1 IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Income Tax Appeal No. 54 of 2003 1. The Commissioner of Income Tax. Dehradun. 2. Income Tax officer Haridwar …..........Appellants Versus Smt Meena Goyal C/o Shri Balesh Bhargava Advocate, 56, Niranjani Akhada, Haridwar …..................Respondent Shri Arvind Vashisth Advocate, present for appellants Shri Siddhartha Singh, Advocate, present for the assessee/respondent Coram: Hon’ble Prafulla C. Pant, J. Hon'ble Sudhanshu Dhulia, J. Oral: Hon'ble Prafulla C.Pant, J. This appeal preferred under section 260A of Income Tax Act, 1961, (for short ITA), is directed against the order dated 06.08.2002, passed by Income Tax Appellate Tribunal (for shor ITAT) Delhi, Bench F, in ITAT No. 427/Del/2001(assesment year 1993-1994) 2 whereby, the tribunal has allowed the appeal of the assessee holding that the assessee was entitled to the Voluntary Discloser Income Scheme ( for short VDIS) under Finance Act, 1997. (2) The question of law involved in this appeal is as under:- Whether the ITAT wrongly interpreted the expression “ in relation to prosecution” in section 78 (b) of Finance Act, 1997, in holding that the assessee against whom First Information Report was lodged (but no charge sheet was filed ) was entitled to the benefit of VDIS ? (3) Brief facts of the case :- On receiving the information from Central Bureau of Investigation (CBI) a notice under section 148 Income Tax Act was issued to the assessee by the Assessing Officer (for short AO) as to why the assessment be not made in respect of the allegedly earned huge profits by the assessee by making supplies on Heavy duty HTILPE cable to BHEL for the assessment year 1993- 1994. In reply to said notice the assessee stated that she had preferred VDIS by disclosing her income at ` 11,70,000/- ffor the assessment year 1993-1994, and ` 14,30,000/- for the assessment year 1994-1995. She 3 took defence of certificate dated 04.12.1997 issued by the Commissioner of Income Tax, Meerut, to this effect. The AO rejected the reply of the assessee on the ground that VDIS was not available to the assessee in view of section 78 (b) of Finance Act, 1997. Aggrieved by said order dated 30th of March 2000, the assessee preferred appeal no. 4/ MRT/2000-2001 before Commissioner of Income Tax (Appeals) {for short CIT (Appeals)}. However, said authority partly allowed the appeal but rejected the benefit of VDIS, vide its order dated 14th of November 2000. Consequently assessee preferred an appeal ITA NO. 427/Del/2001 before ITAT Delhi which was allowed vide impugned order dated 06.08.2002, holding that the assessee was entitled to the VDIS as there was no prosecution pending against her. (4) Heard learned counsel for the parties at length and perused the impugned order passed by ITAT. (5) Before further discussion, we think it just and proper to quote the relevant provision of law. Section 78 (b) of Finance Act, 1997, provides as under:- 78. Scheme not to apply to certain persons :- The provisions of this Scheme shall not apply :- (a).......... (b) in relation to prosecution for any offence punishable under Chapter IX or Chapter XVII of the Indian 4 Penal Code, 1860, (45 of 1860), the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985), the Terrorists and Disputive Activities (Prevention) Act, 1987 (28 of 1987), the Prevention of Corruption Act, 1988 (49 of 1988) or for the purpose of enforcement of any civil liability; (c) …......” (6) It is not disputed that assessee/respondent Meena Goyal filed her Income Tax return on 17.12.1997, for the assessment year 1993-1994, in the status of individual showing her income at ` 38,910/-. It appears that an information was received by the Income Tax Authorities from the CBI relating to earning by the assessee for the assessment year 1993-1994, by supplying Heavy duty HTILPE cable of 81 kms length to BHEL. On this, the AO issued a notice under section 148 of Income Tax Act to the assessee. In reply to said notice assessee submitted the details of the transaction of sale to BHEL but pleaded that she (assessee) has already preferred VDIS by disclosing income of ` 11,70,000/- ffor the assessment year 1993-1994, and ` 14,30,000/- for the assessment year 1994-1995. She also referred to certificate dated 04.12.1997, issued to this effect by Commissioner of Income Tax Meerut in the matter. However, the AO rejected the defence taken by the assessee on the ground that in view of section 78 5 (b) of the Finance Act, 1997, quoted above, the assessee was not entitled to the benefit of VDIS. In the appeal, CIT (Appeals) also took the same view. But in the appeal before the ITAT the contention of the assessee was accepted. (6) It is argued on behalf of the revenue before us that VDIS was not available in relation to the prosecution for the offence punishable under Chapter XVII of IPC and the offence punishable under Prevention of Corruption Act, 1988. It is not disputed that a First Information Report was registered by CBI against the assessee on 26.09.1994. It is also evident that VDIS was floated only in the year 1997 through Finance Act, 1997, and assessee disclosed her income, and got a certificate issued from the authority concerned. The question before us is whether the person against whom only First Information Report is lodged, but the charge sheet is not filed , was barred from taking benefit of the scheme of VDIS, or not, in view of the provision contained in Sub section (b) of section 78 of the Finance Act, 1997. Clause (b) begins with the expression “ in relation to prosecution”. Learned counsel for the appellants submitted that since the assessee could have been prosecuted under Prevention of Corruption Act, 1988, due to the investigation pending against her, as such, she was not entitled to 6 VDIS. (7) We have carefully gone through the provision contained in section 78 (b) of Finance Act, 1997. It does not say anything as to pending investigation. In our opinion a prosecution can be said to have been initiated when the summons have been issued by the court on a report submitted by Investigating Officer before it. Admittedly in the present case no charge sheet was ever filed against the assessee, nor any summons were issued against her. Rather, it is on the record that CBI itself moved the court seeking withdrawl of First Information Report and filed final report on 18.08.1997, i.e. much before the certificate of VDIS was issued in favour of the assessee. That being so we do not find any reason to hold that assessee was barred from seeking benefit of VDIS by section 78 (b) of the aforesaid Act. It has also come on the record that ultimately the CBI court accepted the final report/withdrawl of F.I.R in November 1998. Since neither the prosecution was pending on the date when VDIS was sought by the assessee, nor prosecution was initiated on the investigation pending on the date VDIS benefit was sought, as such, it can not be said that assessee was one of such persons to whom clause (b) of section 78 of Finance Act, 1997, applied. 7 (8) Accordingly, question of law stands answered in favour of the assessee. (9) For the reasons as discussed above, we find no illegality in the impugned order dated 06.08.2002, passed by ITAT Delhi, Bench F, in ITA No. 427/Del/2001, (for the assessment year 1993-1994). Therefore, the appeal is dismissed. (Sudhanshu Dhulia, J.) (Prafulla C. Pant, J.) 23.12.2010 Nahid