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Shri Bhagwandas Jain v. Addl. Commissioner Of Wealth-Tax, M.P
Structured Summary of the Opinion
Factual and Procedural Background
This judgment governs the disposal of eight references made by the Income-tax Appellate Tribunal, Jabalpur Bench, at the instance of eight different assessees (Misc. Civil Cases Nos. 406–412 of 1972). The references arise from a consolidated order in Wealth Tax Appeals Nos. 70 to 78 (Ind.) of 1969-70 dated 13 December 1971 and all involve a common question of law concerning the deductibility, in computing net wealth, of tax liabilities arising from voluntary disclosures under Section 68 of the Finance Act, 1965.
The assessee in the leading reference is a Hindu Undivided Family (HUF) carrying on business in partnership through its karta. For valuation dates in assessment years 1957-58 to 1964-65, and for the valuation date (Diwali 1965) relevant to assessment year 1966-67, the firm made a voluntary disclosure under Section 68 (Finance Act, 1965) amounting to Rs. 20,60,000 (comprised of intangible additions, business cash, and bullion/coins). Under the Voluntary Disclosure Scheme the firm paid tax totaling Rs. 10,56,000 (i.e., 60% under Section 68(3)), credited the balance to capital accounts after excluding Rs. 60,000 for bullion/coins.
On learning of the voluntary disclosure, the WTO (Central Circle, Jabalpur) reopened wealth-tax assessments of the eight partners for the assessment years in question to bring the disclosed assets to tax. The partners claimed that the tax paid under Section 68(3) was deductible as a "debt owed" under Section 2(m) of the Wealth-tax Act, 1957, or alternatively that tax payable under the relevant Finance Acts should be deductible under Section 3 of the W.T. Act. The WTO, the AAC (Appeal Assistant Commissioner) and thereafter the Tribunal rejected this claim. The Tribunal followed a single-judge decision of the Kerala High Court (C.K. Babu Naidu v. WTO [1971] 82 ITR 410) in holding that the tax was not a debt owed on the valuation date. The assessees sought a reference of the common question of law to the High Court under Section 27(1) of the W.T. Act, 1957.
Legal Issues Presented
- Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that neither (a) the tax liability at the rate applicable in accordance with the Finance Act of the year concerned on the disclosed income included on assessment, nor (b) the tax at the rate of 60% prescribed under Section 68(3) of the Finance Act, 1965, was deductible in arriving at the net wealth of the assessee.
Arguments of the Parties
Assessee's Arguments
- The tax paid at the flat rate of 60% under Section 68(3) of the Finance Act, 1965, should be proportionately deducted in computing each partner's net wealth for the valuation dates, because that tax constituted a "debt owed" within the meaning of Section 2(m) of the Wealth-tax Act, 1957.
- Alternatively, the tax that would be payable under the respective Finance Acts applicable to the years in question should be allowed as deduction in computing net wealth under Section 3 of the Wealth-tax Act (i.e., tax payable on the disclosed incomes under the ordinary charging provisions of the Income-tax Acts).
Respondent / Revenue's Arguments
- The WTO, as upheld by the AAC and the Tribunal, contended that the liability to pay tax at the rate of 60% under Section 68(3) arose specifically because of the voluntary disclosure and therefore was not a "debt owed" on the valuation date within the meaning of Section 2(m) of the W.T. Act.
