
We do not think so because any such voluntary disclosure by an assessee even in the absence of section 68 would have exposed him to an assessment or reassessment as the case may be being made in respect of the sum disclosed as part of the income of the relevant assessment year and of course with the additional liability to payment of interest and levy of penalty and perhaps with the right to claim deductions if any admissible in the circumstances of the case and the benefit of other procedural rights
The voluntary character of the declaration cannot therefore alter the character of the tax
There is also no substance in the contention that in the absence of the allocation of the amount disclosed amongst different assessment years the tax payable under section 68 cannot be termed as a tax on income because such allocation would not achieve any additional purpose in the scheme of section 68 Irrespective of the other income which may have been determined in an ordinary proceeding under the relevant law of income tax a fixed rate of tax is payable under section 683 and hence the amount disclosed being treated as the income of any particular year would not make any difference regarding the quantum of tax
Nor is there any other purpose to be served by such allocation
Section 68 is in the nature of a package deal but the net result achieved is that the declarant is treated as having discharged all his liability in respect of the said income under the income tax law
There is one other circumstance which may be noticed here
The tax levied under section 68 can be only a tax on income
If we hold it otherwise it may become a tax on wealth itself
The basis of the liability in this case is the admission made by the declarant that the amount declared was his income earned in previous years but concealed from the knowledge of the Department
In these circumstances it cannot be said that the amount declared under section 68 is not income which was not taxable under the Indian Income tax Act 1922 or the Income tax Act 1961 as the case may be
The finding of the High Court that section 68 created a fresh charge is incompatible with the foundation of the very reassessment proceedings under section 17 of the Act
The basis of these proceedings is the information which the Wealth tax officer acquired 416 from the declaration filed by the assessee in this case that the assessee was in possession of unaccounted funds represented by the non genuine hundis which had progressively reached the level of Rs 701578 during the assessment year 1964 65 from the level of Rs 457465 in 1959 60 by gradual accumulation of income
But for this assumption in the absence of any other material reassessment under the Act would have been possible only in the last year in which the disclosure was made
That however is not the case here
The High Court in support of its view has relied on the decision of the Kerala High Court though not the reason given in support of that decision in C K Babu Naidu vs Wealth tax Officer
That decision has since been reversed in appeal by a Division Bench of that Court in C K Babu Naidu vs Wealth tax Officer A  Ward Calicut  anr in which the Kerala High Court has held that the liability for tax arising under section 68 of the Finance Act was nothing other than the liability under the Income tax Act 1961 itself and accordingly has allowed the deduction of tax paid under section 68 as a debt owed on the valuation date
In Commissioner of Wealth Tax Haryana HP  Delhi III vs Girdhari Lal Commissioner of Wealth tax vs B K Sharma Commissioner of Wealth tax West Bengal III Calcutta vs Bansidhar Poddar D C Shah vs commissioner of Wealth tax Mysore and Shri Bhagwandas Jain vs Addl
Commissioner of Wealth tax M P the High Courts of Delhi Allahabad Calcutta Karnataka and Madhya Pradesh have accepted the view that the tax paid under section 68 of the Finance Act should be treated as a debt owed for purposes of determining net wealth as denied in section 2m of the Act
The High Court of Bombay has also recalled the same conclusion in Bhagwandas Binani vs Commissioner of Wealth tax Bombay City III but in doing so it observed that it appears to us that although it is not possible to say that the amount of income tax paid under section 68 of the Finance Act 1965 is income tax under the charging sec 417 tion 3 or section 4 of the IT Acts it must be regarded as income tax paid in lieu of such income tax and would be entitled to the same considerations as lavished by the Supreme Court on the ordinary charge of income tax
The High Court of Bombay appears to take the view as the High Court of Gujarat has done in the decision under appeal that a new liability is created by section 68 but it however would not have any adverse effect on the right of the assessee to claim the deduction
While we approve of the conclusion reached by the High Court of Bombay we feel that the said decision to the extent it attempts to follow the reason given by the Gujarat High Court to hold that the liability under section 68 is a fresh liability is not correct
The true position is that the amount declared has the liability to pay income tax imbedded in it on the valuation date but only the ascertainment of that liability is postponed to a future date
In the instant case its determination is allowed to he done in accordance with the provisions of section 68
Even though it may appear to be itself a complete code it is only a scheme which provides a method for the liquidation of an already existing income tax liability which was present on the relevant valuation date
The view does not in any way To counter to any observations made by this Court in Commissioner of Income Tax Bombay City I vs Khatau Makanji Spinning and Weaving Co Ltd In that case this Court was concerned with the validity of a charge levied by the Finance Act 1951 in respect of dividends distributed in excess of the specified limit under clause ii of the proviso to Paragraph of Part I of the First Schedule to that Act as applied to the assessment year 1953 54 by the Finance Act 1953
This Court held that income tax was a tax on income of the previous year and it would not cover some thing which was not the income of the previous year or made fictionally so and according to the scheme of that provision it was impossible to say that the additional income tax was properly laid upon the total income because what was actually taxed was never a part of the total income of the previous year
