Broad waiver schemes can cover delayed return filing penalties when they form part of the assessment mechanism.

A scheme granting waiver or settlement of arrears of penalty must be read broadly where its language covers all kinds of penalties accrued under the tax enactment up to the application date. Penalty for delayed filing of returns under the Karnataka Value Added Tax Act was treated as part of the assessment mechanism because return filing is the starting point of assessment and is integral to deemed assessment. On that construction, the penalty for belated return filing fell within the Kara Samadhana Scheme of 2017 and was eligible for consideration under the Scheme.

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Issues: Whether penalty levied for belated filing of returns under the Karnataka Value Added Tax Act is covered by the Kara Samadhana Scheme of 2017 as arrears of penalty relating to the assessment process.

Analysis: The Scheme defined arrears of penalty and interest to include all kinds of penalties levied and accrued under the relevant tax enactments, and also extended to penalties and interest accruing till the date of filing of the application. The expression used in the Scheme was broad enough to cover penalty for delayed filing of returns. Filing of returns is the starting point of the assessment machinery, and the statutory scheme of returns and deemed assessment shows that such filing is integral to assessment. On that construction, a penalty imposed for delayed filing of returns cannot be excluded from the benefit of the Scheme.

Conclusion: Penalty levied for delayed filing of returns is eligible for consideration under the Scheme, and the Revenue's challenge fails.

Ratio Decidendi: A scheme granting waiver or settlement of arrears of penalty must be construed to include penalties that are integral to the assessment mechanism, including penalties for delayed return filing, where the scheme language is broad and covers all kinds of penalties accrued up to the relevant date.

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