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TMI Blog2018 (3) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... Scheme in respect of undisclosed income of ₹ 69,11,731.46. ₹ 34,48,954/- is 49.9% of ₹ 69,11,731.46. (ii) In respect of the balance undisclosed income of ₹ 1,71,34,268.54, the petitioner would take recourse to the first option under Section 115BBE. The petitioner would accordingly pay tax @ 60% on the aforesaid amount under Section 115BBE, surcharge @25% of the tax and cess as applicable. ₹ 85,50,000/- paid as advance tax would be counted. (iii) The petitioner would be also liable to pay interest on the late payment of taxes, surcharge, cess and late filing of return. (iv) ₹ 60,11,500/- deposited by the petitioner under Section 199F of the Finance Act will be refunded to the petitioner without interest after a period of four years in accordance with the deposit scheme. We perceive and believe that by giving the aforesaid directions, we have not interfered with the provisions of the Amendment Act. We have not directed refund of ₹ 34,48,954/-, which would be contrary to Section 199K of the Finance Act. We have also not directed that the advance tax of ₹ 85,50,000/- paid by the petitioner should be treated as payment of tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment) Act, 2016 [Amendment Act, for short] as an aftermath and in wake of the demonetization of ₹ 500 and ₹ 1000 currency notes, which had ceased to be legal tender post midnight between 8th and 9th November, 2016. 4. The petitioner, like many others, stuck with unaccounted demonetized currency notes had thought that they could side-step adverse impact of demonetization by offering for tax undisclosed cash deposited in bank accounts as income for the current year, i.e. Financial Year 2016-17, at the rate mentioned in Section 115BBE of 30% plus the applicable surcharge and cess. The expectation was that they would pay normal incidence of tax and escape the rigours of penalty and prosecution. This is a matter of common knowledge of which judicial notice should be taken. 5. The petitioner accepts and admits to having deposited substantial sum of ₹ 2,40,46,000/- in cash in Indian Overseas Bank, City Union Bank and Punjab National Bank between 13th November, 2016 and 13th December, 2016. The petitioner had also deposited advance tax of ₹ 85,50,000/- for the Assessment Year 2017-18 on different dates between 1st December, 2016 and 15th December, 2016 i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of income furnished under section 139 and the tax in accordance with the provisions of clause (i) of sub-section (1) of section 115BBE has been paid on or before the end of the relevant previous year. (2) No penalty under the provisions of section 270A shall be imposed upon the assessee in respect of the income referred to in sub-section (1). (3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. For the purpose of the present decision, as it is not a search case, we need not refer to Section 271AAB of the Act. 8. Section 115BBE of the Act provides that where the total income declared by an assessee in his return includes income referred to in Sections, 68, 69, 69A, 69B, 69C 69D, or is determined by the Assessing Officer to include such income, the assessee would be liable to pay tax at the rate of 60% on such income. In other words, such assessee would not get benefit of the lower rate of tax earlier prescribed. Under Section 271AAC, Assessing Officer is entitled to levy penalty of 10% of the tax payable under Section 115BBE(1)(i) in addition to the tax already payable under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpressions used in this Scheme but not defined and defined in the Income-tax Act shall have the meanings respectively assigned to them in that Act. 199C. (1) Subject to the provisions of this Scheme, any person may make, on or after the date of commencement of this Scheme but on or before a date to be notified by the Central Government in the Official Gazette, a declaration in respect of any income, in the form of cash or deposit in au account maintained by the person with a specified entity, chargeable to tax under the Income-tax Act for any assessment year commencing on or before the 1st day of April, 2017. (2) No deduction in respect of any expenditure or allowance or setoff of any loss shall be allowed against the income in respect of which a declaration under sub-section (1) is made. Explanation .