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

Citation: [1981] 3 S.C.R. 849 · Decided: 08-05-1981 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Reference answered

Judgment (excerpt)

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JAMNAPRASAD KANHAIYALAL 
v. 
COMMISSIONER OF INCOME-TAX, 
M.P., BHOPAL 
May 8, 1981 
( R.S. PATHAK, A.P. SEN AND E.S. VENKATARAMIAH, JJ.] 
849 
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 
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 
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 
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, 
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 
HELD : Per Sen, J. 
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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 
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850 
SUPREME COURT REPORTS 
[ 1981] 3 s.c.~. 
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-
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] 
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 
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 

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