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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 ..... rs. 3. PMGK Scheme was notified in the Gazette of India dated 15th December, 2016 vide Taxation Laws (Second Amendment) Act, 2016 [Amendment Act, for short] as an aftermath and in wake of the demonetization of Rs. 500 and Rs. 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 Rs. 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 Rs. 85,50,000/- for the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such income has been included by the assessee in the return 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 additi ..... 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 entity as may be notified by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld 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 after four years. Sections 199D and 199E imposing payment of tax @ 30% and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 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 deposited and penalty of 10% on the undisclosed income i.e. total of 49.9%. In addition the declarants were required to dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 Rs. 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 Rs. 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 Rs. 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. 001476 Do Do 60,11,500/-" Though I have given the above two cheques for the total amount but on the amount of Rs. 2,40,46,000/- I have deposited the advance tax to approx Rs. 1 crore and request to allow the credit of the same for the scheme." Thus, the petitioner had confirmed having deposited Rs. 2,40,46,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings, the applicant asked for giving credit of amount of tax to the tune of Rs. 85.5 Lakhs out of the total 49.9% which is required to be deposited by 31.03.2017. Once the amount of Rs. 85.5 Lakhs is adjusted, the applicant would be required to deposit differential amount which works out to be Rs. 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 prior to 17.12.2016. On 28.3.2017 also, the applicant visited your office making same request which you had considered sympathetically with an assurance that the matter would be put-up for consideration before the Ld.CIT. Madam, you would appreciate that each passing day, the window to deposit the amount is going to close soon and given the practical difficulty, the applicant is in no position to deposit this huge amount of Rs. 1,19,98,954/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 1,19,98,954/- when he had already deposited Rs. 85,50,000/- on or before 15.12.2016. The Joint / Addl. CIT was also of the opinion that the applicant cannot be taxed twice on the same income. He also appreciated that when the tax of Rs. 85,50,000/- was deposited, the Scheme had not been notified and when it has been notified and the applicant on being asked, has agreed to file the declaration, then he should not be made to suffer for no fault of his own as he has deposited the entire amount of tax, surcharge and cess. 9. Resultantly, und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,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 Yojana, 2016 issued by the Board vide circular no. 2 F. No. 142/33/2016TPL(Part) dated 18.01.2017 (copy enclosed). In view of the above clarification, your application filed under PMGKY -2016 is hereby rejected." This communication accepts that the issue regarding credit of advance tax of Rs. 85,50,000/- paid before implementation of the PMGK Scheme had been forwarded to the Principal Chief Commissioner for directions and clarifications. Response received on 5th June, 2017 had opined that credit of advance tax paid, TDS or TCS was not to be allowed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 foundational provision to be invoked by declarants, thus is based on the definition under the Income Tax Act (Section 132 (1) (c)) the provision reading as to include "money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property [which has not been, or would not be, disclosed] for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property)". Undisclosed income is also defined in Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 availing the benefit (under the scheme in question) precludes any meaningful argument by it that advance tax payments relative for the assessment years covered by the declaration cannot be taken into consideration as payments under and for purposes of availing the benefits of the scheme." 21. The petitioner relying upon the said decision had also drawn our attention to the concept of advance tax as elucidated in Modi Industries Ltd. Vs. CIT, (1995) 6 SCC 396. Reference was made to the judgment in Delhi Chartered Accountants Society (Regd.) Vs. Union of India, (2013) 29 STR 461 (Del) on the question of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 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 purpose of formulation of taxation policy. Validity and vires of the statutory provisions is not under challenge in the present writ petition. Interpretation of the provisions is in question and examination. 24. The effect of the above finding as per the Revenue is that Petitioner would completely lose right to credit and benefit of Rs. 34,48,954/- under PMGK Scheme. This amount would get forfeited without corresponding tax benefit (Rs.60,11,500/-, though not clearly stated by the respondents, it appears would be refunded after four years without interest). Petitioner would be liable to pay 60% rate of tax as per the provisions of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferring 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 is designed to effectuate the purpose there is scope for the court to exercise discretion. It is in this context we have interpreted PMGK Scheme. 26. In Parisons Agrotech (P) Ltd. v. Union of India, (2015) 9 SCC 657 after quoting and referring to R.K. Garg v. Union of India and Others, (1981) 4 SCC 675, the Supreme Court had observed:- "The Court must always remember that "legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry"; "that exact wisdom and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 in constant interaction and had sought guidance and assistance. Tax officers certainly had failed to appreciate and understand the difference between the two options and the procedure, and have substantially contributed to the muddle. The petitioner we would accept was prompted, if not clearly directed to file declaration and make deposits as made under the PMGK Scheme as the right course and option. Role of an assessing officer or the Income-tax authorities has been described as that of solicitude to the public exchequer with the inbuilt fairness to the assessee. Respondents as tax authorities being law enforcers and having acted as facilitators should have explicated doubts, when they had counselled the petitioner to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69,11,731.46. (ii) In respect of the balance undisclosed income of Rs. 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. Rs. 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) Rs. 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 Rs. 34,48,954/-, which would be contrary to Section 199K of the Finance Act. We have also not directed that the advance tax of Rs. 85,50,000/- paid by the petitioner should be treated as payment of tax, surcharge and penalty under the PMGK Scheme, which as held above, is impermissible. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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