Voluntary Disclosure of Income Scheme, 1997‑‑

‑‑‑‑Scope of S.67 of Scheme‑‑‑Declaration under scheme‑‑‑Tax paid beyond prescribed period‑‑‑Declaration void and non est ‑‑‑Retention of tax by revenue illegal‑‑‑Section 70 of scheme inapplicable‑‑‑Petitioner entitled to refund of tax or adjustment towards arrears‑‑‑Indian Finance Act, 1997, Ss.67 & 70.

Section 67(2) of the Voluntary Disclosure of Income Scheme, 1997, stresses upon the mandatory requirement of payment of tax within the outer limit of time and in the event of any such non‑payment of tax the declaration under the scheme will be non est. When the scheme contemplates that a declaration tiled by the assessee was not acted upon the question of retention of tax paid under such declaration does not arise. There is no provision under the scheme whereby the Revenue can retain the tax paid in respect of a declaration which is void and non est and the retention of the tax contrary to the scheme is against Article 265 of the Constitution of India. In such a situation, the provision under section 70 of the scheme will not apply and accordingly the retention of tax by the Revenue is illegal.

On December 27, 1997, the petitioner filed a declaration under the Voluntary Disclosure of Income Scheme, 1997, disclosing the income for the assessment years 1991‑92. and 1992‑93 and paid tax thereon. The said tax was paid t‑yond the prescribed period. There was a delay of one day in payment of tax and in view of the delay the Department refused to grant a certificate under section 67(2) of the scheme. The petitioner sought for a refund of the tax paid under the scheme as the declaration was deemed to be void. The respondents refused. On a writ petition filed for a direction to refund the tax:

Held, that the Revenue had to refund tile tax paid under the declaration, dated December 27, 1997, to the petitioner within a period of two months from the date of receipt of a copy of the order unless adjustment was made towards any arrears.

Shankarlal v. ITO (1998) 230 ITR 536 (AP) ref.

S. Ravi for Petitioner. J.V. Prasad for Respondents

JUDGMENT

B. PRAKASH RAO, J.‑‑‑ This writ petition seeks refund of tax of Rs.23,281 paid under the Voluntary Disclosure of Income Scheme, 1997 (for short "the scheme"), which was enunciated under the Finance Act, 1997 (Act No.26 of 1997). The petitioner has filed a declaration on December 27, 1997, under the said scheme disclosing the income for the years 1.991‑92 and 1992‑93, for which no returns were tiled by him under section 139(1) of the Income‑tax Act (for short "W Act"). Later, the petitioner had paid the tax as computed under the said declaration on March 31, 1998, and sought for the issuance of a certificate under the scheme. However, the said payment of tax was beyond the prescribed period under the scheme as there was a delay of one day. Since the declaration was tiled on December 27, 1997, the tax had to be paid by the declarant within a period of three months from the date of declaration alongwith simple interest at 2 per cent. per month as provided under section 67 of the scheme. Therefore, the respondents declined to grant the certificate under section 67(2) of. the scheme in view of the delay in payment of the tax. Thereupon, the petitioner sought for the refund of the tax paid under the scheme as the declaration as has been filed is deemed to be void. However, the respondents refused to entertain the said request under the proceedings No.VDIS'97/CIT/VJA/99/1781, dated April 26, 1999, on the ground that section 70 of the scheme prohibits refund of tax paid under the scheme under any circumstances whatsoever.

Sri S. Ravi, learned counsel for the petitioner, relying on section 67(2) of the scheme sought to contend that in the event of making any payment of tax beyond the period prescribed under section 67(1) of the scheme, subsection (2) of section 67 itself contemplates that the declaration tiled shall be deemed never to have been made under the scheme. Therefore, such a declaration becomes a void declaration and as such the refusal to refund the tax paid under the said void declaration is wholly unsustainable.