- The Tribunal followed the view of a single judge of the Kerala High Court (C.K. Babu Naidu, 1971) that treated the Section 68 levy as not being in satisfaction of a liability under the ordinary charging sections of the Income-tax Acts, implying the Section 68 liability lacked the character of a debt owed on the valuation date.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Kesoram Industries and Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 (SC) | The Supreme Court held that a provision for payment of income-tax shown in the balance-sheet was a present obligation — a "debt owed" within Section 2(m) of the W.T. Act — because it was an ascertainable liability (debitum in praesenti, solvendum in futuro). | The court relied on this decision to establish that a tax liability may be a present, ascertainable obligation on the valuation date and therefore fit the definition of "debt owed" deductible in computing net wealth. |
| H.H. Setu Parvati Bayi v. CWT [1968] 69 ITR 864 (SC) | The Supreme Court reiterated the principle in Kesoram: wealth-tax liability on the valuation date is a "debt owed" under Section 2(m) and should be deducted from the value of assets. | The court treated this reaffirmation as supporting the proposition that tax liabilities properly characterised are deductible from net wealth on the valuation date. |
| C.K. Babu Naidu v. WTO [1971] 82 ITR 410 (Ker) — single judge | The single-judge decision held (as described in the opinion) that the Section 68 liability was not a "debt owed" on the valuation date (this view was followed by the Tribunal in the present case). | The court records that this single-judge view was followed below but notes that this view was subsequently reversed by a Division Bench of the Kerala High Court. |
| C.K. Babu Naidu v. WTO [1978] 112 ITR 341 (Ker) — Division Bench | The Division Bench reversed the single-judge decision, holding that Section 68's later part is a machinery provision and that the liability under Section 68 is of the same character as liability under Section 3 of the I.T. Act, 1922 or Section 4 of the I.T. Act, 1961. | The opinion relies on this Division Bench decision as part of the majority view of High Courts treating Section 68 liability as akin to ordinary income-tax liability and thus deductible as a debt owed. |
| CWT v. Ahmed Ibrahim Sahigara [1974] 93 ITR 288 (Guj) | Bhagwati C.J. (then) opined that Section 68 creates a new ad hoc charge to tax disclosed income and is not intended to lay down a concessional rate under the Income-tax Act; thus such levy is not in satisfaction of a liability under Section 3/4 of the I.T. Acts. | The present court expressly disagreed with Bhagwati C.J.'s view and noted that none of the High Courts generally agreed with that approach. |
| CWT v. B.K. Sharma [1977] 110 ITR 902 (Allahabad) | Held that the amount declared under Section 68 partakes the character of total income assessable under Section 3 of the I.T. Act, 1922 (or Section 4 of the I.T. Act, 1961), making the tax liability a "debt owed" within Section 2(m) of the W.T. Act. | The court cited this as an example of High Court decisions forming the majority view in favour of deductibility. |
| CWT v. Sheo Kumar Gupta [1978] 111 ITR 92 (Allahabad) | Similar principle to B.K. Sharma — the declared amount under Section 68 is assessable under the charging provisions of the I.T. Acts, so the tax liability is a "debt owed". | Used as part of the body of High Court authority supporting the majority position adopted by the court. |
| CWT v. Girdhari Lal [1975] 99 ITR 79 (Delhi) | The Delhi High Court adopted the view that liability on amounts declared under Section 68 is assessable under the I.T. Acts and the tax liability is a "debt owed" for wealth-tax computation. | The decision is cited among High Court authorities that influenced the court's conclusion in favour of the assessee. |
Court's Reasoning and Analysis
The court framed the central question as whether the tax of Rs. 10,56,000 paid under Section 68(3) of the Finance Act, 1965, constituted a "debt owed" within Section 2(m) of the Wealth-tax Act on the relevant valuation dates and thus was deductible in computing net wealth.
The court began its analysis by referring to binding Supreme Court authorities which establish the legal character of tax liabilities for wealth-tax purposes. In Kesoram Industries (1966) the Supreme Court held that a provision for income-tax constituted a present, ascertainable obligation — a "debt owed" on the valuation date — because all the ingredients of a debt (an obligation to pay an ascertainable sum) were present even if payment fell in the future. H.H. Setu Parvati Bayi (1968) reiterated the same principle for wealth-tax liabilities.
On the basis of those Supreme Court authorities, the opinion surveyed the High Court decisions dealing specifically with the Voluntary Disclosure Scheme under Section 68 of the Finance Act, 1965. The majority of High Courts had adopted the view that a liability to pay tax under Section 68(3) is in substance a tax liability assessable under the charging provisions of the Income-tax Acts (Section 3 of the I.T. Act, 1922 or Section 4 of the I.T. Act, 1961), and therefore the tax payable on the amount voluntarily disclosed comes within the definition of "debt owed" in Section 2(m) of the W.T. Act and is deductible in computing net wealth.
