IN HIGH COURT OF DELHI AT NEW DELHI Reserved on: 1st August, 2019 Decided on: 21st August, 2019 W.P. (C) 6541/2017 ANKUSH JAINPetitioner Through: Mr. Rakesh Tikku, Senior Advocate with Mr. P. Roy Choudhary, Mr. Lokesh Bhardwaj, Ms. Jyotsna Mehta and Mr. Sushil Kumar Gupta, Advocates. versus PR. COMMISSIONER OF INCOME TAX-4 Respondent Through: Ms. Maninder Acharya, ASG with Mr. Zoheb Hossain, Senior Standing Counsel for Revenue. + W.P. (C) 6543/2017 VAIBHAV JAIN ..... Petitioner Through: Mr. Rakesh Tikku, Senior Advocate with Mr. P. Roy Choudhary, Mr. Lokesh Bhardwaj, Ms. Jyotsna Mehta and Mr. Sushil Kumar Gupta, Advocates. versus PR. COMMISSIONER OF INCOME TAX-4 Respondent Through: Ms. Maninder Acharya, ASG with Mr. Zoheb Hossain, Senior Standing Counsel for Revenue. CORAM: JUSTICE S. MURALIDHAR JUSTICE TALWANT SINGH W.P. (C) 6541/2017 & 6543 of 2017 Page 1 of 18 JUDGMENT Dr. S. Muralidhar, J.: 1. These are two writ petitions arising out of similar set of facts and are being disposed of by this common judgment. issue 2. short issue involved here is whether Principal Commissioner of Income Tax-4 ( PCIT-4 ) was justified in passing impugned order dated 9th June, 2017 under Section 183 of Finance Act, 2016 ( FA, 2016 ) in respect of Income Declaration Scheme, 2016 ( IDS ), holding declaration made by each of Petitioners under IDS to be void under Section 193 of FA, 2016 on ground that it was made both by misrepresenting and suppressing facts. IDS 3. facts in brief are that, IDS became operational in terms of Chapter-IX of FA, 2016 with effect from 1st June, 2016. object of 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 FA, 2016. Section 183 (1) of FA, 2016 reads as under: Declaration of undisclosed income. 183. (1) Subject to provisions of this Scheme, any person may make, on or after date of commencement of this Scheme but before date to be notified by Central Government in Official Gazette, declaration in respect of any income chargeable to tax under Income-tax Act for any W.P. (C) 6541/2017 & 6543 of 2017 Page 2 of 18 assessment year prior to assessment year beginning on 1st day of April, 2017- (a) for which he has failed to furnish return under section 139 of Income-tax Act; (b) which he has failed to disclose in return of income furnished by him under Income-tax Act before date of commencement of this Scheme; (c) which has escaped assessment by reason of omission or failure on part of such person to furnish return under Income-tax Act or to disclose fully and truly all material facts necessary for assessment or otherwise. (2) Where income chargeable to tax is declared in form of investment in any asset, fair market value of such asset as on date of commencement of this Scheme shall be deemed to be undisclosed income for purposes of subsection (1). (3) 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 income in respect of which declaration under this section is made." 4. declaration had to be made to Principal Commissioner or Commissioner in Form-1 as per Rule 4 (1) of Income Declaration Scheme Rules, 2016 ( IDS Rules, 2016 ). After issuance of acknowledgement in Form 2 that declarant had paid tax, surcharge and penalty, Principal Commissioner or Commissioner had to grant declarant Certificate in terms of Form-4. Rule 4 of IDS Rules reads as under: W.P. (C) 6541/2017 & 6543 of 2017 Page 3 of 18 Declaration of income or income in form of investment in any asset. 4. (1) declaration of income or income in form of investment in any asset under section 183 shall be made in Form-1. (2) declaration shall be furnished: (a) electronically under digital signature; or (b) through transmission of data in form electronically under electronic verification code; or (c) in print form, to concerned Principal Commissioner or Commissioner who has jurisdiction over declarant. (3) Principal Commissioner or Commissioner shall issue acknowledgement in Form-2 to declarant within fifteen days from end of month in which declaration under section 183 has been furnished. ( 4) proof of payment of tax, surcharge and penalty made pursuant to acknowledgement issued by Principal Commissioner or Commissioner shall be furnished by declarant to such Principal Commissioner or Commissioner in Form 3. (5) Principal