2015 (11) TMI 24 - HC - Income Tax

Constitutionality of Section 95 of the KVSS, 1998 - whether declaration under KVSS cannot be granted as scheme has expired? - Held that - It is not possible for us to declare Section 95(iii) void on the ground of under inclusion. The non inclusion of others in the exclusionary Section 95(iii) of the KVSS 1998 will not render the classification done by the parliament as arbitrary or violative of Article 14 of the Constitution of India. The petitioner admittedly at the time when he filed his declaration was being prosecuted for offences of cheating under Chapter XVII of the Indian Penal Code. So far as the Petitioner is concerned, he does not fall within the class of the persons against whom proceedings have been instituted for enforcement of any civil liabilities. Therefore, only a person who has been excluded from the benefit of KVSS 1998 on the ground of prosecution for the enforcement of the civil liabilities approaches the Court, would the issue arise for our examination. This is neither a public interest litigation nor is the petitioner in any manner affected by the class of persons being excluded from the benefit of KVSS 1998 for the reason of prosecution being launched for enforcement of the civil liabilities. Furthermore, the Petitioner is seeking a relief under the KVSS 1998 and at the same time, he is calling upon the Court to strike down Section 95 thereof, which will result in all persons being entitled to the KVSS 1998. This will lead to the entire scheme being unworkable. The relief prayed for under the Scheme and the argument of the Petitioner seeking to destroy the entire scheme, is difficult to reconcile. The Petitioner was charged for offence of cheating and his class has been rightly excluded from the benefit of the Scheme. Nevertheless we have examined the challenge and not found any merit in it. Thus, the challenge to Section 95 of the KVSS 1998 mounted by the Petitioner must fail. - Decided against assessee.

Summary

Issues Involved:
1. Challenge to three orders dated 12 February 1999 rejecting the petitioner's declaration under the Kar Vivad Samadhan Scheme, 1998 (KVSS 1998) for Assessment Years 1993-94, 1994-95, and 1995-96.
2. Constitutional validity of Section 95 of the KVSS 1998.

Detailed Analysis:

1. Challenge to the Orders Dated 12 February 1999:
The petitioner filed appeals against the assessment orders for the years 1993-94, 1994-95, and 1995-96. These appeals were pending as of 1 September 1998. The KVSS 1998 was introduced to settle tax disputes pending as of this date. The petitioner filed declarations under KVSS 1998, which were rejected by the designated authority based on Section 95(iii) of the KVSS 1998, as prosecution under Chapter XVII of the Indian Penal Code had been initiated against him. The Court did not entertain the challenge to these orders, and the Apex Court in CBI Vs. Sashi Balsubramanian upheld that the term 'instituted' includes the mere filing of a complaint.

2. Constitutional Validity of Section 95 of the KVSS 1998:
The petition was admitted only on the issue of the constitutional validity of Section 95 of KVSS 1998. The petitioner argued that Section 95 is discriminatory under Article 14 of the Constitution of India because it excludes certain classes of people from the scheme's benefits without a rational nexus to the scheme's objective of revenue collection. Specifically, the petitioner contended that:

- Section 95(iii) arbitrarily excludes individuals based on mere complaints filed in criminal courts, which may be based on suspicion.
- The classification under Section 95(iii) lacks a rational nexus to the objective of revenue collection.
- The exclusion of individuals prosecuted for minor crimes under Chapter XVII of the Indian Penal Code, while those prosecuted for serious crimes like murder are not excluded, is arbitrary.
- The exclusion of individuals against whom proceedings for enforcement of civil liabilities have been instituted is arbitrary.

Court's Consideration and Ruling:
The Court examined the legislative intent and the objectives of KVSS 1998, which aimed to settle tax disputes and collect revenue efficiently. The exclusion under Section 95(iii) was found to have a rational nexus to the scheme's objective, as it aimed to exclude individuals involved in socio-economic crimes from benefiting from the scheme. The Court noted:

- The classification under Section 95(iii) is based on intelligible differentia and has a rational relation to the objective of the legislation.
- The exclusion of individuals prosecuted for socio-economic crimes ensures that the scheme does not extend benefits to those who might have generated income through illicit means.
- The exclusion of individuals involved in minor crimes under Chapter XVII of the Indian Penal Code, while not excluding those involved in serious crimes like murder, is justified as the latter may not have a direct nexus to revenue generation.
- The exclusion of individuals against whom proceedings for enforcement of civil liabilities have been instituted pertains to those who have not honored civil court verdicts, leading to criminal prosecution, thus maintaining the scheme's integrity.

The Court upheld the constitutionality of Section 95 of KVSS 1998, dismissing the petition and emphasizing that the classification made by the Parliament was neither arbitrary nor violative of Article 14 of the Constitution of India.

Conclusion:
The petition challenging the constitutional validity of Section 95 of KVSS 1998 was dismissed, with the Court finding that the exclusions under this section were justified and had a rational nexus to the scheme's objective of efficient revenue collection. The challenge to the orders dated 12 February 1999 was not entertained, as it was consistent with the Apex Court's interpretation in CBI Vs. Sashi Balsubramanian.