2012 (9) TMI 398 - HC - Income Tax

Non depositing of tax in connection with VDIS declaration within prescribed time - Held that - The frame of VDIS has been such that per Section 66 ibid., the declaration itself was required to be accompanied by the proof of payment of the tax payable in respect of the voluntarily disclosed income - Section 67 had given a latitude only to the extent that the declarant may file the declaration and then, pay the tax within three months from the date of filing of the declaration with simple interest @ 2% per every month or part thereof as comprised in the period beginning from the date of filing of the declaration and ending on the date of payment of tax. In fact, any date beyond the last day of the third month from the date of filing of the declaration cannot be considered available for making payment for the very specific and clear phraseology of Section 67 whereby even the proof of payment has to be supplied within the said period of three months. Then, in sub-section (2) of Section 67, the result of default in payment of tax before the expiry of three months from the date of filing of the declaration is also given that the declaration shall be deemed never to have been made. The submission as attempted by the assessee for counting the period of three months step by step and then, referring to the fact that the month of February had 28 days has a fundamental fallacy in it. It is the period of three months that is relevant for the purpose of Section 67 ibid. and not the number of days in such months. When the declaration was made on on a simple computation, the last day of the third month therefrom expired on 30.03.1998. The deposit as made on even if delayed by one day, cannot be taken as a valid deposit for the purpose of the Scheme - against assessee.

Issues Involved:
1. Rejection of declaration under the Voluntary Disclosure of Income Scheme (VDIS) for delayed tax payment.
2. Proceedings under Section 148 of the Income Tax Act, 1961 for reassessment of escaped income.
3. Interpretation of the time limit for tax payment under VDIS.
4. Applicability of equitable considerations and judicial discretion in condoning delays.
5. Compliance with the Supreme Court's ruling in Hemalatha Gargya v. CIT.

Issue-wise Detailed Analysis:

1. Rejection of Declaration under VDIS for Delayed Tax Payment:
The petitioners, who are assessees under the Income Tax Act, 1961, filed declarations under VDIS on 30.12.1997 but paid the tax on 31.03.1998. The declarations were rejected due to untimely payment, as per the communications dated 28.05.1999. The relevant statutory provision, Section 67(2) of the Finance Act, 1997, mandates that if the declarant fails to pay the tax within three months from the date of filing the declaration, the declaration shall be deemed never to have been made.

2. Proceedings under Section 148 of the Income Tax Act, 1961:
Following the rejection of the VDIS declarations, the Income Tax Officer issued notices under Section 148 to reassess the escaped income. The petitioners challenged these notices, but the court found no fault in the authorities' actions as the declarations were invalid due to delayed tax payment.

3. Interpretation of the Time Limit for Tax Payment under VDIS:
The petitioners argued that the three-month period for tax payment should be interpreted to extend until 31.03.1998, considering the last date for filing the declaration was 31.12.1997. However, the court rejected this argument, emphasizing that the period of three months is strict and mandatory, ending on 30.03.1998, as per the Supreme Court's ruling in Hemalatha Gargya v. CIT.

4. Applicability of Equitable Considerations and Judicial Discretion in Condoning Delays:
The petitioners cited decisions from the Punjab & Haryana High Court and the Madras High Court, which had condoned short delays in similar cases. However, the Supreme Court in Hemalatha Gargya explicitly overruled these decisions, stating that the time schedule for payment under VDIS is mandatory and not subject to equitable considerations or judicial discretion.

5. Compliance with the Supreme Court's Ruling in Hemalatha Gargya v. CIT:
The court adhered strictly to the Supreme Court's ruling in Hemalatha Gargya, which held that the statutory provisions of VDIS are mandatory and must be complied with strictly. The Supreme Court emphasized that the use of the word "shall" indicates a mandatory requirement, and any deviation from the prescribed time limit results in the declaration being deemed never to have been made.

Conclusion:
The court dismissed the writ petitions, holding that the delayed payment of tax rendered the VDIS declarations invalid. The authorities' actions in rejecting the declarations and proceeding under Section 148 were upheld. The court reiterated that the statutory time limit for tax payment under VDIS is strict and mandatory, with no scope for equitable considerations or judicial discretion to condone delays. The interim orders were vacated, and the authorities were directed to proceed expeditiously in accordance with the law.

← Previous Next →