The court acknowledged contrary views: Bhagwati C.J.'s opinion in CWT v. Ahmed Ibrahim Sahigara which treated Section 68 as enacting a separate ad hoc charge (and thus not a satisfaction of a liability under the ordinary charging sections), and an earlier single-judge Kerala decision (C.K. Babu Naidu, 1971) which followed that approach. The court rejected Bhagwati C.J.'s interpretation, noting that most High Courts had declined to accept that view and that the single-judge Kerala decision had been reversed by a Division Bench.
Reasoning from Kesoram and H.H. Setu Parvati Bayi, and guided by the majority of High Court authorities treating Section 68 liability as akin to ordinary income-tax liability (with Section 68(3) simply prescribing a flat rate), the court concluded that the tax at 60% under Section 68(3) was a present, ascertainable obligation on the valuation date and therefore a "debt owed" under Section 2(m) of the W.T. Act. Consequently, that tax was deductible in computing net wealth for the assessment years under consideration.
The court also recorded the factual point that the WTO, when recomputing net wealth, spread out the total disclosure of Rs. 20,60,000 rather than the resultant sum remaining with the firm after payment of tax — a factual practice relevant to how the assessments were reopened and computed.
Holding and Implications
HOLDING: The court answered the common question referred by the Tribunal in favour of the assessee. It held that the tax at the rate of 60% prescribed under Section 68(3) of the Finance Act, 1965, was deductible in arriving at the net wealth of the assessees under Section 2(m) of the Wealth-tax Act, 1957, for the assessment years 1957-58 to 1965-66.
Direct consequences:
- The Tribunal was not justified in holding that the Section 68(3) tax was not deductible in computing net wealth; that view is set aside for the references before the court.
- There shall be no order as to costs.
Broader implications (as reflected in the opinion):
- The decision affirms the application of the Supreme Court's principle that an ascertainable tax liability constitutes a "debt owed" on the valuation date and is deductible in computing net wealth.
- The opinion aligns with the majority of High Court decisions that treat Section 68 liabilities as liabilities assessable under the charging provisions of the Income-tax Acts and not as a separate ad hoc charge outside those charging provisions.
This summary is based exclusively on the information contained in the provided opinion and does not add or infer facts beyond that text.
1. This judgment shall also govern the disposal of the following references, viz.:
(1) Miscellaneous Civil Case No. 406 of 1972 (Premchand Jain v. Addl. CWT), (2) Miscellaneous Civil Case No. 407 of 1972 (Hukumchand Jain v. Addl. CWT), (3) Miscellaneous Civil Case No. 408 of 1972 (Shikhar Chand Jain v.
Addl. CWT), (4) Miscellaneous Civil Case No. 409 of 1972 (Manek Chand Jain v. Addl. CWT), (5) Miscellaneous Civil Case No. 410 of 1972 (Sobhalal Jain v. Addl, CWT), (6) Miscellaneous Civil Case No. 411 of 1972 (Dalchand Jain v. Addl. CWT), and (7) Miscellaneous Civil Case No. 412 of 1972 (Premchand Jain v. Addl. CWT), as they involve a common question of law. These eight references under Sub-section (1) of Section 27 of the W.T. Act, 1957, are by the Income-tax Appellate Tribunal, Jabalpur Bench, Jabalpur, at the instance of eight different assessees, referring a common question of law said to arise from its consolidated order in Wealth Tax Appeals Nos. 70 to 78 (Ind.) of 1969-70, dated December 13, 1971, to the High Court for its opinion, viz.:
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that neither the tax liability at the rate applicable in accordance with the Finance Act of the year concerned on the disclosed income included on assessment nor at the rate of 60% prescribed under Section 68 of the Finance Act, 1965, was deductible in arriving at the net wealth of the assessee ?"
2. The assessee is a HUF, which is carrying on business in partnership styled "M/s. Bhagwandas Shobhalal Jain, Sagar". through Bhagwandas, karta of the joint Hindu family. The partnership is engaged in the business of manufacture and sale of bidis. The assessment years involved are 1957-58 to 1964-65 and the valuation date for each year is the last day of Diwali year preceding the year of assessment. During the assessment year 1966-67, the valuation date for which was the last day of Diwali 1965, the firm made a voluntary disclosure under Section 68 of the Finance Act, 1965, amounting to Rs. 20,60,000 comprising of three items :
(i) A sum of Rs. 3 lakhs representing intangible additions in the assessment year 1957-58 ;
(ii) A sum of Rs. 17 lakhs representing cash said to have been earned by the firm from business done in the preceding year ; and
(iii) Rs. 60,000 representing the value of bullion and coins said to be in the possession of the partners.
