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Ranganatha Associates And Others v. Union Of India And Others
Factual and Procedural Background
The petitioner, Ranganatha Associates, an excise contractor and an assessee under the Income-tax Act, 1961, sought writ relief to quash certain departmental endorsements (annexures G and J) rejecting the petitioner's request to adjust a refund of Rs. 92,87,365 (arising from assessment year 1989–90) against tax payable of Rs. 31,11,623 determined under the Kar Vivad Samadhan Scheme, 1998 (the Scheme) for assessment year 1990–91. The petitioner had filed a return for 1990–91 and taxes had been paid; an assessment was made that resulted in a tax demand, and the petitioner had filed appeals that were pending.
The petitioner made a declaration under the Scheme (Form No. 1A) and the designated authority issued an intimation/certificate under section 90(1) on February 25, 1999. Separately, assessment proceedings for 1989–90 resulted in an order dated March 25, 1999, producing a refund. The petitioner requested adjustment of that refund against the Scheme liability and sought related certificates, but the respondents declined to adjust, issuing endorsements rejecting the petitioner's declarations on grounds of non-payment within the Scheme's time limits. Multiple writ petitions involving similar facts and endorsements were filed by the petitioner and other persons; the Department filed counter-statements, and the matter was argued at length before the court.
Legal Issues Presented
- Whether adjustment/set-off of a refund due to the assessee (under an earlier assessment) against tax arrears determined under the Kar Vivad Samadhan Scheme, 1998, is permissible for the purpose of satisfying the payment requirement of the Scheme (i.e., whether the word “pay” in section 90 includes adjustment).
- Whether the time schedule prescribed by section 90(2) of the Scheme — namely payment within thirty days of the order of the designated authority — is directory or mandatory, and whether the court can extend or condone delay in payment so as to allow entry into the Scheme.
Arguments of the Parties
Petitioners' Arguments
- The Scheme was intended to facilitate settlement and end litigation; the word "pay" under section 90 should be read to permit adjustment of refunds (i.e., adjustment should be an acceptable mode of payment to satisfy the Scheme).
- Departmental instructions and a clarification (quoted question and answer) stated that adjustment of a refund is a mode of payment, and that such instructions bind the Department; petitioners relied on this to claim adjustment should have been effected.
- Section 245 of the Income-tax Act permits set-off of refunds against sums payable under the Act, and therefore it should be read into or applied to the Scheme so that refund adjustment may discharge the Scheme liability.
- On the time schedule point, petitioners argued that courts have condoned delay in other cases (citing several High Court decisions and other case law) and that equity could apply to extend or condone the time for payment in the facts of these cases.
- Petitioners relied on several authorities to support a beneficial or liberal construction of the Scheme to allow entry despite delay or to treat adjustment as a valid mode of payment.
Respondents' Arguments
- The Scheme is an independent, self-contained statutory scheme prescribing its own time and manner of payment; it does not permit adjustment of refunds as a manner of payment for the purposes of section 90(2).
- Section 90(2) requires payment within thirty days and the statutory language is mandatory; equitable relief or condonation of delay is not available in view of the statutory scheme and binding precedent.
- The departmental clarification cited by petitioners did not override the Scheme's express provisions; section 245 set-off under the Act is not operative for a designated authority under the Scheme because the Scheme defines “designated authority” and limits the authority to act under the Scheme.
