Satish Chandra, C.J.
1. Messrs. Pioneer Trading Syndicate, the assessee, carried on business in sports goods and also in radio and allied things. For the assessment year 1967-68, the ITO found in the assessee's books the following credit entries :
Rs.(i) Sri Jagat Ram 10,000(ii) Smt. Gita Singh 18,600
2. The assessee had purchased a motor car for Rs. 14,500. According to him, the source of this money was two other deposits credited in the assessee's books, namely, of Rs. 10,000 by Sri Jagat Ram and of Rs. 14,500 by Smt. Viranwali. Sri Jagat Ram is the father and Smt. Viranwali, the mother of the assessee. The ITO found that the explanation in respect of these credit entries was not satisfactory. He added all these credits amounting to Rs. 43,100 as the assessee's income from undisclosed sources.
3. The assessee went up in appeal. The AAC reduced the addition by Rs. 3,000 in respect of the credit entries in favour of Sri Jagat Ram. The addition of the balance was upheld. The assessee then went up to the Tribunal in appeal. On behalf of the assessee, it was reiterated before the Tribunal that all the three creditors had made disclosures before the CIT under the Finance (No. 2) Act, 1965, of the following amounts :
Rs.(i) Sri Jagat Ram 20,000(ii) Smt. Gita Singh 20,000(iii) Smt. Viranwali 10,000
4. These disclosures had been accepted. The declarants had paid tax on the amounts of income disclosed by them. Subsequently, these persons had deposited the money with the assessee. The assessee had paid interest on the deposits. The creditors were taxed on the interest income earned by them from the assessee. The Tribunal, relying upon a decision of this court in Badri Pd. & Sons v. CIT : [1975]98ITR657(All) , held that the declarations under the Voluntary Disclosure Scheme did not give immunity to the assessee. The revenue was entitled to examine the explanation of the assessee independently. The same could be accepted if it was found that the creditors had the necessary capacity to advance the money to the assessee. Examining the evidence from this angle, the Tribunal upheld the addition of Rs. 5,000 only in relation to Jagat Ram. It also upheld the addition in respect of the two ladies. In the result, additions to the tune of Rs. 28,100 were upheld by the Tribunal.
5. The Tribunal submitted a statement of the case for eliciting the opinion of this court on the following question of law I
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in its view that the aggregate sum of Rs. 28,100 appearing as deposit in the assessee's account books in the names of third persons was the income of the assessee having regard to the fact that this very amount had been declared and accepted by the department to be the income of the depositor under the Voluntary Disclosure Scheme contained in the Finance (No. 2) Act of 1965?'
6. When the reference came before a Bench of this court, it felt that in view of the decision of the Delhi High Court in Rattan Lal v. ITO : [1975]98ITR681(Delhi) and of the Gujarat High Court in Manilal Gafoorbhai Shah v. CIT : [1974]95ITR624(Guj) , the decision of this court in Badri Pd.'s case : [1975]98ITR657(All) required reconsideration. The reference was hence referred to a Full Bench. That is how this case had come before us.
7. The question which requires our consideration, in substance, is as to the effect of the acceptance by the Commissioner of the voluntarily disclosed income by an individual under the scheme envisaged by the Finance (No. 2) Act, 1965 (Act No. XV of 1965). For the assessee, it was stressed that once the Commissioner accepts the voluntarily disclosed income, it becomes the total income of the declarant and is deemed to be his earned income. If the declarant deposits such income with another person, the department is not entitled to disregard the Commissioner's order of acceptance and to institute an enquiry as to the solvency or paying capacity of the creditor in respect of the amounts covered by the voluntary disclosure.
8. On the other hand, the learned counsel for the revenue submitted that the voluntary disclosures were accepted without any enquiry or satisfaction that the disclosed amounts represented the income of the declarant. The procedure envisaged by the Voluntary Disclosure Scheme was summary. The Scheme gave some immunities to the declarant. It did not preclude an enquiry into the genuineness of the declaration in subsequent proceedings in relation to persons other than the declarant.