3. When the WTO, Central Circle, Jabalpur, came to know about the voluntary disclosure made, he reopened the wealth-tax assessments of all the eight partners in the assessment years 1957-58 to 1964-65 for bringing to tax the value of the assets disclosed in the years under consideration.
4. It appears that under the Voluntary Disclosure Scheme, the firm, while making a voluntary disclosure of Rs. 20,60,000 under Section 68(1) of the Finance Act, 1965, actually paid tax amounting to Rs. 10,56,000 and the firm credited the balance of Rs. 9,44,000 after excluding Rs. 60,000, the value of bullion and coins, which were in the possession of the partners who held equal shares. When the WTO reopened their wealth-tax assessments for the years in question, it was claimed by the partners that the tax paid at the rate of sixty per cent. under Section 68(3) of the Finance Act, 1965, totalling Rs. 10,56,000 should be proportionately deducted for computation of their net-wealth during these years, being "debt owed" within the meaning of Section 2(m) of the W.T. Act, 1957, or, in the alternative, the tax that was payable under the respective Finance Acts relating to these respective years should be allowed to be deducted in making the computation of their net wealth under Section 3 of the Act.
5. The contention of the assessees did not prevail before the WTO, Central Circle, Jabalpur. He rejected their claim on the ground that the liability to pay tax at the rate of sixty per cent. under Section 68(3) of the Finance Act, 1965, arose on account of their making a voluntary disclosure under Section 68(1) of the Act and, therefore, there was no "debt owed" on the valuation date within the meaning of Section 2(m) of the W.T. Act, 1957, in the respective assessment years. In appeal, the AAC of Wealth-tax, Jabalpur Range, Jabalpur, affirmed the view of the WTO, holding that liability to pay tax on concealed income under Section 68 of the Finance Act, 1965, was not a "debt owed" on the relevant valuation date, within the meaning of Section 2(m) of the W.T. Act, 1957. On further appeal, the Tribunal upheld the view of the WTO as well as of the AAC of Wealth-tax, following the view expressed by a single judge of the Kerala High Court in C.K. Babu Naidu v. WTO [1971] 82 ITR 410.
6. Feeling aggrieved, the assessee applied to the Tribunal under Section 27(1) of the W.T. Act, 1957, to have the aforesaid question of law referred to this court for its opinion. Incidentally, we may mention that the WTO, in computation of the net wealth under Section 3 of the W.T. Act of the assessees, while re-opening their wealth-tax assessments for the assessment years 1957-58 to 1964-65, spread out the total disclosure of Rs. 20,60,000 and not the resultant sum of Rs. 10,04,000 remaining with the firm after payment of tax amounting to Rs. 10,56,000.
7. To appreciate the rival contentions, it is necessary to set out a few relevant provisions. Section 3 of the W.T. Act, 1957, which is the charging provision, reads :
"3. Charge of wealth-tax.--Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as the wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule."
8. The term "net wealth" as defined in Section 2(m) of the Act is as follows :
"2. (m) 'net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than-
(i) debts which under Section 6 are not to be taken into account;
(ii) debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under this Act; and
(iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of this Act or any law relating to taxation of income or profits, or the Estate Duty Act, 1953 (34 of 1953), the Expenditure tax Act, 1957 (29 of 1957), or the Gift-tax Act, 1958 (18 of 1958),--
(a) which is outstanding on the valuation date and is claimed by the assessee in appeal, revision or other proceeding as not being payable by him; or
(b) which, although not claimed by the assessee as not being payable by him, is nevertheless outstanding for a period of more than twelve months on the valuation date."