- The respondents relied on binding Supreme Court authority (Hemalatha Gargya v. CIT) and this court's previous decisions to support the view that payment timetables in such schemes are mandatory and cannot be extended by courts on equitable grounds.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Hemalatha Gargya v. CIT, [2003] 259 ITR 1 (SC) | Held that the statutory time limits in a settlement scheme are mandatory; use of “shall” is ordinarily mandatory; courts cannot invoke equity to extend time where statute prescribes consequences (and provides them) for non-compliance. | The court treated this Supreme Court ruling as binding and dispositive on the question of time limits under a one-time settlement scheme, thereby rejecting equitable extension and holding that delay in payment within 30 days disentitles petitioners to Scheme benefits. |
| Gufic Pharma Ltd. v. J.G Arora, [1999] 238 ITR 835 (Guj) | Explains the limits of the designated authority under the Scheme and that the designated authority cannot conflate its role with other jurisdictions; it may only determine existence of conditions for the Scheme and not decide merits of pending revisions. | The court relied on this decision to support the conclusion that the designated authority's powers are limited and that other officers (who may effect set-off under section 245) are not the designated authority under the Scheme; thus section 245 could not be used to permit adjustment for Scheme purposes in the present facts. |
| Smt. Laxmi Mittal v. CIT, [1999] 238 ITR 97 (P&H) | High Court held a beneficial construction may be given; delay in deposit can be condoned; a taxing statute should be construed liberally in favor of the assessee. | The court noted this case as earlier authority favoring condonation of delay but observed that it has been specifically overruled (or its approach disapproved) by the Supreme Court in Hemalatha Gargya; the present court did not follow Laxmi Mittal. |
| Commissioner Of Income-Tax v. E. Prahalatha Babu, [2001] 249 ITR 309 (Mad) (and referenced variant [2000] 241 ITR 457 (Mad)) | Madras High Court decision earlier taking a view supportive of condonation/beneficial construction of the Scheme. | The court observed this and similar High Court decisions but held that they have been overruled or negated by Hemalatha Gargya; thus they did not assist the petitioners. |
| Vijay Omprakash Bansal v. Commissioner Of Income-Tax, [2002] 257 ITR 649 (Bom) | Bombay High Court view that the Scheme is for the benefit of the assessee and a beneficial interpretation may be given; suggested that "shall" could be read as "may" and delay condoned. | The court noted this decision but concluded it could not be followed in view of the Supreme Court's ruling in Hemalatha Gargya which rejected such equitable readings. |
| Sardar Machhi Singh v. CIT, [2000] 245 ITR 58 (MP) | Listed among authorities relied upon by petitioners for condonation/beneficial interpretation. | The court recorded that such High Court decisions existed but held they were not controlling in the face of the Supreme Court's subsequent ruling; they did not change the outcome. |
| Dr. Mrs. Renuka Datla v. CIT, [2003] 259 ITR 258 (SC) | Listed by petitioner counsel among authorities; a Supreme Court decision (as listed in the opinion). | The opinion lists this decision among those cited by petitioners, but the court's primary reliance was upon Hemalatha Gargya for the mandatory character of scheme timelines. |
| Smt. Atamjit Singh v. Commissioner Of Income-Tax, [2001] 247 ITR 356 (this court) and [2001] 252 ITR 233 (Division Bench confirmation) | This court's decision (single judge and Division Bench confirmation) disagreed with Laxmi Mittal and refused to condone delay; supports mandatory construction. | The respondents relied on this court's decision to support the mandatory character of the Scheme's time limits; the court treated it as aligned with the Supreme Court's stance. |
| Maqbul Ahmad v. Onkar Pratap Narain Singh, AIR 1935 PC 85, 88 | Principle that when consequences for non-compliance are provided by statute, the requirement is to be treated as mandatory. | The Supreme Court invoked this precedent in Hemalatha Gargya; the present court accepted the Supreme Court's reliance on the principle and applied it to interpret the Scheme's mandatory requirements. |
| Union of India v. Kaumudini Narayan Dalai, [2001] 249 ITR 219 and Union Of India v. Satish Panalal Shah, [2001] 249 ITR 221 | Discuss principle regarding the limited scope in which the Revenue may challenge prior interpretations of a jurisdictional High Court; observations about 'just cause' for challenging earlier interpretations. | The opinion notes the Supreme Court's consideration of these cases in Hemalatha Gargya and records the Supreme Court's view that the Revenue may have 'just cause' to challenge earlier interpretations; this did not alter the mandatory construction adopted by the court in the present matter. |
Court's Reasoning and Analysis
The court articulated a focused two-question analysis: (1) whether adjustment of an available refund could be treated as payment for the Scheme; and (2) whether the 30‑day payment requirement in section 90(2) could be extended or condoned.
