Madras High Court
E. Prahalatha Babu, 18, 14Th Street, ... vs The Commissioner Of Income Tax Tamil ... on 15 September, 1999
Equivalent citations: 1999(3)CTC369
ORDER
1. The petitioner submitted his declaration under the voluntary Disclosure Income Scheme, 1997. The said scheme came into force from 1st July, 1997. The last date for making the declaration was 31st December, 1997. Section 64 of the Finance Act, 1997 (Act No. 26 of 1997) deals with the charging of tax. Section 65 of the said Act prescribe the particulars to be furnished in the declaration. Section 66 prescribes the time limit for payment of tax, according to which the declarant is to pay the tax along with the declaration. Section 67(1) enables the declarant to file the declaration without paying the tax as contemplated under section 66 and he may pay the tax within three months from the date of filing of the declaration with simple interest at the rate of 2% for every month or part of the month comprised in the period beginning from the date of filing the declaration and ending on the date of payment of such tax. Section 67(2) made it clear that if the declarant fails to pay the tax in respect of the voluntarily disclosed income before the expiry of three months from the date of filing of the declaration, the declaration filed by him shall be deemed never to have been made under the scheme. Section 70 contemplates that the tax paid in respect of voluntarily disclosed income under Section 64(1) of the said Act shall not be refundable. The petitioner has filed the declaration before the respondent on 29.12.1997. The petitioner did not pay the tax along with the return. The petitioner ought to have paid the lax on or before 28.3.1998, before the expiry of three months period in accordance with Section 67(1) of the said Act. Admittedly the petitioner did not pay the tax within the stipulated time. But, however, he paid the amount of tax on 31.3.1998. As there is a delay of three days in paying the tax, the respondent, under the impugned proceedings, rejected the declaration made by the petitioner under the scheme and refused to give the benefit of the scheme. Challenging the said order, the writ petition has been filed.
2. The learned counsel for the petitioner contended that the petitioner approached the Vysa Bank, Kutchery Road Branch, Mylapore for the sanction of the loan to pay the tax in accordance with the scheme. The total value of the declaration made under the scheme by the petitioner is Rs. 38.36 lakhs and the petitioner is liable to pay the tax at 30% of the declared amount. The petitioner applied for the loan of Rs. 9.75 lakhs to be repaid on 18 monthly instalments. The bank sanctioned the loan only on 31.3.1998 and immediately thereafter the tax had been paid. The lax having been paid, the benefit to the petitioner under the scheme cannot be refused on the technical grounds; especially when the tax paid is not refundable and also when the declaration made by the petitioner can be used against him for reopening of the income-tax returns submitted by him for the previous assessment years.
3. The learned counsel for the respondent vehemently contended that the Act provides or prescribes the procedure to be followed. Under the said procedure, the time limit is also prescribed for compliance of the formalities to have the benefit of the scheme. Hence if the assessee wants to have the benefit of the scheme he has to comply with the conditions specified in such provisions of the Act in strict sense. Section 67(2) of the said Act makes it clear that if the compliance of condition is not strictly adhered to, then the declaration itself shall be deemed never to have been made under the scheme. Hence the declarant should be careful in filing their declaration and complying the conditions thereon.
4. I have carefully considered the contentions of both the counsel. The purpose of the introduction of the scheme is clear from section 64 of the Finance Act, 1997 (Act 26 of 1997) which is as follows:
" 64. Charge of tax on voluntarily disclosed income. - (1) Subject to the provisions of this Scheme, where any person makes, on or after the date of commencement of this Scheme but on or before the 31st day of December, 1997, a declaration in accordance with the provisions of section 65 in respect of any income chargeable to tax under the Income-tax Act for any assessment year--
(a) for which he has failed to furnish a return under section 139 of the Income-tax Act;
(b) which he has failed to disclose in a return of income furnished by him under the Income-tax Act before the date of commencement of this Scheme:
(c) Which has escaped assessment by reason of the omission or failure on the part of such person to make a return under the Income-tax Act or to to disclose fully and truly all material facts necessary for his assessment or otherwise.
then, notwithstanding anything contained in the Income-tax Act or in any Finance Act, income-tax shall be charged in respect of the Income so declared (such income being hereinafter referred to as the voluntarily disclosed income) at the rates specified hereunder, namely:
(i) in the case of a declarant, being a company or a firm, at the rate of 35 per cent of the voluntarily disclosed income,
(ii) in the case of a declarant, being a person other than a company or a firm, at the rate of 30 per cent of the voluntarily disclosed income.
