The Supreme Court has held that taxpayers cannot claim absolute immunity from disclosing source of income under the Voluntary Disclosure of Income Scheme (VDIS) if they conceal facts while declaring assets.

While upholding a Bombay High Court ruling, a bench of Justice S B Sinha and Justice P K Balasubramanyan said: "Immunity granted pursuant to acceptance of a declaration made under the voluntary taxation scheme or Kar Vivid Samadhan Scheme, 1998 does not lead to a total immunity. The immunity granted under the scheme has its limitations."

Dismissing an appeal filed by a Mumbai-based partnership firm Tanna & Modi, the court said: "It is, however, also well settled that fraud vitiates all solemn acts. Fraudulent actions shall render the act a nullity."

The court observed that a partner represents a firm and he has an implied authority to take any action vis-a-vis the firm unless otherwise specific binds the firm itself.

Noting that each partner need not make a declaration in the event of a firm concealing its income, the court, however, said a firm in its declaration can cover the loopholes when a search warrant is issued in the name of a partner.

At the same time, the court made it clear, that in case of fraud it cannot be oblivious of the fact that each firm acts through its partner.

"A firm is the conglomeration of its partners, and is not a juristic person... As the income of a firm vis-a-vis its partners have a direct co-relation, in our opinion, while construing a statute granting immunity, it should not be construed in such a manner so as to frustrate its object," the apex court said.