On the first question (permissibility of adjustment/set-off): the court examined the Scheme as a self-contained statutory code, quoting section 90 in full and considering related statutory provisions (notably section 90(2) and section 90(4)), the departmental clarification (Q&A stating adjustment of refund is a mode of payment), and section 245 of the Income-tax Act (which allows set‑off of refunds by certain officers under the Act). The court emphasized that the Scheme designates a specific “designated authority” (a Commissioner of Income-tax or officer notified by a Chief Commissioner) to determine amounts and issue certificates under the Scheme and that other officers authorized under section 245 are not the designated authority for Scheme purposes. The court relied upon the Gujarat High Court's reasoning in Gufic Pharma Ltd. v. J.G Arora to show that the designated authority's role is narrowly confined and cannot be used to import section 245 set-off into the Scheme. Because the Scheme is independent and self-contained, and because the designated authority under the Scheme does not have the broader set-off powers contemplated by section 245, the court concluded it could not read section 245 or the departmental clarification into section 90(2) to allow adjustment as a mode of payment for Scheme compliance. The court therefore rejected the petitioners' adjustment argument.
On the second question (time schedule under section 90(2)): the court noted that section 90(2) expressly required payment of the determined sum within thirty days and that non‑compliance had occurred in the admitted facts. The court reviewed authorities cited by both sides. It observed a line of High Court decisions that had taken a liberal view permitting condonation of delay, but it highlighted that the Supreme Court in Hemalatha Gargya had firmly held that such statutory time limits in settlement schemes are mandatory, that consequences for non‑compliance are prescribed by the statute, and that equity could not be invoked to override the statutory scheme. The Supreme Court's decision expressly disapproved earlier High Court decisions (including Laxmi Mittal and Prahalatha Babu) that had permitted condonation. Given the binding effect of the Supreme Court's ruling, the court found itself compelled to reject any equitable extension of time and denied the petitioners' request for condonation or extension of the thirty-day limit. The court thus answered both questions against the petitioners and in favor of the Revenue.
Holding and Implications
Holding: The court answered both issues against the petitioners. In particular, it held that:
- The application to permit adjustment/set-off of the refund against the Scheme liability is not permissible for the purposes of satisfying the payment requirement under section 90(2) of the Kar Vivad Samadhan Scheme, 1998, in the facts of these cases.
- The thirty‑day payment requirement under section 90(2) is mandatory and the court will not grant equitable relief or extend/condone the time so as to permit entry into the Scheme where payment was not made within the time-frame prescribed by the Scheme.
Direct consequences: The writ petitions were rejected and the petitioners were denied the relief of adjustment and the benefit of the Scheme. The court ordered that parties bear their own costs.
Broader implications: The court adhered to binding Supreme Court authority (Hemalatha Gargya) and therefore did not create new precedent; it applied existing precedents to decline to read additional modes of payment or equitable exceptions into the Scheme. The opinion emphasizes that the Scheme is self-contained and that courts cannot introduce provisions not present in the Scheme when the Supreme Court has interpreted analogous provisions as mandatory.
R. Gururajan, J.:— The petitioner, Ranganatha Associates, is seeking a, writ of certiorari to quash the endorsements at annexure G, dated June 17, 1999, and annexure J, dated August 5, 1999, in addition to seeking a direction to the respondents to adjust or set off the refund due of Rs. 92,87,365 for the assessment year 1989–90 against the tax payable of Rs. 31,11,623 under the Kar Vivad Samadhan Scheme, 1998, for the assessment year 1990–91. Other conse-quential prayers are also sought for by the petitioners.
2. Facts in brief: The petitioner is carrying on business as excise contractor. He is an assessee in terms of the Income-tax Act, 1961 (for short, “the Act”). For the assessment year 1990–91, the petitioner filed a return of income on February 5, 1991, declaring his income as Rs. 1,16,22,373 and taxes of Rs. 49,27,210 (advance tax and TDS) were paid and an order of assessment was made on March 31, 1993, by the Assistant Commissioner of Income-tax, Central Circle-IV, Bangalore, determining the total income at Rs. 3,09,700 and assessed to tax with interest at Rs. 83,78,804.
