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2004 DIGILAW 185 (KER)

Gopalakrishnan Nair v. Commissioner of Income Tax

2004-05-18

G.SIVARAJAN

body2004
Judgment :- G. Sivarajan, J. The petitioner is an Advocate practicing at Thiruvananthapuram. He is an assessee to Income Tax. He submitted a return under the Voluntary Disclosure of Income Scheme, 1997 (hereinafter referred to as 'V.D.I.S.') on 31st December, 1997 declaring a total income of Rs.4,83,000/- and the tax payable thereon was Rs. 1,44,900/-. The petitioner did not remit the tax due along with the declaration. However, he had paid the tax together with interest due thereon for the period from the date of declaration till the date of payment on 30th March, 1998. It so happened that the interest paid was deficit by Rs.360/-. This, according to the petitioner, happened on account of the fact that though the petitioner had calculated the interest on the tax due for the period of three months at Rs.6,519/-, by mistake the petitioner had paid only Rs.6,159/-. The respondent by notice dated 15th April, 1998 (Ext.Pl) informed the petitioner that the interest remitted is less by Rs.360/-. The petitioner immediately on receipt of the said communication remitted the sum of Rs.360/- and submitted a reply dated 29th April, 1998 (Ext.P2) explaining the circumstances under which the deficit occurred. The respondent, however, by communication dated 1st May, 1998 (Ext.P3) treated the declaration submitted by the petitioner as invalid. The petitioner has challenged the said communication in this proceedings. 2. Shri Jayasankar Nambiar, learned Counsel appearing for the petitioner submits that the declaration was submitted well within the time provided under the scheme and the remittance of the tax and interest calculated thereon also was paid well within the time provided therefor. He further submitted that it so happened that instead of remitting interest of Rs.6,519/- the petitioner happened to remit only Rs.6,159/-by mistake and that is how deficit of Rs.360/- occurred. The Counsel further submitted that immediately on receipt of the communication (Ext.Pl) from the respondent the petitioner remitted Rs.360/- and submitted, a reply. The Counsel brought to my notice the provisions of S,67(1) as well as the provisions of sub-s.(2) thereof of the V.D.I. Scheme which according to the Counsel will settle the issue. The Counsel further submitted that immediately on receipt of the communication (Ext.Pl) from the respondent the petitioner remitted Rs.360/- and submitted, a reply. The Counsel brought to my notice the provisions of S,67(1) as well as the provisions of sub-s.(2) thereof of the V.D.I. Scheme which according to the Counsel will settle the issue. The Counsel pointed out that S.67(1) of the schemeprovided for payment of tax due as per declaration filed within three months from the date of filing the declaration together with interest due thereon from the date of filing of the declaration till payment before the expiry of three months from the date of declaration. The Counsel, however, submits that even if there is some delay in payment of the interest on the tax due as per the declaration within the time specified in sub-s.(1) of S.67 of the Scheme, such delay or non-payment of interest on the tax due cannot have the effect of nullifying the declaration. Counsel submits that the consequences of non-compliance of the provisions of S.67(l) is provided in sub-s.(2) itself. 3. Shri George K. George, Standing Counsel (Government of India), Taxes, on the other hand submits that S.67(1) is absolute in terms and unless the tax declared in the return together with the interest thereon is not paid within three months from the date of filing the declaration S.67(2) will come into play and consequently the declaration will become invalid. The Counsel also submitted that even though S.67(2) refers only to the tax element and there is no reference to the interest payable under S.67(1) the cumulative effect of the provisions of S.67(1) and (2) is that both the tax and interest thereon have to be paid within the three months specified in S.67(1) failing which the consequence specified in sub-s.(2) would follow. The Counsel also relied on the decision of the Supreme Court in Hemalatha Gargya v. C.I.T. ((2003) 259 ITR 1) and submits that the Supreme Court has clearly specified the parameters so far as the availing of the benefit of V.D.I. Scheme. Standing Counsel states that it is specifically stated that both the tax and interest has to be paid within the time specified in S.67(1) of the Scheme and that there is no question of any equitable consideration. Standing Counsel states that it is specifically stated that both the tax and interest has to be paid within the time specified in S.67(1) of the Scheme and that there is no question of any equitable consideration. The Standing Counsel further submits that if any liberal view is taken in the matter that will have an adverse impact on the very efficacy of the Scheme. 4. I have carefully considered the rival contentions with reference to the relevant provisions under Ss.66 and 67 of the Scheme particularly with reference to sub-s.(2) of S.67 and the decision of the Supreme Court referred to above. Here, it must be noted that in Hemalatha Gargya's case the Supreme Court was concerned with a situation where the assessees had not paid the tax within the time prescribed either under S.66 or within the extended time under S.67(1) of the scheme. They offered various explanations in the matter. Different High Courts have taken conflicting views in the matter. The Revenue relied on the decisions in their favour and contended that the language of S.67(2) makes it abundantly clear that the period specified was mandatory. Considering the rival contentions Supreme Court observed as follows: "We are of the view that the submissions of the Revenue must be accepted. 