- For the purposes of this section, specified entity shall mean- (i) the Reserve Bank of India; (ii) any banking company or co-operative bank, to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act); (iii) any Head Post Office or Sub-Post Office; and (iv) any other entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or the Commissioner notified in the Official Gazette and the form could be signed by the person competent to verify the return of income under Section 140 of the Act. No deduction in respect of any expenditure, allowance or set-off of any loss was allowed. As per Subsection (1) to Section 199D tax at the rate of 30% was chargeable on the undisclosed income. In addition, as per Sub-section (2) to Section 199D, the declarant was liable to pay 33% of such tax as surcharge called Pradhan Mantri Garib Kalyan Cess so as to fulfil the commitment of the Government for welfare of the economically weaker sections of the society. Further, as per Section 199E, in addition to tax of 30% and the cess equal to 33% of the tax, the declarant was liable to pay penalty @10% on the undisclosed income. In other words, the total amount of tax, surcharge and penalty payable on the undisclosed income was 49.90 per cent. Lastly, the declarant under sub-section (1) to Section 199F was to deposit 25% of the undisclosed income under Pradhan Mantri Garib Kalyan Yojna, 2016 and comply with the conditions specified in the PMGKY Scheme. The deposits made were to earn no interest and could be withdrawn only afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 199K, no amount of tax and surcharge paid under Section 199D and penalty paid under Section 199E was refundable. Section 199M states that where a declaration has been made by misrepresentation or suppression of facts or without payment of tax, surcharge and penalty or without depositing the amount in the Deposit Scheme, such declaration shall be treated as void and shall be deemed to have never been made under the Scheme. 12. A reading of the aforesaid provisions introduced and enacted vide the Amendment Act, would indicate that the guilty and remiss assessees had two separate and distinct options. They could declare unaccounted cash deposited in the bank accounts in the return of income filed under section 139 of the Act and pay tax, surcharge and cess as per Section 115BBE of the Act and Section 2 of the Finance Act post amendment at the effective rate of tax of 77.25%. Penalty @ 10% under the Section 271AAC could be imposed by the assessing officer on conditions being satisfied. Alternatively, the assessees could as a second option file a declaration under Section 199C, which would require them to deposit tax at the rate of 30%, surcharge at the rate of 33% on tax deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different bank accounts are my uncounted (sic) cash income which were deposited before the announcement of scheme PMGKY, 2016. Hence, I had no option except declare amount as my professional receipts, hence I deposited advance tax also at this income. Q.17. Now what do you want to say? A.17. Since cash deposit of ₹ 2,40,46,000/- is my uncounted (sic) income, hence I would like to declare this income under the scheme PMGKY, 2016 with request to adjust the advance tax amount with this scheme which is approx ₹ 1 crore which I have already deposited. Q.19. Do you want to say anything else? A.19. Nothing specific once again, I repeat cash deposited of ₹ 2,40,46,000/- is my uncounted (sic) income and I surrender the same in PMGKY, 2016 for the guarantee of the same. I am submitting the following mentioned post dated cheques. Sr.No. Cheque No. Bank A/c no. Amount 1. 001475 City Union Bank Ltd, Janakpuri 208001000627453 1,19,98,954/- 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was recorded and I was suggested to declare that income under PMGKY Scheme, 2016. As per that scheme, tax, cess and penalty makeup to 49.9% and declarant is also required to deposit 25% of the declared amount in separate Bank account in the shape of F.D. which is to remain locked up for four years without bearing interest thereon. To this applicant agreed and filed the Declaration also in Form h. However, during the course of proceedings, the applicant asked for giving credit of amount of tax to the tune of ₹ 85.5 Lakhs out of the total 49.9% which is required to be deposited by 31.03.2017. Once the amount of ₹ 85.5 Lakhs is adjusted, the applicant would be required to deposit differential amount which works out to be ₹ 34,48,954/-. In the event, this proposal is not acceptable then the applicant would have to deposit 49.9% of the declared amount which is not only huge, double taxation but is also practically impossible to comply at this fag end of the closer of this scheme. For this purpose when the applicant appeared before your good self on 27.3.2017 and reiterated that this much accommodation be extended to him and he be allowed the credit of sum deposited pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... your goodself and issue would be resolved soon. The applicant was asked to visit the office of the Assessing Officer on the next day who will arrange a meeting with your good self. Appreciating the concern raised and given the fact that hardly 3 days are left when the Scheme is going to close, the Joint / Addl. CIT, assured that all efforts would be made to resolve this issue. 