AI Drafter 
TaxTMI 
TaxTMI 
2017 (3) TMI 1185
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....ation dated 18th March, 1998, disallowing adjustment of tax deducted at source, was Circular No. 755 dated 25th July, 1997 issued by the CBDT. 2. This petition was admitted on 23rd March, 1998. However, interim relief was refused. This resulted in the petitioner making the payment of tax on the undisclosed income declared by it on 31st December, 1997 under the Scheme on 31st March, 1998, without taking the benefit of the Income tax deducted at source under 1961 Act the on its voluntarily disclosed income under the Scheme of 1997 Act. 3. The Scheme was introduced as a part of the Finance Act, 1997, i.e. Chapter IV titled as "The Voluntary Disclosure of Income Scheme 1997" commencing from Section 62 upto Section 78 thereof. This Scheme of Finance Act, 1977 (1977 Act) came into force w.e.f. 1st July, 1997. It is a part of Act 1997 and not a part of the 1961 Act. Undisputedly, the Scheme of 1997 Act, is distinct and different from the 1961 Act. However, it, inter alia, provided an opportunity to a person who had not paid full taxes under the 1961 Act, in the past as a consequence of non­disclosure of its income under the Act, to voluntarily disclose the same and pay the tax t....
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....) Section 67 of the Scheme of 1997 Act gives an option to the declarant to pay the tax under the Scheme on the declared undisclosed income within three months of the filing of the declaration with the simple interest of 2% per month or part thereof; (g) Section 70 of the Scheme of 1997 Act provides that any amount of tax paid in pursuance of a declaration made under Section 64 of the Scheme shall not be refundable under any circumstances; (h) Section 71 of the Scheme of 1997 Act provides that nothing contained in the declaration will be used against the declarant for imposition of any penalty or prosecution under the Act, 1961 or under the Wealth Tax Act; (i) Section 76 of the Scheme of 1997 Act empowers the Central Government to issue orders to remove difficulties in implementing the above Voluntary Scheme of 1997 Act; (j) Section 77 of the Scheme of 1997 Act empowers the CBDT to make Rules for the implementation of the same; and (k) Section 78 of the Scheme of 1997 Act excludes certain class of persons from its benefit. Brief facts:­ 5. The Petitioner was incorporated in the year 1991. The Petitioner had not filed its return of income under Section 139 of....
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....osed income under the Scheme of 1997 Act. Therefore, it was submitted that the obligation to pay tax of Rs. 1,75,22,360/­ on the declared undisclosed income would be partly discharged by the taxes deducted at source of Rs. 1,59,76,149/leaving a balance of Rs. 15,48,211/­ as tax along with interest from 31stDecember, 1997. Thus, the total payment of tax and interest now payable after proposed adjustment aggregated to Rs. 16,41,104/­. Thus, the Petitioner sought clarification whether on payment of Rs. 16,41,211/being the tax along with interest, would it be entitled it to a Certificate under Section 68(2) of the Scheme of 1997 Act. 8. On 18th March, 1998, the Commissioner of Income Tax rejected the Petitioner's request made in the letter dated 16th March, 1998. The content of the letter extracted in its entirety reads as under:­ "Please refer to your letter dated 16th March, 1998 requesting for adjustment of tax deducted at source against tax payable on income declared under VDIS 97. Your above request is rejected in view of the specific circulars issued by Board on this subject dtd.10.06.1997 and 25.07.1997." 9 It is an agreed position between the ....
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....ctions 198, 199 and 205 of the 1961 Act. In fact, Section 205 of 1961 Act provides that where tax is deducted at source by the payer, the payee (recipient of the amounts) shall not be called upon to pay the tax. Therefore, the party is entitled to the credit of tax deducted at source as evidenced by a Certificate of tax deducted at source issued by the payer. Even otherwise, under the general law of contract, the Petitioner will be entitled to credit of tax declared at source in computing the tax payable under the Scheme of 1997 Act. This even in the absence of the provisions of Sections 198, 199 and 205 of the 1961 Act being invoked; (iii) In any event, the only applicable Circular, i.e. Circular No.755 dated 25th July, 1997, runs counter to the clear provisions of law. Therefore, no reliance can be placed upon it. Besides, Circular No.755 dated 25th July, 1997 issued by the CBDT is issued without any authority of law. The CBDT has not invoked its powers under Section 119 of the Act, 1961 while issuing the Circular. This, of course, is without prejudice to the submission that Circulars under the 1961 Act cannot govern the Scheme of 1997 Act. Nor does the Circular invoke any pro....