Commissioner or Commissioner shall grant certificate in Form-4 to declarant within fifteen days of submission of proof of full and final payment of tax, surcharge along with penalty by declarant under section 187 of Act in respect of income so declared. (6) Principal Director-General of Income-tax (Systems) or Director-General of Income-tax (Systems) shall specify procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for W.P. (C) 6541/2017 & 6543 of 2017 Page 4 of 18 evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing form in manner specified in sub-rule(2). Explanation. For purposes of this rule "electronic verification code" means code generated for purpose of electronic verification of person furnishing return of income as per data structure and standards specified by Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems)." 5. Section 193 of FA, 2016 begins with non-obstante clause and reads as under: Declaration by misrepresentation of facts to be void. 193. Notwithstanding anything contained in this Scheme, where declaration has been made by misrepresentation or suppression of facts, such declaration shall be void and shall be deemed never to have been made under this Scheme. Background facts 6. Each of Petitioners availed of IDS by filing declaration under Section 183 of FA, 2016 in Form-1 on 27th September, 2016. Each of Petitioners, declared income of Rs.8,26,91,750/- as investment in shares of various companies in assessment years (AYs) 2011-2012, 2012-2013 and 2016-2017. 7. After filing of above declarations, Designated Authority ( DA ) issued acknowledgement in Form-2 under Rule 4 (3) of IDS Rules. As far as Ankush Jain, Petitioner in W.P. (C) No. 6541/2017 is concerned, DA issued acknowledgement in Form-2 under Rule 4 (3) of IDS Rules determining amounts payable as under: W.P. (C) 6541/2017 & 6543 of 2017 Page 5 of 18 Tax- 2,48,07,525/- Surcharge- 62,01,881/- Penalty- 62,01,881/-. 8. separate acknowledgement was issued by DA in respect of Vaibhav Jain, Petitioner in W.P. (C) No. 6543/2017. Thereafter, Petitioners made full payment of tax, penalty and surcharge and submitted Form- 3 to PCIT (9), New Delhi on 19th December, 2016. 9. PCIT, CPC, Bangalore accepted two declarations made by Petitioners under Section 183 of FA, 2016, with reference to undisclosed income of Rs.8,26,91,750/- for each petitioner and issued certificate in Form-4 read with Rule 4 (5) of IDS Rules. Impugned order of PCIT 10. Subsequently, PCIT (4), New Delhi passed impugned order on 9th June, 2017 under Section 183 of FA 2016, holding that above declaration of income of Rs.8,26,91,750/- by each of Petitioners was made by suppression and misrepresentation of facts. Therefore, both declarations were held to be void . 11. PCIT referred to report submitted by ACIT, Special Range-4 dated 7th June, 2017 with regard to assessment proceedings in case of M/s Akinchan Developers Private Limited, M/s Indo Metal Impex Private Limited, M/s Prayas Infosolutions Private Limited and Mr. Satyender Kumar Jain. In said report, it was noted in paras 6 & 7 as under: W.P. (C) 6541/2017 & 6543 of 2017 Page 6 of 18 6. As per report, assessment proceedings in case of M/s Akinchan Developers Pvt. Ltd. (A.Y. 2011-12 and 2012-13), M/s Indo Metal Impex Pvt. Ltd (A.Y. 2011-12 and 2012-13) and M/s Paryas lnfosolutions Pvt. Ltd (A.Y. 2012-13) were initiated u/s 148 of I.T. Act by Assessing Officer, Addl. ClT Special.Range-4, New Delhi, on basis of information received from Office of Principal DIT Investigation, Kolkata in August 2016, that these companies have taken accommodation entries in form of share capital from Kolkata based shell companies. Subsequently, on basis of further investigation, Assessing officer issued notices u/s 148 for A.Y: 2011-12 and 2012-13 to Shri Satyendar Kumar Jain (AAMPJ5555B) after recording reasons. 