7. On the next day, i.e. 29.03.2017, applicant met the Assessing Officer and filed a letter with a copy marked to your goodself. The Assessing Officer as per your instructions arranged a meeting with Shri Vijay Choudhary Joint / Addl. CIT, Range-62 as Shri Farhat Khan was on leave. Shri Choudhary asked the applicant to come again on 30.03.2017 around 11.30 A.M. as he was hopeful that the matter would be resolved in a positive way. 8. On 30.03.2017, the applicant again visited the office of the Assessing Officer as well as of Shri Vijay Choudhary, Joint / Addl. CIT, Range-62. After meeting him, the Joint / Addl. CIT was kind enough to appreciate the difficulty faced by the applicant if he is once again asked to deposit the entire amount of ₹ 1,19,98,954/- when he had already deposited ₹ 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich were not returned or rejected on the ground that the petitioner had not paid and deposited full amount of ₹ 1,19,98,954/- towards tax, surcharge and penalty and had made part deposit of ₹ 34,48,954/-. It took the respondents nearly three months to discuss and examine the case as vide letter dated 28th August, 2017, the declaration made by the petitioner was rejected recording as under:- In this regard, It is communicated that your application dated 31.03.2017 regarding giving the credit of Advance Tax paid of ₹ 85,50,000/- (paid before the implementation of PMGKY-2016 Scheme which was effective from 17.12.2016) was forwarded to the Pr. Chief Commissioner of Income Tax, Delhi for directions / clarifications. In response to this letter, the clarification has been received from 0/o Pr. CCIT, Delhi vide letter F. No. Joint CIT(Hq) (Coord)/PMGKY/2017- 18/3143 dated 05.06.2017 which is requoted as under: No credit for advance tax paid, TDS or TCS shall be allowed under the Scheme. It is further communicated that the said clarification is in reference of clarification on the taxation and investment regime for the Pradhan Mantri Garib Kalyan Yoj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such payments? Thereby hangs a tale. In the opinion of this court, there is no bar, express or implied, which precludes the reckoning or taking into account of previously paid amounts which have nexus with the periods sought to be covered by the scheme. 16. Granted, such schemes are to be seen as containing special dispensations, etc and interpreted in a stand alone or sui generis manner. Equally, those who seek its benefits are to go by it. But there should be something which provides a clear insight that Parliament wished that such past amounts are not to be reckoned at all, for purposes of payments. All that the words of the statute enjoin are that the tax and surcharge amounts under the scheme shall be paid on or before a date to be notified . These words necessarily refer to all payments. They are not limited in their meaning to only what is paid immediately before, or in the proximity of the declaration filed. 17. The provision of Section 182 itself states that for the purposes of the IDS, undefined terms and expressions shall be in terms of the Income Tax Act, by incorporating those into the Finance Act and the scheme. Undisclosed income which is the foundati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of tax in this manner by the assessee. The Act also enjoins upon the assessee the duty to file a return of income disclosing his true income. On the basis of the income so disclosed, the assessee is required to make a self-assessment and to compute the tax payable on such income and to pay the same in the manner provided by the Act. Thus the filing of return and the payment of tax thereon computed at the prescribed rates amounts to an admission of tax liability which the assessee admits to have incurred in accordance with the provisions of the Finance Act and the Income Tax Act. Both the quantum of tax payable and its mode of recovery are authorized by law. The liability to pay income tax chargeable under Section 4 (1) of the Act thus, does not depend on the assessment being made. As soon as the Finance Act prescribes the rate or rates for any assessment year, the liability to pay the tax arises. The assessee is himself required to compute his total income and pay the income tax thereon which involves a process of self-assessment. 