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.... in Sushila Devi Mohata v/s. CIT 2004(1) Cal. L. J.128 and of the Orissa High Court in Orissa Rural Housing Development Corporation Ltd., v/s. Asst. CIT 343 ITR 316 to contend that the Petitioner is not entitled to benefit of adjustment/ refund of any excess paid under the Scheme of 1997 Act. Consideration:­ 14. A person seeking to avail the benefit of the Scheme of 1997 Act must strictly satisfy its provisions as held by the Supreme Court in Hemalatha Gargya v/s. CIT 259 ITR 1. The Apex Court held that the person seeking the benefit of the Scheme of 1997 Act is bound to strictly comply with its conditions like any fiscal legislation and equitable considerations can have no place in construing it. 15. Before dealing with the other contentions, it would be appropriate at the very outset to decide/examine whether the tax payable under the Scheme of 1997 Act is the same tax that is payable under the 1961 Act i.e. is the charge/ subject matter of tax the same or different. For, if the charge is different, then the tax paid under the Scheme of 1997 Act is not tax under the 1961 Act. Consequently, the TDS i.e. the tax deducted at source of income tax under the 1961 Act is no....
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....) 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 sub­section (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 commencement 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." This Section, when applied to companies, brings to tax income chargeable to tax but not disclosed under the 1961 Act, and declared now under Section 64 of the Scheme of 1997 Act at the rate of 35% in case of Petitioner. Section 64 of the Scheme of 1997....
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....e Scheme. This is also evident from Section 64 of the Scheme providing "notwithstanding anything contained in the Income Tax Act or Finance Act, income shall be charged in respect of income so declared.........." Thus, the charge is different. 19. This is further supported by Section 66 of the Scheme, which reads as under:­ "66:­ Time for payment of tax - The tax payable under this Scheme in respect of the voluntarily disclosed income shall be paid by the declarant and the declaration shall be accompanied by proof of payment of such tax." Therefore, the proof of payment of tax to be provided is of the tax payable under the Scheme of 1997 Act and not the tax paid under the 1961 Act. 20 Mr. Mistri, in support of his submission states that the tax payable under the Scheme of 1997 Act is the income tax payable under the 1961 Act. According to him, it is the 'same animal' and, therefore, the benefit of TDS i.e. tax deducted at source under the 1961 Act is available for payment of tax under the Scheme of 1997 Act. Our attention is invited to the definition section viz: Section 63 of the Scheme of 1997 Act, which reads as under:­ " Section 63­ Defini....
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....rovisions viz: Section 64 of the Scheme of 1997 Act. As pointed out above, the charge of tax under the Voluntary Scheme of 1997 Act is a declaration made of any undisclosed income chargeable to tax under the 1961 Act then such undisclosed income when declared (called voluntarily disclosed income) is charged to tax at the flat rate @ 35% in case of firms/companies and 30% in case of individuals. Thus, the definition Section of the Scheme of 1997 Act on which reliance is placed by the Petitioner is of no avail, as the charge of tax does not undergo any change in view thereof. 22 So far as reliance upon the Apex Court's decision in Hemalatha Gargya (supra) by the Petitioner is concerned, we note that the observations being relied upon by the Petitioner, reads as under:­ " As a consequence, in our view, the appeals preferred by the assessees must be and are hereby dismissed whereas the appeals preferred by the Revenue authorities must be and are hereby allowed. However, having held that 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 amount....
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....shy; (a) for which he has failed to furnish a return under section 139 of the Income­ tax Act, or (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 Act, or (c) which has escaped assessment by reason of the omission or failure on the part of such person to make a return under the Indian Income­ tax Act, 1922 (11 of 1922), or the Income­-tax Act or to disclose fully and truly all material facts necessary for his assessment or otherwise, then, notwithstanding anything contained in the Indian Income­ tax Act, 1922 (11 of 1922), or 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 rate or rates specified in the Schedule. (2) Nothing contained in sub­section (1) shall apply in relation to ­ (i) the income assessable for any assessment year for which a notice under section 139 or section 148 of the Income­tax Act has been served upon such person and the return has not been furnished before the commence....
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....he Voluntary Disclosure of Income and Wealth Tax Act, 1976 is not a tax paid under 1961 Act. Therefore, the benefit of TDS under the 1961 Act cannot be availed to adjust the tax payable under the Voluntary Disclosure of Income and Wealth Tax, 1976. 24 Therefore, even though the provisions of the Voluntary Disclosure Income and Wealth Act, 1976 which was before the Calcutta High Court in Sushila Devi Mohata (supra), are identical to the Voluntary Scheme of Act, 1997, yet the above difference between these Acts and Income Tax Act was not considered/ nor present to the mind of the Calcutta High Court while dealing the issue. Therefore, such a decision is rendered sub silentio. Salmond in Chapter 6 of his book - Jurisprudence, 12th Edition states as follows:­ " Circumstances destroying or weakening the binding force of precedent :­ A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown....