7. information regarding accommodation entries was also received by Initiating officer for further examination and necessary action under Prohibition of Benami property Transaction Act, 1988. Initiating officer, after making necessary inquiry and considering evidence issued provisional attachment orders u/s 24(4) of Prohibition of Benami property Transaction Act, 1988 on 24.05.2017 by holding Shri Satyendar Kumar Jain as beneficial owner of bogus share capital introduced in companies mentioned earlier. details of orders passed by Initiating Officer are as under: S.No. Name of Benamidar Name of Beneficial Amount Owner 1. Akinchan Developers P. Shri Satyender Kumar 4,85,83,200/- Ltd. Jain 2. Indo Metal Impex p. Ltd. Shri Satyender Kumar 7,14,00,000/- Jain 3. Paryas Inforsolutions P. Ltd. Shri Satyender Kumar 2,49,00,300/- Jain 4. Goodview Tradecom P. Ltd. Shri Satyender Kumar 42,00,000/- Jain W.P. (C) 6541/2017 & 6543 of 2017 Page 7 of 18 5. Mubarak Lubricants P. Ltd. Shri Satyender Kumar 12,00,000/- Jain 6. Puniya Leather P. Ltd. Shri Satyender Kumar 35,00,000/- Jain 7. Virat Vintrade P. Ltd. Shri Satyender Kumar 40,62,500/- Jain 8. R.P.Vyapaar P.Ltd. Shri Satyender Kumar 15,37,500/- Jain 9. Salona Dealtrade P.Ltd. Shri Satyender Kumar 22,50,000/- Jain 10. Swarnim Commosale P. Shri Satyender Kumar 22,50,000/- Ltd. Jain 12. PCIT in impugned order noted that provisional attachment orders under Section 24 (4) of PBPT Act were passed on 24th May, 2017 and in respect of same, observed that on careful consideration of all material available, it had been decided that each of Petitioners had made declaration of undisclosed income under IDS by misrepresentation and suppression of facts . 13.The PCIT adverted to Form No.1 submitted by Petitioners and noted that in 3rd Column where names under which shares were held had to be mentioned, it was written, multiple names . According to PCIT, investment in shares declared by each of Petitioners actually belonged to one Mr. Satyender Kumar Jain. Reliance was placed upon provisional attachment order under Section 24 (4) of PBPT Act. It was pointed out that although Petitioners had declared investment in W.P. (C) 6541/2017 & 6543 of 2017 Page 8 of 18 shares of Akinchan Developers Private Limited (ADPL); it was held that said investments did not actually belong to Petitioners, Ankush Jain and Vaibhav Jain, but in fact to Mr. Satyender Kumar Jain. 14. PCIT in impugned order placed reliance on report submitted by ACIT, Special Range-4, New Delhi dated 7th June, 2017 with regard to assessment proceedings in case of M/s Akinchan Developers Private Limited ( ADPL ), M/s Indo Metal Impex Private Limited ( IMIPL ), M/s Prayas Infosolutions Private Limited and Mr. Satyender Kumar Jain. similar proceeding was initiated in case of Mr. Vaibhav Jain. While Mr. Ankush Jain stated that he came to know about proceedings only after receipt of impugned order dated 9th June, 2017, similar order was passed in case of companion writ Petitioner Vaibhav Jain. It is in above circumstances that these writ petitions were filed challenging impugned order dated 9th June, 2017 of PCIT, who had rejected declaration of undisclosed income on ground that each of Petitioners had both misrepresented as well as suppressed facts. 15. This Court has heard submissions of Mr. Rakesh Tikku, learned senior counsel appearing on behalf of Petitioners and Ms. Maninder Acharya, learned ASG of India appearing on behalf of Respondent, PCIT. Submissions on behalf of Petitioners 16. One of grounds of challenge raised by Petitioners is that impugned order was passed in violation of principles of natural justice, W.P. (C) 6541/2017 & 6543 of 2017 Page 9 of 18 since no prior notice was issued to either of Petitioners before passing impugned order rejecting declarations of undisclosed income under IDA scheme. It is also contended that order passed under Section 183 of Act was quasi-judicial one and could not have been passed without prior notice to each of Petitioners. In support of this proposition, reliance is placed on decisions in East India Commercial Communication Company Ltd. Calcutta v. Collector of Customs, Calcutta AIR 1962 SC 1893, Union of India v. Madhumilan Syntex Private Limited (1988) 3 SCC 348 and Metal Forgings. v. Union of India (2003) 2 SCC 36, C.B. Gautam v. Union of India (1993) 1 SCC 78. 17. It is further submitted that impugned order was based on report, copy of which was never provided to either of Petitioners. Thirdly, it is submitted that PCIT-4, New Delhi or DA had no jurisdiction to pass impugned order since declaration was made to PCIT, CPC, Bangalore. This was jurisdictional defect which went to root of matter. It is pointed out that each of Petitioners had given full particulars of shares invested and declarations had in fact been accepted by PCIT, CPC, Bangalore, by issuing acknowledgement in Form No.4. 