3. The petitioner preferred an appeal against the order of assessment before the appellate authority. The appeal was partly allowed in terms of the order, dated January 25, 1994. A second appeal was filed before the Appellate Tribunal, Bangalore, on June 28, 1994, and the appeal is pending. The Finance (No. 2) Act, 1998, introduced a Scheme called Kar Vivad Samadhan Scheme, 1998 (“the Scheme” for short). The said Scheme provided for settling arrears of tax, interest and penalty in relation to tax determined on or before March 31, 1998. It provided certain benefits and immunities from penalty and prosecution under the direct and indirect tax laws. The petitioner made a declaration in Form No. 1A as per annexure A. Respondent No. 2 accepted the declaration and a certificate of intimation under section 90(1) of the Scheme was issued on February 25, 1999. In the meanwhile, assessment proceedings for the assessment year 1989–90 were pending. The petitioner filed Writ Petition No. 1257 of 1993 and the same was disposed of with certain directions. Assessment proceedings were conducted and finally an assessment order was passed on March 25, 1999, resulting in refund of tax of Rs. 93,87,365 as per annexure C.A notice of demand in terms of annexure-D is filed in the case on hand. The petitioner made a letter on March 26, 1999, seeking an order of adjustment of refund amount towards the tax payable in terms of the Scheme. The petitioner also sought for a certificate in terms of annexure F. The respondents did not adjust the amount and issued a letter at annexure G stating therein that the petitioner had failed to make payments in terms of the Scheme within the due date and, therefore, the declaration was treated as rejected. The petitioner made one more letter in terms of annexure H. An endorsement was issued in terms of annexure J stating that the declaration had rightly been treated as rejected. The petitioner in these circumstances is before me.
4. The respondents have entered appearance. They justify their stand. They say that the Scheme is an independent Scheme. They further say that the petitioner's request for adjustment is unreasonable and unjustifiable. They support their endorsements reply and statement is filed.
5. Writ Petitions Nos. 33422-23 of 1999 are filed by Smt. N. Leelavathi and Ranganatha Associates seeking for similar prayer. The facts and grounds are the same or similar. The petitioners want annexure K to be quashed. Annexure K is nothing but an endorsement of rejection of the application filed by the petitioners in terms of the Scheme. The reason given is that of non-payment in terms of the Scheme.
6. Writ Petitions Nos. 33424-25 of 1999 are filed by Smt. Lakshmidevi and Ranganatha Associates. In these writ petitions also the petitioners challenge rejection of application in terms of annexure K.
7. Writ Petitions Nos. 33426-27 of 1999 are filed by Smt. R. Sarojamma and Ranganatha Associates; Writ Petitions Nos. 33428-29 of 1999 are filed by Sri D. Ravindranath and Ranganatha Associates; and Writ Petitions Nos. 33430-31 of 1999 are filed by Sri D. Dasappa and Ranganatha Associates. In these petitions also the petitioners challenge similar endorsements of rejection as in the previous cases.
8. Writ Petitions Nos. 33432-33 of 1999 are filed by Sri D. Ramachandrappa and Ranganatha Associates; Writ Petitions Nos. 33434-35 of 1999 are filed by Sri D. Jairaj and Ranganatha Associates; and Writ Petitions Nos. 33436-37 of 1999 are filed by Sri D. Vijayakumar and Ranganatha Associates. In all these petitions also the petitioners challenge rejection of their applications.
9. The respondent-Department has filed a detailed counter-statement taking the same or a similar stand in all these cases.
10. Sri Sarangan, learned senior counsel appears for the petitioners along with Sri E.S Kiresur. Sri M.V Sheshachala, learned standing counsel appears for the Income-tax Department. Sri P.S Dinesh Kumar, Central Government standing counsel appears for the Union of India.
11. Sri Sarangan, learned senior counsel argued at great length to contend that the Kar Vivad Samadhan Scheme, 1998, provides for certain immunities and certain protections in the matter of tax payment. In the case on hand, according to learned counsel, the Department is in excess of the amount tax paid by the petitioners by way of refund. Learned senior counsel would say that a reading of the Scheme would show that the adjustment is permissible. The word “pay” need not mean only factual cash payment but also would include adjustment of refund for the purpose of satisfaction of payment in terms of the Scheme. Learned counsel has referred to various judgments in support of his contentions. In so far as the time schedule is concerned, counsel would say that on the facts of this case it cannot be said that the petitioner has violated the time schedule warranting rejection of the applications filed by them. Learned counsel invited my attention to various provisions of the income-tax laws, the difference between the Scheme and the Voluntary Disclosure of Income Scheme, 1997, case laws and the statement of objections filed by the respondents.