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....to tax under the Scheme of 1997 Act. Therefore, the reliance upon the decision of the Calcutta High Court in Sushila Devi Mohata (supra), cannot, in our view, govern the issue for the above reasons. 27. In the above view, a tax payable under the Scheme of 1997 is not a tax under the Act,1961. The tax payable under the Scheme of 1997 Act is indeed a 'different animal' from the tax payable under the 1961 Act. Therefore, the tax deducted at source and/or any other mode of payment of tax under the 1961 Act cannot be used to discharge the obligation to pay tax under the Scheme of 1997 Act on the disclosure of undisclosed income. Thus, it is not permissible to adjust the tax deducted at source under the 1961 Act to discharge an obligation to pay tax under the Scheme of 1997 Act. 28. We are fortified in our view by the submission of the Petitioner that the Circular issued by the CBDT dated 25th July, 1997 has no application as it applies only to Act,1961 and not the Scheme. This on the basis that the Scheme of 1997 Act is a separate and distinct enactment from the 1961 Act. In fact, the Petitioner has placed reliance upon the decision of the Apex Court in Hemalatha Gargya (s....
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....of the tax payable under the above Scheme. Nor is there any provision under the Scheme of 1997 Act for refund of the tax paid under the 1961 Act. 31. Besides, the above position in law, we cannot but refer to one more aspect of this case, i.e. filing of the declaration on 31st December, 1997 by the petitioners and its acceptance by the respondent Revenue. In terms of Section 64 of the Scheme of 1997, a person seeking to avail the benefit of the same has to file a declaration thereunder on or after 1st July, 1997 but on or before 31st December, 1997. This declaration is voluntary disclosure of undisclosed income chargeable to tax under the 1961 Act. This declaration has to be in the prescribed proforma and verified in the manner prescribed as provided in Section 65 of the Scheme of 1997 Act. The last date for availing the benefit of the above Scheme is by filing a declaration on or before 31st December, 1997. In terms of Section 66 of the Scheme of 1997 Act, a declarant has to submit proof of payment of tax payable under the above Scheme. However, Section 67 of the Scheme of 1997 Act provides a facility to a declarant who has filed a declaration under the Scheme on or before 31st....
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....id. In this case, the petitioner has itself on 31st December, 1997 in its declaration stated that the balance amount of tax payable is Rs. 1,75,22,360/­ on the voluntarily disclosed income of Rs. 5,00,63,885/­. At the time of filing of the declaration, the petitioner did not claim any credit for the tax deducted at source under the 1961 Act in respect of the tax payable on voluntarily disclosed income under the Scheme as is now being made. 34. In fact, in its application dated 16th March, 1998, addressed to the Commissioner of Income Tax, the petitioner had for the first time claimed that it is entitled to credit of tax deducted at source of Rs. 1,59,74,149/­ paid under the 1961 Act to determine the tax payable under the Scheme of 1997 Act. The relevant part of its application dated 16th March, 1998, reads as under :­ "6. Accordingly, the Company proposes to pay the taxes due on income disclosed as under :­ a) Total income disclosed for the years covered under the Return filed under VDIS 1997 on 31.12.1997 Rs. 500,63,885/­ b) Tax payable on the above under the Scheme (at 35%) Rs.175,22,360/­ c) Taxes deducted at source....
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....ember, 1997. This is not permissible under the Scheme of 1997 Act. The Scheme of 1997 Act being a fiscal statute, the petitioners seeking benefit thereof, must strictly satisfy its requirements. The Petitioner is seeking to modify / amend its declaration resulting in a different amount of tax payable from that declared on or before 31st December, 1997. Therefore, it does not strictly satisfy the term of the Scheme of 1997 Act. 37 Moreover, the application dated 16th March, 1998 by the petitioner does not even make an attempt to explain the circumstances in which the declaration filed on 31st December, 1997 allegedly mentioned inaccurate particulars nor does the petition contain any explanation as to the circumstances which led the petitioner to file a declaration which is incorrect. In fact, there is no formal application made by the petitioner even to amend its declaration dated 31st December, 1997. The petitioner continues to stand by the declaration filed on or before 31st December, 1997 and yet proposes to pay taxes in a manner different from that stated in its declaration dated 31st December, 1997. 38 As pointed out above, at the very highest, the impugned communication ....
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....as made to your Honour to that effect on 16th March, 1998. Your Honour, by your letter dated 18th March,1998 numbered CITIII/VDIS/Misc/188/97­98, rejected the request. The Company filed a Writ Petition before the High Court. The High Court while admitting the Writ plea, to be heard in due course, did not grant any interim relief or reliefs prayed for. Therefore, the Company has fully paid the taxes as payable under the VDIS without deducting the TDS suffered on the income. This is only for your kind information." 40 It may be noted that the payment of the tax under the Scheme of 1997 Act was in terms of the declaration made by the petitioner on 31st December, 1997. In its declaration, no claim for the Tax Deducted at Source under the 1961 Act being treated as tax paid under the Scheme was made by the petitioner. Further, it is pertinent to note that the letter dated 31st March, 1998 has been filed by the petitioner with the Commissioner of Income Tax, not along with the proof of payment of tax under the Scheme but separately and only after the proof of payment had been submitted to the Revenue. Further, the communication does not in terms states that the petitioner reserves ....