18. It is submitted that reliance on order dated 24 th May, 2017 passed under PBPT Act was misplaced. According to Petitioners, proceedings under PBPT Act, which were with respect to one of companies in which Petitioners has invested, had no effect on declaration made by each of them under IDS. Reference is made to Section 190 of PBPT Act to urge that provisions thereof had no W.P. (C) 6541/2017 & 6543 of 2017 Page 10 of 18 applicability to income disclosed under IDS. Lastly, it is submitted that IDS is beneficial scheme and has to be construed liberally. Submissions on behalf of Respondents 19. On behalf of Respondents, Ms. Maninder Acharya, ASG of India submitted as under: (i)The admitted fact was that each of Petitioners had under column in Form-1 which is titled names in which, shares were held simply stated multiple names . Such declaration ex facie amounted to suppression of facts. (ii) There was no option with Respondent No.1 but to pass impugned order since Section 193 of FA, 2016 was straightaway attracted. (iii) Under Rule 4 (5) of IDS Rules, issuances of Form- 4 constituted receipt of proof of full and final payment of tax, surcharge and penalty by declarant. mere acceptance of declaration under Form-4 did not mean that power under Section 183 of FA, 2016 could not be exercised. (iv) There was no question of violation of principles of natural justice. IDS was one-time measure giving Assessees opportunity to make complete and full disclosure. Section 183 of FA, 2016 did not envisage issuance of any show cause notice (SCN) before passing order under Section 193 of FA, 2016 for failure to comply with W.P. (C) 6541/2017 & 6543 of 2017 Page 11 of 18 requirements of IDS. 20. Ms. Acharya explained that consequence of rejection of declaration under IDS is that said amount would be assessed under normal procedure established under Act, where in any event each of Petitioners would be heard. Reference is made to decision in Hemlatha Gargya v. CIT (2003) 259 ITR 1 (SC). There was sufficient material available with Respondents, which indicated that amount declared in IDS was that of Mr. Satyender Kumar Jain. In other words, undisclosed income sought to be declared under IDS by each of Petitioners actually belonged to Mr. Satyender Kumar Jain and therefore this was clear suppression of material facts which justified rejection of declarations. Analysis and reasons 21. above submissions have been considered. purpose underlying enactment of IDS, which was introduced under FA, 2016, has been set out in Notes on Clauses to FA, 2016, which read as under: opportunity is proposed to be provided to persons who have not paid full taxes in past to come forward and declare undisclosed income and pay tax, surcharge and penalty totalling in all to forty-five per cent of such undisclosed income declared. scheme is proposed to be brought into effect from 1st June 2016 and will remain open up to date to be notified by Central Government in official gazette. scheme is proposed to be made applicable in respect of undisclosed income of any financial year upto 2015-16. W.P. (C) 6541/2017 & 6543 of 2017 Page 12 of 18 Tax is proposed to be charged at rate of thirty per cent on declared income as increased by surcharge at rate of twenty five per cent of tax payable (to be called Krishi Kalyan cess). penalty at rate of twenty five per cent of tax payable is also proposed to be levied on undisclosed income declared under scheme. 