12. Per contra, learned counsel for the respondents would say that the Scheme of the Finance (No. 2) Act, 1998, provides no adjustment. The time schedule has to be kept in mind by the court in deciding these cases. Equity jurisdiction is not available in the case on hand of the petitioners. Learned counsel strongly relies on a judgment of the Supreme Court in the case of Hemalatha Gargya v. CIT, [2003] 259 ITR 1.
13. Heard learned counsel fairly for a long-time, and, in the light of the subsequent judgment in the case of Hemalatha Gargya v. CIT, [2003] 259 ITR 1 (SC) the matter was again reheard by this court, and learned counsel on either side argued at great length in support of their respective stands.
14. The Kar Vivad Samadhan Scheme, 1998, was introduced in the year 1998. It came into force on September 1, 1998. Certain benefits are made in terms of the Scheme. It provides for settlement of tax payable and the time and manner of payment of tax arrears. It provides for immunity from prosecution and imposition of penalty in certain cases. It also provides for putting an end to long drawn legal battles in the matter of tax arrears.
15. The petitioners have raised two essential contentions on the facts of these cases. The admitted facts are that the petitioners did file applications in terms of the Scheme. Their applications were scrutinised and certain payments were determined as tax payable in terms of the Scheme as per Form No. 2A issued under section 90(1) of the Finance (No. 2) Act. The admitted facts, however, reveal a factum of refund order in terms of annexure C dated March 25, 1999, an order passed by the Joint Commissioner of Income-tax (Assessment), Special Range-3, Bangalore. The admitted facts further reveal a request for adjustment and the rejection of the same in terms of annexure J dated August 5, 1999.
16. In all these cases, the Department after rejecting their request for adjustment, has chosen to issue endorsements stating therein that the petitions filed by the petitioners seeking benefit of the Scheme are rejected on the ground of non-payment of the tax within 30 days.
17. In the light of the arguments of learned counsel on either side, two questions emerge for my consideration:
(1) Permissibility of adjustment/set off of refund available with the Department towards tax arrears in terms of the Scheme.
(2) Time schedule in terms of section 90(2) of the Scheme.
18. On point No. 1 re: adjustment: Sri Sarangan, learned senior counsel invited my attention to the Scheme itself to say that the Scheme is introduced for the laudable object of ending litigation and for collection of arrears of tax. Learned counsel says that the word “pay” under section 90 is to be understood as inclusive of adjustment of excess amount available with the respondents. Per contra, the Department says that no adjustment in these cases is allowed. The Scheme provides for the time and the manner of payment of tax arrears. It is worthwhile to quote the entire section 90. It reads as under:
“90. (1) Within sixty days from the date of receipt of the declaration under section 88, the designated authority shall, by order, determine the amount payable by the declarant in accordance with the provisions of this Scheme and grant a certificate in such form as may be prescribed to the declarant setting forth therein the particulars of the tax arrear and the sum payable after such determination towards full and final settlement of tax arrears:
Provided that where any material particular furnished in the declaration is found to be false, by the designated authority at any stage, it shall be presumed as if the declaration was never made and all the consequences under the direct tax enactment or indirect tax enactment under which the proceedings against the declarant are or were pending shall be deemed to have been revived:
Provided further that the designated authority may amend the certificate for reasons to be recorded in writing.
(2) The declarant shall pay the sum determined by the designated authority within thirty days of the passing of an order by the designated authority and intimate the fact of such payment to the designated authority along with proof thereof and the designated authority shall thereupon issue the certificate to the declarant.
(3) Every order passed under sub-section (1), determining the sum payable under this Scheme, shall be conclusive as to the matters stated therein and no matter covered by such order shall be reopened in any other proceeding under the direct tax enactment or indirect tax enactment or under any other law for the time being in force.