However, Sri J.V. Prasad, learned senior standing counsel appearing on behalf of the respondents, sought to sustain the impugned action of refusal to refund the tax paid by placing reliance on section 70 of the scheme which, as mentioned supra, contemplates that any amount of tax paid shall not be refundable under any circumstances.

In view of the admitted facts, the only question which arises for consideration is as to whether a declarant under the scheme who paid the tax beyond the prescribed period thereunder is entitled for refund of the same.

The scheme was enunciated under the Finance Act, 1997 (Act No.26 of 1997), with a view to give concessional rate of tax and immunity in respect of disclosure of concealed income. The scheme is a self‑contained one providing the procedure. Therefore, one has to look into the provisions contained therein for any situation arising on the facts. Section 65 contemplates the filing of a declaration for any assessment year with all the particulars in the form specified therein. Section 66 contemplates the proof of payment of tax to be accompanied alongwith the declaration. However, section 67 provides for the payment of tax at a later stage not beyond the period of three months from the date of declaration with simple interest at the rate of 2 per cent. for every month or part of a month and further, section 67(2) of the scheme treats a declaration as no declaration if the tax is not paid within the said three months. For the sake of convenience, sections 66 and 67 of the scheme are extracted hereunder (see (1997) 225 ITR (St.) 143).

"66. 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.

67.‑‑‑(1) Notwithstanding anything contained in section 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 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.'"

Thus, from a reading of the aforesaid provisions and the scope and ambit of the scheme as contemplated, it is quite apparent that if one has to avail of the benefit under the scheme, he has to mandatorily comply with the requirements. It contemplates the payment of tax alongwith the declaration itself, but at the same time, making a provision for payment of tax at a later stage not beyond three months from the date of filing the declaration with interest. Further, subsection (2) of section 67 stresses upon the mandatory requirement of payment of tax within the outer limit of time and in the event of any such non‑payment of tax, the declaration shall be deemed never to have been made under the scheme, i.e. it will be non est. Section 70 of the scheme contemplates that no amount of tax paid in pursuance of a declaration shall be refundable under any circumstances. Necessarily, it would only mean that the expression "declaration" used in section 70 should be a declaration as contemplated by section 66 read with section 67(1) of the scheme. When the very scheme contemplates that a declaration without payment of tax is void and non est and the declaration filed by the assessee was not acted upon, the question of retention of the tax paid under such declaration will not arise. The Revenue cannot retain any amounts paid under a declaration falling within the mischief of section 67(2). There is no provision under the scheme whereby the Revenue can retain the tax so paid in respect of a declaration which is void and non est. In the absence of any such authority of law, the retention of tax contrary to the very scheme is in the teeth of Article 265 of the Constitution of India Therefore, the provision. under section 70 of the scheme cannot have any application to a situation where the tax is paid beyond the prescribed period and, accordingly, the retention of the said tax by the Department is illegal and the petitioner is entitled to refund of the same.

This Court in Shankarlal v. ITO (199f) 230 ITR 536, while considering the scope and effect of the scheme, has, on a consideration of section 70 and the limitations on the tax refund contemplated thereunder, held that if this is understood as forfeiting the tax paid in cases where the declarations are ineligible under section 64(2), such a forfeiture would be confiscatory and unconstitutional unless it is properly qualified. It was further held (page 555):‑‑

"It appears to us that the intention of this section was only to state that there will be no cash refund of the tax paid in pursuance of the declaration made under subsection (1). It will not, however, stand in the way of adjustment of the amount if the declaration itself is not acceptable as not falling under section 64(1)."

Therefore, in view of the above reasons, it cannot be said that the Revenue can retain the tax paid and the petitioner is not entitled for the refund.

In the result, the writ petition is allowed with a direction to the respondents to refund the tax paid under the declaration, dated December 27, 1997, to the petitioner herein within a period of two months from the date of receipt of a copy of this order unless adjustment is made towards any arrears. No costs.

M.B.A./584/FC

Petition accepted.