22. Notes on Clauses further explained IDS as under: Clauses 178 to 196 of Bill seeks to insert new Chapter IX relating to Income Declaration Scheme, 2016. said Scheme, inter alia, provides for declaration of undisclosed income by any person. scheme shall be in operation from 1st day of June, 2016 till date to be notified by Central Government in Official Gazette. proposed Chapter, inter alia, provides for levying tax of thirty per cent on undisclosed income declared in scheme, surcharge at rate of twenty-five per cent, of such tax as Krishi Kalyan Cess, and penalty at rate of twenty-five per cent, of tax; procedure and manner of filing declaration under said Scheme; undisclosed income declared under said Scheme not be included in total income or affect finality of completed assessments; income declared under said Scheme shall not be refundable; exemption from wealth-tax in respect of assets specified in declaration; power to remove difficulty by Central Government; and power of Central Board of Direct Taxes with approval of Central Government to make rules for purposes of said Scheme. 23. As rightly pointed out, IDS itself was one-time measure to enable those who had failed to disclose their income with view to avoid payment of tax thereon, to make good this lapse by making complete and full disclosure in manner specified in IDS. W.P. (C) 6541/2017 & 6543 of 2017 Page 13 of 18 24. This was explained by Supreme Court in context of earlier Voluntary Disclosure of Income Scheme, 1997 (VDIS), analogous to IDS in present case, in Hemalatha Gargya v. Commissioner of Income Tax (2003) 259 ITR 1 (SC). There, Supreme Court emphasised that Assessees who seek benefit by VDIS are bound to comply strictly with conditions under which such benefit is granted. following observations in said judgment are relevant to this context: Besides scheme has conferred benefit on those who had not disclosed their income earlier by affording them protection against possible legal consequences of such non-disclosure under provisions of Income-tax Act. Where assessees seek to claim benefit under statutory scheme they are bound to comply strictly with conditions under which benefit is granted. There is no scope for application of any equitable consideration when statutory provisions of scheme are stated in such plain language. Seen from angle of designated authority, which is created under Scheme, it is clear that authority cannot act beyond provisions of Scheme itself. power to accept payment under Scheme has been prescribed by statute. There is no scope for Revenue authorities to imply provision not specifically provided for which would in any way modify explicit terms of Scheme. 25. In present case, perusal of disclosure forms submitted by Assessees reveal that in Column 6, which concerns statement of undisclosed income (as per annexure) , there is separate statement of undisclosed income where for three years i.e. 2011, 2012 and 2016, amounts have been disclosed. In column title description , it uniformly states, invested in shares in multiple names , whereas for 2011 and 2012 it W.P. (C) 6541/2017 & 6543 of 2017 Page 14 of 18 states, notice of 148 issued after 1st June, 2016 for Indo, Akinchan and Prayas . For 2016, it states invested in shares of multiple names of Akinchan , Prayas and Mangal Yatan. use of phrase multiple names is again repeated in Part-B of form, which is titled unquoted equity share of Rule 3 (1)(c)(ii) under column which reads names under which held , phrase multiple names is simply stated throughout. 26. This must be read together with verification, where each of applicants has solemnly declared that information given in declaration is correct and complete to best of my knowledge and belief and in particular that in addition to own income of declarant for which declaration is made income of any other person in respect of which have not chargeable to tax has not been included in this declaration . 27. There is another specific declaration in para H which reads, income declared is not chargeable to tax under Income Tax Act for any previous year relevant to assessment year where search has been conducted under Section 132 . It is further expressly stated that undisclosed income declared in form of investment in Benami Property and existing in name of Benamidar shall be transferred in name of real owner on or before 30th September, 2017 failing which immunity under Benami Transactions (Prohibition) Act, 1988 shall not be available . Therefore, form itself made it abundantly clear to person seeking benefit under IDS that disclosure had to be both truthful and complete. W.P. (C) 6541/2017 & 6543 of 2017 Page 15 of 18 28. It is in this context that in Section 193 of FA, 2016 it was made clear that where declaration under IDS is made by misrepresentation or suppression of facts such declaration shall be void and shall be deemed never to have been made under scheme . forms also have statutory character as they are prescribed under IDS Rules. 