LexM/S. TANNA AND MODI versus C.L.T. MUMBAI XXV AND ORS.
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MIS. TANNA AND MODI A v. C.l.T. MUMBAI XXV AND ORS. MAY 17, 2007 [S.B. SINHA AND P.K. BALASUBRAMANY AN, JJ.] B • ~ Voluntary Disclosure of the Income Scheme, I997 : s.64(2)-Revocation of certificate-Search and seizure action against c partners of firm-Income Tax authorities having already discovered assets declared in VJDS by assessee firm-Fact of search not disclosed in VIDS application-Certificate declared null and void-Writ Petition dismissed by High Court -Held: Though under Income Tax Act and VIDS, 1997 a firm and its partner mqy have to be treated differently, a firm is the conglomeration of its partners, and it is not a juristic person-On facts, disclosure made by D firm related to some amount which had been disclosed by ·partner during ·- search and seizure action-Even source of income was found to be the "'" same-As income of firm vis-a-vis its partners have a direct correlation, while construing a statute granting immunity it should not be construed in such a manner so as to frustrate its object-Keeping in view the purport and E object of 1997 Scheme, rule of purposive construction should be applied- Applying the principles underlying Article I 36 and 142 of the Constitution, and having regard to nature of fraud practiced upon statutory authorities, no case made out for invoking jurisdiction under Article 136-Constitution of India, 1950-Arts. 136 and 142-Income Tax Act, 1961-Partnership Act, I831-s. I9-Interpretation of Statutes-Purposive construction F Interpretation of Statutes : Tax statutes-Circulars issued by Central Board of Direct Taxes-Held: May also be taken into consideration for purpose of construing the statute- Executive construction is ordinarily allowed to prevail and shall be binding G on authorities under /. T. Act. Appellant-assessee, a partnership firm, made a voluntary disclosure, under the Voluntary Disclosure of the Income Scheme, 1997. The said declaration was accepted and a certificate was issued. However, by order dated 233 H 234 SUPREME COURT REPORTS (2007] 7 S.C.R. A 8.4.2003, the Commissioner of Income Tax declared the said certificate to be .: null and void u/s 64(2) of the Scheme, as the search and seizure action had been carried out in respect of the partners of the assessee relating to the assets declared by it in the VDIS application which had been discovered earlier by the Income Tax Department during the course of search and seizure action, B but the assessee did not disclose this fact while filing the VDIS declaration. The writ petition filed by the assessee firm having been dismissed by the High Court, the firm filed the instant appeal. . It was, inter al:a, contended for the assessee-appellant that the firm for. ~ the purpose of applicability of provision of Income Tax Act being a distinct . c and separate entity vis-a-vis its partners, and there being no search and seizure of the premises of the firm, nor any warrant having been issued, the proceedings could not have been initiated for revoking the certificate issued under the VDI Scheme. Dismissing the appeal, the Court D HELD: 1.1. For the purpose of the application of the provisions of the Income Tax Act, 1961 and the Voluntary Disclosure of Income Scheme, 1997, ) a firm and its partner may have to be treated differently as a partner of a firm may have income other than his share of profits from the firm. (Para 17) (243-E] E 1.2. It is, however, also well settled that fraud vitiates all solemn acts. Fraudulent actions shall render the act a nullity. It would b~ non est in the . eyes of law. Acts of a firm vis-a-vis its partners, however, as is understood in common parlance or in terms of the provisions of the Partnership Act, 1932, F in a case of this nature, may have to be taken into consideration for judging the validity ofaction. Under the Partnership Act, a partner represents a firm. He has an implied authority in terms of Section 19 thereof and thus, any action \. taken by a partner of a firm vis-a-vis. the firm, unless otherwise specific, binds the firm itself. It is one thing to say that for the purpose of invoking the provisions of the Income Tax Act and other taxation laws a firm and its partner5 G are treated to be separate entities but while construing a statute involving immunity from certain penal actions, the provisions thereof should not ordinarily be judged ori the touchstone of the provisions of the 1961 Act, only · bec
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