9. Section 68 of the Finance Act, 1965, so far as relevant, reads as follows :
"68. Voluntary disclosure of income.--(1) Where any person makes a declaration in accordance with Sub-section (2) in respect of the amount representing income-
(a) which he has failed to disclose in a return of income for any assessment year filed by him before the 1st day of March, 1965, under the Indian Income-tax Act, 1922 (XI of 1922), or the Income-tax Act, 1961 (43 of 1961), or
(b) which has escaped assessment for any assessment year for which an assessment has been made before the 1st day of March, 1965, under either of the said Acts, or
(c) for the assessment of which no proceeding under either of the said Acts has been taken before the 1st day of March, 1965, he shall, notwithstanding anything contained in the said Acts, be charged income-tax at the rate specified in Sub-section (3) in respect of the amount so declared.........
(3) The rate of income-tax chargeable in respect of the-amount referred to in Sub-section (1) shall be sixty per cent. of such amount." Section 3 of the Indian I.T. Act, 1922, runs thus :
"3. Charge of income-tax.--Where any Central Act enacts that income-tax shall be charged for any year at any rate or rates tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually."Section 4 of the I.T. Act, 1961, reads:
"4. (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall he charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year or previous years, as the case may be, of every person ;
Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall he charged accordingly.
(2) In respect of income chargeable under Sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act."
10. The question at issue is whether the amount of Rs. 10,56,000 paid by the firm was a "debt owed" within the meaning of Section 2(m) of the W.T. Act, 1957, on the valuation date of the respective assessment years and, as such, was deductible in computing the net wealth of the assessees. In anwer-ing the question, we feel no doubt or difficulty. The law is clear on the subject.
11. In Kesoram Industries and Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 (SC), the assessee-company had, in its balance-sheet for the period ending March 31, 1957, shown a certain amount as provision for payment of income-tax and super-tax in respect of that year of account. The question involved was the same, i.e., whether that amount was "debt owed" within the meaning of Section 2(m) of the Act as on March 31, 1957, which was the valuation date. It was held by the majority judgment of the Supreme Court that the debt was a present obligation to pay an ascertainable sum of money, whether the amount was payable in praesenti or in futuro : debitum in praesenti, solvendum in futuro. A liability to pay income-tax, according to their Lordships, was a present liability though it became payable after it was quantified in accordance with ascertainable data. Their Lordships held that there was a perfected debt, at any rate, on the last day of the accounting year and not a contingent liability. The rate is always easily ascertainable. If the Finance Act is passed, it is the rate fixed by that Act; if the Finance Act is not passed, it is the rate proposed in the Finance Bill pending before Parliament or the rate in force in the preceding year, whichever is more favourable to the assessee. All the ingredients of a "debt", according to their Lordships, were present and, therefore, there was present liability of an ascertainable amount. It was further held by them that the amount of provision for payment of income-tax and supertax in respect of the year of account ending March 31, 1957, was a "debt owed" within the meaning of Section 2(m) of the Act on the valuation date, viz., March 31, 1957, and was as such deductible in computing the net wealth of the company as on the valuation date.
12. In H.H. Setu Parvati Bayi v. CWT [1968] 69 ITR 864, their Lordships of the Supreme Court reiterated their view in Kesoram Industries and Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 (SC), with respect to the liability to pay wealth-tax. According to their Lordships, the wealth-tax liability of an assessee on the valuation date for the assessment year beginning on the 1st of April following, is a "debt owed" within the meaning of Section 2(m) of the Act and should be deducted from the estimated value of the assets as on the valuation date. That was because their Lordships were of the view that the language of the charging Section 3 of the W.T. Act, 1957, was in pari materiel with the language of the charging Section 3 of the Indian I.T. Act, 1922, and, therefore, the same meaning must be given to the expression "debt owed" occurring in Section 2(m) of the W.T. Act, 1957.