29. Court is not persuaded by submission of Petitioners that each of them ought to have been issued notice prior to impugned order being passed. Even now, neither of Petitioners has any explanation to offer for not specifying complete details of persons in whose names shares in which investments had been made were actually held. 30. There are eight companies whose shares were purchased by two Petitioners, whose names have been included in list. Admittedly, in respect of shares in ADPL, proceedings under Section 24 (4) of PBPT Act, 1988 have been initiated. Petitioners have themselves enclosed copy of order dated 24th May, 2017 passed in respect of Benamidar i.e. ADPL, which inter-alia notes that cash that was routed through accommodation entries in garb of share capital/premium in fact belonged to Mr. Satyender Kumar Jain and that it was at his direction that entire transaction was orchestrated. It was noted that neither of these two Petitioners was either Director or Shareholder in said company. It was noted that declarants had not provided name of Benamidar through whom investment had been routed and that these facts were all completely within knowledge of two Petitioners. These conclusions of PCIT have not been convincingly countered by either of W.P. (C) 6541/2017 & 6543 of 2017 Page 16 of 18 Petitioners. In circumstances, PCIT was right in concluding that neither of Petitioners had made full and true disclosure of all material facts. 31. In Tanna & Modi v. CIT, Mumbai (2007) 7 SCC 434 Supreme Court upheld action of Respondent declaring certificate issued under Kar Vivad Samadhan Scheme, 1998 to be null and void on account of suppression of facts by declarant. It was held in para 20 as under: 20. It may be necessary for aforementioned purpose to bear in mind that immunity granted pursuant to acceptance of declaration made under voluntary taxation scheme or Kar Vivad Samadhan Scheme, 1998 does not lead to total immunity. Immunity granted under Scheme has its own limitations. Scheme must be applied only in event conditions precedent laid down therefor are applicable. See State, CBI v. Sashi Balasubramanian and Alpesh Navinchandra Shah v. State of Maharashtra. 32. mere fact that acknowledgement may have been issued in Form- 4 by CIT, CPC did not provide any immunity to Petitioners if it was found that declaration was contrary to Section 193 of FA, 2016 which begins with non-obstante clause. 33. There is no merit in objection to jurisdiction of PCIT, Delhi to issue impugned order. fact remains that Petitioners declarations were uploaded electronically at Delhi where both Petitioners reside. Their assessments were completed in Delhi. explanation offered in counter affidavits of Respondent that PCIT-30, New Delhi had by order W.P. (C) 6541/2017 & 6543 of 2017 Page 17 of 18 dated 10th January, 2017 under Section 127 of Act transferred jurisdiction to Additional Commissioner of Income Tax, Special Range-4 who in turn was authorised to make impugned order merits acceptance. Moreover, since this is case of suppression of material facts Respondent No.1 was duty bound to give effect to provision provided under Section 193 of FA, 2016. 34. Therefore, where jurisdictional Principal Commissioner/ Commissioner of Income Tax finds declaration to be based on such misrepresentation or suppression of facts, he would not be precluded from holding declaration itself to be void in terms of Section 193 of FA, 2016. Court accepts contention of Respondent that there is no provision as such in IDS to afford declarant hearing prior to passing order holding such declaration to be void for being in contravention of Section 193 of FA, 2016. 35. For all of aforementioned reasons, Court finds no error having been committed by Respondent No.1 in passing impugned order. 36. writ petitions are dismissed but in circumstances with no order as to costs. S. MURALIDHAR, J. TALWANT SINGH, J. AUGUST 21, 2019 mw W.P. (C) 6541/2017 & 6543 of 2017 Page 18 of 18 Ankush Jain v. Pr. Commissioner of Income-tax-4