2002 (11) TMI 6 - SC - Income Tax

Section 67 limits Voluntary Disclosure Scheme payments: deadlines non-extendable; deferred payment if tax and 2% interest paid within three months

Hemalatha Gargya Versus Commissioner of Income-Tax And Another

SC held the time for payment under section 67 of the Voluntary Disclosure Scheme is not extendable. The Scheme's general rule requires payment before ... Whether the time for payment fixed under section 67 of the Voluntary Disclosure of Income Scheme, 1997 is extendable - Held that:- A plain reading of the provisions of the Scheme would show that the tax payable under the Scheme 'shall be paid' within the time specified is the general rule provided in section 66, namely, payment prior to the making of a declaration. The exception to this general rule has been carved out by section 67(1) which allows a declarant to file a declaration without paying the tax. This exception, however, is subject to two conditions, viz., (1) the payment of tax within three months from the date of the filing of the declaration together with, (2) the payment of simple interest at the rate of two per cent. for every month or part of a month. The period of interest is to commence from the date of filing the declaration and shall end with the date of payment of tax. It may be noted that under section 67(1) not only must these two conditions be fulfilled within the period of three months but proof of such payment must also be filed within the same period. It is clear that the authority cannot act beyond the provisions of the Scheme itself. The power to accept payment under the Scheme has been prescribed by the statute. There is no scope for the Revenue authorities to imply a provision not specifically provided for which would in any way modify the explicit terms of the Scheme. There is no question of imposition of penalty under the Scheme. What has been prescribed under section 67(2) is merely the consequence of the failure to comply with section 67(1). There is as such no question of importing the doctrine of mens rea or exercising any discretion contrary to the provisions of section 67(2). The assessees are not entitled to the benefit of the Scheme since the payments made by them were not in terms of the Scheme, we direct the Revenue authorities to refund or adjust the amounts already deposited by the assessees in purported compliance with the provisions of the Scheme to the concerned assessees in accordance with law. Issues Involved:1. Whether the time for payment fixed under section 67 of the Voluntary Disclosure of Income Scheme, 1997, is extendable.Detailed Analysis:1. Conflicting Views on Extension of Time:The issue has led to conflicting views among various High Courts. Some High Courts, such as in the cases of Smt. Laxmi Mittal v. CIT, E. Prahalatha Babu v. CIT, and CIT v. E. Prahalatha Babu, have held that the period is extendable. Conversely, other decisions, like Kamal Sood v. Union of India, Vyshnavi Appliances Pvt. Ltd. v. CBDT, Smt. Atamjit Singh v. CIT, K. Dilip Kumar v. Asst. CIT, M. Kuppan v. CIT, and Smt. Atmjit Singh v. CIT, have held that the period for payment of the tax due on the undisclosed income is inflexible.2. Provisions of the Scheme:The Scheme was introduced in the Finance Act, 1997, effective from July 1, 1997, to March 31, 1998. Section 64 allows individuals to declare undisclosed income and pay tax at 30%. Section 66 mandates that the tax payable under the Scheme must be paid by the declarant, and the declaration must be accompanied by proof of payment. Section 67(1) allows for the filing of a declaration without paying the tax, provided the tax is paid within three months from the date of filing the declaration, with simple interest at the rate of 2% per month. Section 67(2) states that if the tax is not paid within this period, the declaration shall be deemed never to have been made.3. Assessees' Arguments:The assessees argued that the purpose of the Scheme was to unearth black money, and the time fixed under section 67(1) is not rigid due to the provision for interest on delayed payment. They contended that the Scheme's operation until March 31, 1998, implied flexibility in payment deadlines. They also argued that the court could dilute the severity of section 67(1) under certain circumstances, citing Hindustan Steel Ltd. v. State Of Orissa. Additionally, they claimed that the Revenue could not selectively challenge the interpretation of section 67(1), referencing Union of India v. Kaumudini Narayan Dalal and Union of India v. Satish Panalal Shah.4. Revenue's Arguments:The Revenue argued that the Scheme is a self-contained code with no provision for extending the time under section 67(1). They emphasized that the language of section 67(2) is mandatory, and no extension beyond the specified three months is permissible. They also contended that the conflicting decisions of various High Courts justified their challenge before the Supreme Court. Finally, they asserted that any payments not made in terms of the Scheme should be refunded or adjusted according to the Income-tax Act, 1961.5. Supreme Court's View:The Supreme Court accepted the Revenue's submissions. The Court held that the provisions of the Scheme are mandatory, as indicated by the use of the word 'shall' and the explicit consequences of non-compliance in section 67(2). The Court found no basis for extending the time under section 67(1) and emphasized that the Scheme's statutory provisions must be strictly complied with. The Court also clarified that the designated authority under the Scheme could not act beyond its provisions.6. High Court Decisions and Circular:The Court noted that the High Court's reliance on a circular under section 119(2)(b) of the Income-tax Act, 1961, in Smt. Laxmi Mittal's case was misplaced. The circular merely stated a general rule of interpretation and did not empower the Commissioner to extend the time for payment. The Court rejected the assessees' reliance on Hindustan Steel Ltd. v. State of Orissa, stating that there was no question of penalty under the Scheme, only the consequence of non-compliance.7. Final Decision:The Supreme Court dismissed the assessees' appeals and allowed the Revenue's appeals. The Court directed the Revenue authorities to refund or adjust the amounts deposited by the assessees in purported compliance with the Scheme. The appeals were disposed of without any order as to costs.