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 S.66, namely, payment prior to the making of a declaration. The exception to this general rule has been carved out by S.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. 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 S.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." 5.I do not find anything in the decision of the Supreme Court which takes a view that if the interest on the declared amount is not paid within the period specified under S.67(1) of the Scheme S.67(2) would apply and the declaration will be treated as a nullity. It is relevant in this context to refer to the provisions of S.67 of the Scheme which reads as follows: "67. Interest payable by declarant. - (1) Notwithstanding any thing contained in S.66, the declarant may file a declaration without paying the tax under that section and the declarant may file the declaration and the declarant may pay the tax within the three months from the date of filing of the declaration with simple interest at the rate of two per cent for every month or part of a month comprised in the period beginning from the date of filing the declaration and ending on the date of payment of such tax and file the proof of such payment within the said period of three months. (2) 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 this Scheme." S .67(1), it must be noted, provides that notwithstanding the provisions contained in S.66, the declarant may file a declaration without paying the tax under that section, the declarant may file the declaration and the declarant may pay the tax within three months from the date of filing of the declaration with simple interest at the rate of 2 per cent for every month or part of a month comprised in the period beginning from the date of filing the declaration and ending on the date of payment of such tax and file the proof of such payment within the said period of three months. From the said provision it is clear that persons who have filed the declaration within the time provided under the scheme have got the facility of paying the tax due thereon along with simple interest at the rate of 2 per cent for every month or part of a month comprised in the period beginning from the date of filing the declaration and ending on the date of payment of tax within three months from the date of declaration. However, sub-s.(2) thereof only refers to non-payment of the tax due as per the declaration and specify the consequence, viz., invalidity of the declaration. What will happen if the interest on the tax due contemplated under S.67(1) is not within the time specified therefor is not provided for. As already noted S.67(1) refers to tax and interest thereon payable within the date of three months from the date of filing the declaration. But sub-s.(2) only refers to the nonpayment of the tax within three months and does not refer to non-payment of interest. Though the Department has got a stand that the tax will take interest also having regard to the fact that the tax and interest was separately treated in S.67(1) and the further fact that tax alone is referred to in S.67(2), I am of the view that the tax mentioned in sub-s.(2) cannot take interest also. Of course, no outer time-limit for payment of the interest provided under S.67(1) in case of non-payment of interest along with tax before the expiry of three months. A question may arise as to what would happen if the interest on the tax due as per the declaration is not paid at all as contemplated under S.67(1). I do not propose to deal much on this aspect in this proceedings on the facts of this case. 6. The petitioner, according to him, had paid the entire interest due on the tax along with the tax within the time stipulated under S.67(1) of the scheme and that it is only on account of a mistake occurred as pointed out earlier that there was a deficit of a small amount of Rs.360/- and that too was paid immediately on the respondent bringing it to the notice of the petitioner. It can be said that S.67(2) would show that the scheme was more concerned with the payment of tax alone within the period of three months as specified which would mean any delay in payment of interest does not have the effect of nullifying the declaration. In other words there is discretion in the authority concerned to condone the reasonable delay in remittance of the interest. A close reading of the decision of the Supreme Court in Hemalatha Gargya's case (supra) would show that all that is stated in the said decision was only in the context of the delay in the remittance of the tax due as per the declaration and not with reference to interest. Further the effect of S.67(2) is not considered. 7. As already noted, the petitioner had filed the declaration/return under the V.D.I. Scheme on 31st December, 1997 which is well within the time provided under the Scheme and the petitioner had also remitted the tax due as per the declaration on 30th March, 1998 tpgether with interest which is also well within the time provided under the Scheme. The only question is with regard to the deficit of Rs.360/-, representing deficit of interest, which was explained by the petitioner in Ext.P2, which seems to be bona fide. In the circumstances, I quash Ext.P3 and direct the respondent to accept the declaration as fully satisfied and to give the relief to the petitioner as per the V.D.I. Scheme. Original Petition is disposed of as above.