9. The answer to these rival submissions will depend upon the interpretation of the various provisions of the Finance (No. 2) Act of 1965. Section 24 of this Act was headed as 'voluntary disclosure of income'. It consists of sixteen sub-sections. Sub-section (1) envisaged a declaration in respect of amounts representing income chargeable to tax for an assessment year commencing prior to April 1, 1964, for which a return had not been filed or which was not disclosed in the return of income filed or which had escaped assessment. On such a declaration being made, the amount disclosed was chargeable to income-tax in accordance with Sub-section (3). Sub-section (2) requires that the declaration shall be made to the Commissioner and shall contain the name, address and signature of the person making the declaration. Sub-section (3) provides for the charge of income-tax on the voluntarily disclosed income. It reads :
'(3) Income-tax shall be charged on the amount of the voluntarily disclosed income-
(a) where the declarant is a person other than a company, at the rates specified in Paragraph A, and.....
of Part I of the First Schedule to the Finance Act, 1965 (X of 1965), as if such amount were the total income of the declarant, so, however, that-
(i) the proviso to the said Paragraph A or, as the case may be, the second proviso to the said Paragraph F shall not apply;
(ii) where the declarant is a person other than a company, the voluntarily disclosed income shall be deemed to be earned income;
(iii) where the declarant is a company, the voluntarily disclosed income shall be deemed to consist of income other than income by way of royalties or fees for rendering technical services or profits and gains derived from the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any article or thing or of processing of goods or mining ; and
(iv) where the declarant is a firm, it shell be deemed to be an unregistered firm.....'
10. Under this provision, income-tax is chargeable on the amount of the voluntarily disclosed income as if this amount was the total income of the declarant and further where the declarant is a person other than a company the voluntarily disclosed income is deemed to be earned income.
11. Under Sub-section (7), the Commissioner, on receipt of the declaration, shall forward the same to the ITO together with a copy of his order under Sub-section (4) and the ITO shall determine the amount payable in accordance with Sub-section (3) and shall serve upon the declarant a notice of demand under Section 156 of the I.T. Act, 1961. Under Sub-section (4) the Commissioner has to make an order in writing supported by reasons specifying the amount of income which has been voluntarily disclosed but, which, in his opinion, has been detected by the ITO prior to the date of the declaration. Such an order is passed after hearing the declarant. Under Sub-section (5), the person objecting to the order passed by the Commissioner under Sub-section (4) may, within thirty days of the date on which such order is served on him, make an application to the Board, stating therein the reasons for such objection and requesting for appropriate relief in the matter. Under Sub-section (6) on receipt of the application under Sub-section (5) the Board may after giving theapplicant an opportunity of being heard, pass such orders as it thinks fit. Sub-section (8) says :
'(8) An order under Sub-section (6) shall be final and shall not be called in question before any court of law or any other authority.'
12. This provision makes the order of the Board in respect of the previously detected income final. Sub-sections (9) to (12) lay down the liabilities and immunities enjoyable by a declarant. Under sub-s (9), the amount of income-tax so paid shall not be refundable in any circumstances and the declarant will not be entitled to reopen any assessment or reassessment made under the I.T. Act, 1961, or claim any set-off or relief in any appeal, reference or revision or other proceeding in relation to such assessment or reassessment.
13. Sub-section (10) provides that the amount of the voluntarily disclosed income shall not be included in the total income of the declarant for any assessment year under any of the Acts mentioned in Sub-section (9) if he has credited such amount in the books of account, if any, maintained by him for any source of income or in any other record and that the credit made shall be intimated by the declarant to the ITO.
14. Sub-section (11) provides that notwithstanding anything contained hereinabove or in any other law for the time being in force, nothing contained in any declaration made under this section shall be admissible as evidence against the declarant for the purpose of any assessment proceeding or any proceeding relating to imposition of penalty or for the purpose of prosecution under any of the Acts mentioned in Sub-section (9) in respect of any amount specified in an order made by the Commissioner under Sub-section (4) or, if such amount is altered by an order of the Board, then such altered amount.
15. Sub-section (12)(a) requires that such declaration or record of any proceeding shall be treated as confidential. Under Sub-section (13) the provisions of Section 154 of the I.T. Act, 1961, have been made applicable for the rectification of any mistake apparent from the record of any proceeding under this section. Sub-sections (14) to (16) are not very material.