(4) Where the declarant has filed an appeal or reference or a reply to the show cause notice against any order or notice giving rise to the tax arrear before any authority or tribunal or court, then, notwithstanding anything contained in any other provisions of any law for the time being in force, such appeal or reference or reply shall be deemed to have been withdrawn on the day on which the order referred to in sub-section (2) is passed:
Provided that where the declarant has filed a writ petition or appeal or reference before any High Court or the Supreme Court against any order in respect of the tax arrear, the declarant shall file an application before such High Court or the Supreme Court for withdrawing such writ petition, appeal or reference and after withdrawal of such writ petition, appeal or reference with the leave of the court, furnish proof of such withdrawal along with the intimation referred to in sub-section (2).”
19. Section 90(1) provides for determination by the designated authority of the declaration made under section 88 within 60 days. It provides for grant of a certificate in such form as may be prescribed to the declarant setting forth therein the particulars of tax arrear and the sum payable after such determination towards full and final settlement of tax arrears. In the event of any false information, a presumption is available in terms of the proviso to the effect that the declaration was never made by the declarant. Sub-section (2) of section 90 provides for payment of the sum determined by the designated authority within 30 days of passing of the order by the designated authority. In the case on hand, there is no difficulty of a declaration and there is no difficulty of a certificate. The question only revolves round payment within 30 days in terms of section 90(2) of the Act. The Act provides for any other mode of payment. Whether that mode includes adjustment or not is to be seen. The Government introduced the Voluntary Disclosure of Income Scheme, 1997, in terms of the Finance Act, 1997. There are several case laws available in the light of the Scheme of 1997 in addition to case laws in terms of the Scheme of 8. Counsel strongly places reliance on a clarification on the Kar Vivad Samadhan Scheme, 1998, regarding instructions under section 96 of the Finance (No. 2) Act, 1998, issued by the Department. Question No. 3 mentioned therein read as (see [1998] 233 ITR (St.) 50):
“Where refund for an earlier year is adjusted against the demand of any year, will such an adjustment be regarded as payment of tax ?”
20. Answer to it being (see [1998] 233 ITR (St.) 51):
“Yes. The adjustment of refund payable is one of the modes of payment of taxes.”
21. Learned counsel says that these instructions are binding on the Department and, therefore, they cannot deny adjustment benefits. Section 245 provides for set off of refunds against tax remaining payable. The said section reads as under:
“245. Where under any of the provisions of this Act, a refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section.”
22. According to learned counsel, in the light of section 245 read with the answer to the said question No. 3, adjustment ought to have been given, and if adjustment had been done, the petitioners would not have been put to undergo the present difficulties. He refers to a request in that regard and rejection by the Department. It is no doubt true that section 245 provides for set off of refund against the tax remaining payable in terms of the provisions of the Act. It also provides for an intimation in writing to such person of the action to set off proposed to be taken under the Scheme. In the case on hand, a reading of the Scheme would show that this Scheme is introduced with the laudable object of early recovery and closure of long pending litigations. The Scheme as such does not provide for any such adjustment as a matter of fact. Learned counsel wants me to read section 245 into the Scheme for the purpose of payment in terms of section 90(2). I am unable to accept this submission. The Scheme is an independent Scheme and a self-contained Scheme. Courts cannot introduce what is not available in the Scheme in the case on hand. The clarification as referred to has to be understood as against the demand of the previous order and it cannot be understood as an adjustment of refund towards tax arrears. In fact, the respondents have clarified to me that the said adjustment is permissible at the instance of the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or the Chief Commissioner. It also provides for an intimation to the petitioner. In the case on hand, learned counsel for the respondents points out that the designated authority has been defined to mean “Commissioner of Income-tax” and an officer notified by a Chief Commissioner for the purpose of the Scheme. In the light of the definition of the “designated authority”, it is not possible for other officers to provide for any adjustment in terms of section 245 of the Act. Therefore, the respondents are right in saying that a close reading of the income-tax provisions to the Scheme would show that the adjustment is not permissible in law in terms of section 245 of the Act. In fact, this very question of “designated authority” has been considered by the Gujarat High Court in the case of Gufic Pharma Ltd. v. J.G Arora, [1999] 238 ITR 835. While considering this very question the Division Bench has observed at page 841 reading as under:
“Indisputably, the assessee, as on the date of the declaration, had tax arrear which stood determined prior to March 31, 1998, and had also a dispute pending before the Commissioner of Income-tax by way of revision under section 264 which could not have been ignored by him. The decision that the revision was infructuous would come only later on and not prior to the date. The fact that the order of the Commissioner of Income-tax later on decides to reject the application for any reasons would not result in non-fulfilment of conditions under section 95(i)(c). The assessee having made the declaration fulfilling both the conditions as on the date of the declaration could not have been denied entry to the portals of the Kar Vivad Samadhan Scheme merely because the assessee has agreed to the withdrawal of deduction though at the hands of an authority having no jurisdiction but realising that the deduction was otherwise not sustainable but had bona fide grievance against the levy of additional tax under section 143(1A). The designated authority could not examine the merit of issue raised in revision. It was for the revising authority to have determined maintainability or otherwise of the revision before him. He alone could pronounce upon it. When a revision is filed whether it is maintainable or not can only be decided by the revising authority. So also the question about the sustainability of any grounds raised therein rests in the domain of the revising authority. The mere fact that the revising authority also happens to be the designated authority, he cannot merge the two distinct jurisdictions and obligations into one and reflect one order into another. As a designated authority, he has jurisdiction to see only the existence of the conditions which makes the Kar Vivad Samadhan Scheme operative in the case. If requirement of the Scheme is that a revision in respect of tax arrears is pending, his jurisdiction as designated authority stops to go further on finding as on the date of declaration a revision in respect of the order determining the tax demand out of which the whole or part sum remains unpaid, is pending. Whether the revision has merit or will be successful, is not his domain. That is the domain of the revising authority. That jurisdiction he may not be called upon to exercise if on determining the amount payable under the Scheme the assessee deposits the same within the time prescribed. Because in such event the revision is deemed to be withdrawn under section 90(4) of the Finance (No. 2) Act of 1998. An authority discharging both the functions cannot by deciding a pending revision on merit and reflect that order on merit while acting as designated authority. This is precisely what has been done in the present case.”
23. The said Division Bench has noticed the role of the designated authority vis-a-vis other officers. Therefore, I am of the view that the argument of Mr. Sarangan, learned senior counsel for the petitioners, with regard to adjustment in terms of section 245 is not permissible in the given set of facts, particularly in the light of the Scheme. The argument to the effect that the instructions are binding on the Department need not be considered in the light of section 245 being not available to the facts of this case. Although this argument of adjustment at the outset is attractive and appealing, but a further close reading of the provisions of the Scheme and the Act would show that the said argument has no legal sanction, and has to be rejected, and, I do so in the case on hand. The first contention of adjustment thus stands rejected.
24. On Point No. 2 re: time schedule: Elaborate arguments have been advanced with regard to settlement and payment in terms of section 90(2) of the Act. Section 90(2) provides payment within 30 days. The admitted facts reveal no payment having been made within 30 days. The answer for the delay is pending adjustment proceedings. The adjustment argument is rejected by me in the earlier paragraph. Whether this court could extend time or not is required to be considered in the light of various judgments.
25. Sri Sarangan, learned senior counsel relies on the following judgments:
(1) Smt. Laxmi Mittal v. CIT, [1999] 238 ITR 97 (P&H);
(2) Commissioner Of Income-Tax v. E. Prahalatha Babu, [2001] 249 ITR 309 (Mad);
(3) Vijay Omprakash Bansal v. Commissioner Of Income-Tax, [2002] 257 ITR 649 (Bom);
(4) Sardar Machhi Singh v. CIT, [2000] 245 ITR 58 (MP); and
(5) Dr. Mrs. Renuka Datla v. CIT, [2003] 259 ITR 258 (SC).
26. Learned counsel for the respondents relies on a judgment of this court in Smt. Atamjit Singh v. Commissioner Of Income-Tax, [2001] 247 ITR 356 and of the Supreme Court in Hemalatha Gargya v. CIT, [2003] 259 ITR 1. These cases deal with the Voluntary Disclosure of Income Scheme, 1997.