13. Taking up the decisions of the different High Courts, which are directly on the point, viz., whether the liability to pay tax on disclosed income under the Voluntary Disclosure Scheme framed under Section 68 of the Finance Act, 1965, was a "debt owed" within the meaning of Section 2(m) of the W.T. Act, 1957, on the relevant valuation date, but for the discordant note struck by Bhagwati C.J. in CWT v. Ahmed Ibrahim Sahigara [1974] 93 ITR 288 (Guj) and a single judge, Issac J., in C.K. Babu Naidu v. WTO [1971] 82 ITR 410 (Ker), which decision has since been reversed by P. Govindan Nair, Actg. C.J., and George Vadakkal J. in C.K. Babu Naidu v. WTO [1974] 112 ITR 341 (Ker), the majority of the High Courts have consistently taken the view that in the computation of net wealth, when there is voluntary disclosure made, the tax payable thereon at rates specified in Section 68(3) of the Finance Act, 1965, was a "debt owed" within the meaning of Section 2(m) of the W.T. Act, 1957, and was, therefore, deductible. We may mention that there are two decisions of the Allahabad High Court, by Gulati and C.S.P. Singh JJ., in CWT v. B.K. Sharma [1977] 110 ITR 902 and by C.S.P. Singh and R.M. Sahai JJ. in CWT v. Sheo Kumar Gupta [1978] 111 ITR 92 and of the Delhi High Court, by Ansari and Khanna JJ., in CWT v. Girdhari Lal [1975] 99 ITR 79, taking the view that the amount declared by the assessee under Section 68 of the Finance Act, 1965, partakes of the character of total income assessable under Section 3 of the Indian I.T: Act, 1922, or Section 4 of the I.T. Act, 1961. It is liable to assessment only under the charging sections of the said two Acts and, therefore, the tax liability on the amount declared would be a "debt owed" within the meaning of Section 2(m) of the W.T. Act, 1957. The Division Bench of the Kerala High Court in C.K. Babu Naidu v. WTO [1978] 112 ITR 341 further holds that the latter part of Section 68 of the Finance Act, 1965, is only a machinery provision and the earlier provision provides what is envisaged by Section 3 of the Indian I.T. Act, 1922, or Section 4 of the I.T. Act, 1961, that the Finance Act shall declare the rates applicable. The Division Bench has further held that that view proceeds upon the principle that liability for tax arising out of the declaration made under Section 68 of the Finance Act, 1965, is nothing other than the liability under the I.T. Acts, 1922, or 1961. The only difference under the Voluntary Disclosure Scheme made by Section 68 of the Finance Act, 1965, was to provide a flat rate of sixty per cent. of the amount disclosed under the Scheme. According to the majority view, therefore, the liability to pay tax under Section 68 of the Finance Act, 1965, was a liability that arose on the valuation date and that liability was "debt owed" by the assessee on the valuation date falling within Section 2(m) of the W.T. Act, 1957, and the assessee is entitled to deduct the income-tax liability on the valuation date on the amounts voluntarily declared under Section 68 of the Finance Act, 1965.
14. Bhagwati C. J. (as he then was) in CWT v. Ahmed Ibrahim Sahigara [1974] 93 ITR 288 (Guj), however, held that Section 68 of the Finance Act, 1965, was not intended to lay down a concessional rate at which income-tax may be charged under the I.T. Act, but it enacts a new charge to tax, on an ad hoc basis, on disclosed income irrespective of the assessment year in which it was earned. With great respect, we are unable to subscribe to the view expressed by him. None of the High Courts have agreed with his view that the tax paid on concealed income disclosed by an assessee under Section 68 of the Finance Act, 1965, was not in satisfaction of any liability under Section 3 of the Indian I.T. Act, 1922, or Section 4 of the I.T. Act, 1961, or that Section 68 of the Finance Act, 1965, creates a new charge to tax, on an ad hoc basis, on disclosed income irrespective of the assessment year in which it was earned. As already stated, the same view was taken by Issac J. in C.K. Babu Naidu v. WTO [1971] 82 ITR 410 (Ker), but that view has been reversed by P. Govindan Nair, Actg. C.J., and George Vadakkal J. in C.K. Babu Naidu v. WTO [1978] 112 ITR 341 (Ker).
15. In that state of law, we have no hesitation in answering the common question referred in all the eight references against the CWT and in favour of the assessee. It must accordingly be held that the Tribunal was not justified in holding that, on the facts and in the circumstances of the case, the tax at the rate of 60% prescribed under Section 68(3) of the Finance Act, 1965, was not deductible in arriving at the net wealth of the assessees under Section 2(m) of the W.T. Act, 1957, during the assessment years 1957-58 to 1965-66. There shall be no order as to costs.
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