19. Furthermore, the court also is of the opinion that the clarification by the Revenue, that credit for TDS paid, can be enjoyed for avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... postulated payment of tax, surcharge, penalty and requirement to make a deposit. We would be rewriting provisions of Chapter IXA of the Finance Act if we direct grant of benefit of advance tax paid under the Act i.e. the Income Tax Act for payment to be made under PMGK scheme. The challans for payment under the Act and PMGK Scheme were separate. In Kumudam s case, as noticed above, there was an anomaly and contradiction as benefit of TDS was available but credit of advance tax was denied, though both were in nature of tax paid in advance. Thus, the Division Bench had held that the distinction of TDS and advance tax was congruous, as both were in the nature of pre-paid taxes. Further, there was no express or implied provision that had precluded reckoning or taking into account the previously paid amount. In view of the aforesaid position, we would not accept the prayer of the petitioner to treat payment of advance tax of ₹ 85,50,000/- as deposit of tax, surcharge and penalty under Sections 199D and 199E of the Finance Act. Wide latitude is required and available in matters relating to fiscal and economic regulations and classification of objects, persons and things for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd uncertainties that could prevail at the given point of time on interpretation, provided the purpose and objective of the legislation is not sacrificed and undermined. Legislations do not and cannot deal with all circumstances with abstract symmetry. When interpretation and understanding of legal provisions and applicability in a peculiar factual matrix was ambiguous and nebulous at the given point of time and confusion had prevailed, the Courts should provide succour to the party who would suffer an infelicitous and odious harm, subject to purpose of the legislation not being defeated and subdued. In Shailesh Dhairyawan Vs. Mohan Balkrishna Lulla (2016) 3 SCC 619 , referring to the principle of constructive interpretation or construction, the Supreme Court observed that the court is supposed to attach that meaning to the provision which serves the purpose behind the provision and should ascertain what the provision is designed to accomplish. This means examination of three components i.e. language, purpose and discretion. Language though restrictive can reveal range of possibilities given the semantic use. Therefore purpose is the core of the text. Within the language which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mended provisions of section 115BBE of the Income-tax Act, 1961 shall apply to A.Y.2017-18, relating to F.Y. 2016-17. Hence, undisclosed deposits between 01.04.2016 to 15.12.2016 shall also attract tax at the rate provided in the Taxation Laws (Second Amendment) Act, 2016. XXX Question No.11: Whether the cash seized during a search and seizure action of the Department and deposited in Public Deposit Account is allowed to be adjusted against the payments required to be made under the Scheme? Answer: The adjustment of cash seized by the Department and deposited in the Public Deposit Account may be allowed to be adjusted for making payment of tax, surcharge and penalty under the Scheme on the request of the person from whom the cash is seized. However, the said amount shall not be allowed to be adjusted for making deposits under the Pradhan Mantri Garib Kalyan Deposit Scheme. Thus, in case of seized cash/money deposit adjustment for payment of tax, surcharge and penalty was permitted. 29. Despite the circular, facts narrated in some detail do show that the Amendment Act had equally puzzled and flummoxed the tax law enforcers with whom the petitioner was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of tax, surcharge and penalty under PMGK Scheme, we would hold that the declaration made under PMGK Scheme should not have been entirely rejected in view of the peculiar and specific factual background in the present case. We have given the aforesaid direction and finding keeping in mind and being sensitive to the petitioner's predicament and adverse consequences propounded by the respondents though the law enforcers were equally responsible in the lapse occasioned. 31. In the aforesaid factual matrix, we would direct as under:- (i) Deposit of ₹ 34,48,954/- will be treated as payment of tax, surcharge and penalty under the PMGK Scheme in respect of undisclosed income of ₹ 69,11,731.46. ₹ 34,48,954/- is 49.9% of ₹ 69,11,731.46. (ii) In respect of the balance undisclosed income of ₹ 1,71,34,268.54, the petitioner would take recourse to the first option under Section 115BBE. The petitioner would accordingly pay tax @ 60% on the aforesaid amount under Section 115BBE, surcharge @25% of the tax and cess as applicable. ₹ 85,50,000/- paid as advance tax would be counted. (iii) The petitioner would be also liable to pay int ..... X X X X Extracts X X X X X X X X Extracts X X X X
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