This decision is clearly distinguishable from the present case where what is taxed is the income which was ordinarily liable to tax but which had not been included in the return of the assessee or which had escaped assessment or which was still to be assessed to income tax under the relevant Income tax Act
It was in fact a part of the total income though not assessed till the declaration was made
Merely because it is stated that the rate of tax charged on the 418 amount declared is sixty per cent or fifty seven per cent as the case may be it does not cease to be a part of the total income
This is not a case where what was not in fact income had been converted into income by section 68
For the same reason the Department cannot derive any support from the observations made by this Court in Madurai District Central Co operative Bank Ltd vs Third Income tax officer Madurail We are therefore of the view that the assessee was entitled to claim deduction of income tax payable on the amounts added to his total wealth under section 2m of the Act in the course of the reassessment proceedings
In the result these appeals are allowed the judgment of the High Court is set aside and the questions referred to it are answered in the affirmative and in favour of the assessee
The Department will pay the costs of the appellant assessee Hearing fee one set
PBR Appeals allowed


Summary:
As part of a measure to mop up unaccounted money on which no income tax had been paid an incentive scheme was prepared by the Government under which a person disclosing such income was required to pay a specified rate of tax without attracting the penal provisions of the Income Tax Act
Section 68 of the Finance Act 1965 provided that a person making voluntary disclosure of his income in accordance with the provisions of the section would be charged income tax at a specified rate notwithstanding anything contained in the Income Tax Act
The assessee had a large sum of such unaccounted money in his possession
Without allocating the total sum amongst the different assessment years he declared that he had a sum of Rs 7 lakhs in his possession which was earned by him during the assessment years 1957 58 to 1964 65
Income Tax in respect of this income computed in accordance with section 68 of the Finance Act was paid by him
In the wealth tax returns filed by him in response to the notice issued by the Wealth Tax officer for re assessment consequent on the disclosure of his wealth the assessee claimed deductions of income tax paid under section 68 of the Finance Act
But the Wealth Tax officer disallowed the claim holding that since the assessee had not shown the liability to pay income tax in his balance sheets for the respective years the deductions claimed by him could not be allowed in any of the assessment years
The Appellate Assistant Commissioner dismissed the assessee s appeal
The Tribunal on the other hand held that the liability constituted a debt owed because in truth and substance it was a liability under the Income Tax Act 1922 or 1961 and not a new liability created by the Finance Act 1965
On reference the High Court held in favour of the Revenue on the ground that section 68 of the Finance Act enacted a new charge of tax on an ad hoc 403 basis on disclosed income and therefore it was not a debt owed which could be allowed as a deduction under the Wealth Tax Act
On behalf of the Revenue it was contended that since the tax paid by the assessee under the voluntary disclosure scheme was in discharge of a liability created for the first time by the Finance Act 1965 it was not an allowable deduction under the Wealth Tax Act
Allowing the appeal  HELD The assessee was entitled to claim deduction of income tax paid on the amounts added to his total wealth under section 2 m of the Wealth Tax Act in the course of the assessment proceedings
418 B C 1
Merely because the amounts were disclosed in a declaration under section 68 of the Finance Act they did not cease to be incomes not already charged to income tax
Although the Finance Act merely levied a fixed rate of tax in respect of all the income disclosed without allowing deductions exemptions and such other allowances which are allowable under the Income Tax Acts its function was no more than that of an annual Finance Act despite the fact that it made certain alterations in regard to the filing of declaration and computation of taxable income
414 G H 2
The nature of the declaration which was dependent on the volition of the declaring and the fact that the liability to tax the amount was contingent upon the willingness of the declaring to disclose the amount would not make a difference because such voluntary disclosure even in the absence of section 68 would have exposed the assesseee to assessment or reassessment
The voluntary character of the declaration cannot alter the character of the tax
415 A B 3
The true position is that the amount declared has the liability to pay income tax embedded in it on the valuation date but only the ascertainment of that liability is postponed to a future date
417 C In the instant case its determination was allowed to be done in accordance with the provisions of section 68
Even though this section was a complete code in itself it was only a scheme which provided a method for the liquidation of an already existing income tax liability which was present on the relevant valuation date
417 D 4
Nor did the absence of allocation of the amount disclosed amongst different assessment years detract the tax from being called a tax on income because such allocation would not achieve any additional purpose in the scheme of section 68 This section is in the nature of a package deal
The net result achieved was that the declarant was treated as having discharged all his liability in respect of such income under the income tax law
415E 404 5
The finding of the High Court that section 68 created a fresh charge is incompatible with the foundation of the very reassessment proceedings under section 17 of the Wealth Tax Act
415 H 6
Moreover section 68 at more than one place stated that what was pay able was income tax which clearly showed that what was payable under the section was income tax
412 B C CIT vs Khalau Makanji Spinning and Weaving Co Ltd Madurai District Central Cooperative Bank Ltd vs Third ITO  distinguished
C K Bahu Naidu vs Wealth Tax Officer  C Ii T vs GirdhariLal  CWT vs BK Sharma  CWT vs Bansidhar Poddar
 DC Shah vs CWT  Bhagwandas Jain vs Addl
CWT and Bhagwanidas Binani vs CWT  approved