(2) Nothing contained in sub-section (1) shall apply in relation to--
(i) the income assessable for any assessment year for which a notice under section 142 or section 148 of the Income-tax Act has been served upon such person and the return has not been furnished before the commence-ment of this Scheme;
(ii) the income in respect of the previous year in which a search under section 132 of the Income-tax Act was initiated or requisitioned under section 132A of the Income-tax Act was made, or survey under section 133A of the Income-tax Act was carried out or in respect of any earlier previous year."
Sub-clause (b) of Section 64(1) specified the persons who are entitled for the scheme. Hence there is no doubt that the scheme has been introduced to those who have failed to furnish their return or who have failed to disclose the income in his return. This is almost to bring out the hidden black money to facilitate the same to be treated as accounted one. Hence those who opted to file the declaration under this scheme have necessarily made the declaration about the black money they have possessed with a fond hope that they will have the benefit of the scheme by paying the tax are required either under Section 66 or 67 of the Act. When that be the intention of the Parliament, whether the sub-section (2) of Section 67 which makes the declaration non-existent on the basis of the failure to pay the tax within the stipulated time can be considered to be mandatory and thereby the declarant can be refused of the benefit.
5. This is a beneficial provision introduced by the Parliament to give the benefit to those who are possessed of the black money to make the declaration and pay the tax and thereby convert the same into an accounted one. When making the declaration, the declarant has to disclose the quantum of the amount which has not been accounted for in the income-tax department in the previous years and which is liable for taxation Hence the declarant is revealing the secret in order to have the benefit of the scheme which enables him to convert the hidden wealth as an accounted one by paying the tax. Further the tax paid under the scheme is not refundable one as per Section 70 of the Act. When such strict restrictions are there whether it would be reasonable to refuse the benefit of the scheme to the declarant after the payment of the tax by him. It goes without saying that the declarant not only deprived of the tax paid by him but also subject himself to other proceedings on the basis of the declaration. In such circumstances, there should be some leniency with regard to the strictness of the period of limitation to comply with the payment of tax.
6. In an identical case in Smt. Laxmi Mittal v. Commissioner of Income-Tax, '238 ITR 97 the Punjab and Haryana High Court has held that Section 67 does not embody a totally inflexible rule in the following words:
"Mr. Sawhney submits that section 67 lays down as inflexible rule and according to this provision the deposit has to be made within a period of three months from the date of declaration. Any failure renders the declaration and that deposit non-est. This contention cannot be accepted. The Government of India has itself issued a circular dated September 3, 1998. By this circular it has been, inter alia, provided by the Board that the period for calculating interest will be 90 days from the date of declaration. If the 90th day happens to be a bank holiday, payment on the 91st day being the next working day would be valid. Thus, it is clear that section 67 does not embody a totally inflexible rule. When things are beyond the control of the citizen, certain moving space is normally allowed. This is precisely what the petitioner is wanting in the present case.
Taking the totality of circumstances in to consideration it appears that the petitioner was unable to make the deposit on account of reasons beyond her control. The Revenue has suffered no loss as the interest for three months viz., Rs. 33,000, has been deposited by the petitioner. Still further, it is also clear that a declaration under the scheme could be made on or before December 31, 1997. The tax along with interest could have been deposited on or before March 31, 1998. Any deposit before that should not be considered as being beyond the scheme. In any event, the interest having been paid, the Revenue the suffered no loss."
I am in total acceptance with the view taken by the learned Judges of the Punjab and Haryana High Court, as the same is more reasonable and sensible. Otherwise, the person who made the declaration by revealing the secret, because of his inability to comply with the condition within the period of limitation, will be definitely subject himself for other proceeding. He will also forced to forgo the tax paid by him. In the result, not only deprived of the benefit of the scheme bat also forced to face the loss which cannot be the intention of the legislature. The scheme is not only to bring out the hidden income of an individual but also to get the revenue for the Centre. As rightly pointed out by the learned Judges of the Punjab and Haryana High Court, when the declarant has paid the amount with interest thereto and that too without any long delay, with an explanation for the non-payment of the amount within the stipulated three months period from the date of declaration the delcerent must be given the benefit of the scheme.
7. For the reasons stated above, I am of the view that the impugned proceedings cannot be sustained and as such it is set aside and the writ petition is allowed. No cost.