16. An important feature of the Scheme envisaged by the Finance (No. 2) Act, 1965, is that an order under Sub-section (6) has been made final. Such an order cannot be questioned in any court of law or before any other authority. An order under Sub-section (6) is passed by the Board against the order of the Commissioner passed under Sub-section (4). The Board passes the order under Sub-section (6) after hearing the parties. Likewise, the Commissioner is required to give an opportunity of being heard to the declarant before passing an order. The order under Sub-section (6) relates to the whole or any part of the amount of voluntarily disclosed income to have been detected or deemed to have been detected by the ITO prior to the date of declaration. In such a case, the Commissioner passes a reasoned order in writing estimating such detected income, the amount found by the Commissioner or the Board to have been detected is deducted from the amount declared and the balance amount only is treated as the voluntarily disclosed income : vide Sub-section (1). The scheme is that persons under Sub-section (1) shall make a declaration in accordance with Sub-section (2). Income-tax is chargeable on the amount disclosed as income. The Commissioner has to forward the declaration to the ITO who determines the amount of tax payable and issues a notice of demand. No enquiry or investigation is made into the source of income or whether the declarant is liable to income-tax on the amount disclosed. The declarant is taken at his word and the amount is treated as his total income and is deemed to be his earned income. All this is done without any investigation. Sub-section (15) provides that the Commissioner shall on an application by the declarant grant a certificate to him setting forth the particulars of the voluntarily disclosed income and the amount of income-tax paid in respect of the same and the date of payment. But there is no provision making the certificate or the declaration to be final and not liable to be questioned in any court or before any authority. The significance is obvious. Whenever the proceedings were summary and without any investigation the matter was left without any finality. The order in respect of detected income requires investigation and tearing. Then there is an appeal to the Board. The order of the Board has been made final by Sub-section (8). In the premises, the certificate granted by the Commissioner under Sub-section (15) as to the particulars of the voluntarily disclosed income cannot be treated as final so as not to be questionable before any court of law or before any authority. This certificate is final only in so far as the voluntary disclosure under the Finance (No. 2) Act of 1963 is concerned. The fact that the voluntarily disclosed income is by a fiction treated as if such amount was the total income of the declarant or it shall be deemed to be the earned income are liable to be reopened if questioned in any other proceeding. The declarant is not granted any immunity in relation to these aspects of the voluntarily disclosed income. The immuni-ties granted to him are specifically mentioned in Sub-sections (9), (10) and (11). Under sub-section (10), the voluntarily disclosed income shall not be included in the total income for any assessment year provided he has credited such amounts in his books and has intimated the credits so made to tte ITO. None of the immunities mentioned in Sub-sections (9), (10) and (11) or the embargo on a public servant disclosing any particulars contained in the declaration before any court extend to an investigation of the nature and source of the voluntarily disclosed income.
17. If an assessee other than the declarant claims that the credit entries appearing in his books of account in the name of the declarant are moneysrepresenting the income earned by the declarant, this explanation is open to investigation. The certificate granted under Sub-section (15) or the fact that the declarant has voluntarily disclosed amounts under the Finance (No. 2) Act of 1965 will not preclude an examination of the explanaticn. The Finance Act does not make these matters final and not liable to be called in question.
18. The fact that a certain person made a declaration voluntarily disclosing certain amounts as his income will be relevant and admissible as a piece of evidentiary value. Certainly it will not be conclusive. While considering the explanation of the assessee, the revenue will in law be entitled to be satisfied, inter alia, that the declarant had the capacity to earn the amounts disclosed by him.
19. In Badri Pd.'s case : [1975]98ITR657(All) , a Bench of this court observed that the declaration or the fact of payment of tax had no relevance for discharging the burden which lay on the assessee under Section 68 of the I. T. Act, 1961, of explaining the cash credits. With respect, we will not go that far. The fact of declaration and the payment of tax on it are admissible materials, but the revenue can ask for satisfaction of the fact that the declarant had really earned that amount before accepting the explanation. We are in respectful agreement with the conclusions reached by the Gujarat High Court in Manilal Gafoorbhai Shah v. CIT : [1974]95ITR624(Guj) , though for abovementioned reasons. We are, however, unable to endorse the opinion expressed by the Delhi High Court in Rattan Lal v. 110 : [1975]98ITR681(Delhi) . Their Lordships did not give appropriate importance to Sub-section (8) relating to finality of orders passed under Sub-section (6).
20. In the present case, the Tribunal has gone into the earning capacity of the creditors. It did not feel itself bound by the declaration. The Tribunal took the correct view of law. On facts, it came to the conclusion that the explanation of the assessee with respect to the sum of Rs. 28,100 was not acceptable. Accordingly, we answer the question referred to us in the affirmative, in favour of the department and against the assessee. The Commissioner will be entitled to costs which are assessed at Rs. 200.