27. Smt. Laxmi Mittal v. CIT, [1999] 238 ITR 97 (P&H) is a case that arose under the Voluntary Disclosure of Income Scheme, 1997. The Haryana High Court has ruled (headnote):
“The provisions of a taxing statute are to be construed liberally and in favour of the assessee. In case tax was not deposited along with the declaration, interest at the rate of 2 per cent, for every month or ‘part of a month’ could: be charged. Therefore, the order passed by the Commissioner of Income-tax was liable to be set aside.”
28. This judgment was noticed by the High Courts of Madras, Bombay and Madhya Pradesh. The Madhya Pradesh High Court noticing Smt. Laxmi Mittal's case, [1999] 238 ITR 97 (P&H), ruled that the delay in deposit can be condoned. The Madras High Court also has ruled following Smt. Laxmi Mittal's case, [1999] 238 ITR 97 (P&H), that the delay can be condoned. The Bombay High Court noticing Smt. Laxmi Mittal's case, [1999] 238 ITR 97 (P&H) and Prahalatha Babu's case, [2000] 241 ITR 457 (Mad) also has ruled that the Scheme is for the benefit of the assessee and a beneficial interpretation has to be given to it, and the word “shall” may be interpreted as “may”. The court ruled that the explanation for delay can be condoned. However, a learned single judge of this court in the case of Smt. Atamjit Singh v. Commissioner Of Income-Tax, [2001] 247 ITR 356 noticed Smt. Laxmi Mittal's case, [1999] 238 ITR 97 (P&H) and has categorically ruled that this court disagrees with the said view of the Punjab and Haryana High Court. The said judgment is confirmed by the Division Bench of this court in [2001] 252 ITR 233 (Smt. Atamjit Singh v. Commissioner Of Income-Tax). The Supreme Court has now set at rest the entire controversy in a recent judgment in the case of Hemalatha Gargya v. CIT, [2003] 259 ITR 1. The Supreme Court in Hemalatha Gargya's case, [2003] 259 ITR 1 has specifically overruled Smt. Laxmi Mittal's case, [1999] 238 ITR 97 (P&H) and E. Prahalatha Babu's case, [2000] 241 ITR 457 (Mad). In the light of the overruling of these two judgments and in the light of this court not accepting Smt. Laxmi Mittal's case, [1999] 238 ITR 97 (P&H), two other judgments of the Madhya Pradesh High Court and the Bombay High Court cannot be considered as supporting the case of the petitioner. Even otherwise, the Supreme Court in Hemalatha Gargya v. CIT, [2003] 259 ITR 1 has noticed the Voluntary Disclosure of Income Scheme, 1997, and has specifically ruled in the following words (page 7):
“We are of the view that the submissions of the Revenue must be accepted. A plain reading of the provisions of the Scheme would show that the tax payable under the Scheme ‘shall be paid’ within the time specified is the general rule provided in section 66, namely, payment prior to the making of a declaration. The exception to this general rule has been carved out by section 67(1) which allows a declarant to file a declaration without paying the tax. This exception, however, is subject to two conditions, viz., (1) the payment of tax within three months from the date of the filing of the declaration together with, (2) the payment of simple interest at the rate of two per cent, for every month or part of a month. The period of interest is to commence from the date of filing the declaration and shall end with the date of payment of tax. It may be noted that under section 67(1) not only must these two conditions be fulfilled within the period of three months but proof of such payment must also be filed within the same period.
The use of the word ‘shall’ in a statute, ordinarily speaking, means that the statutory provision is mandatory. It is construed as such unless there is something in the context in which the word is used which would justify a departure from this meaning. There is nothing in the language of the provisions of the Scheme which would justify such a departure. On the other hand, the provisions of section 67(2) make it abundantly clear that if the declarant fails to pay the tax within the period of three months as specified, the declaration filed shall be deemed never to have been made under the Scheme. In other words, the consequences of non-compliance with the provisions of section 67(1) relating to the payment have been provided. It is well-settled that when consequences of the failure to comply with the prescribed requirement is provided by the statute itself, there can be no manner of doubt that such statutory requirement must be interpreted as mandatory (see Maqbul Ahmad v. Onkar Pratap Narain Singh, AIR 1935 PC 85, 88).
Besides the Scheme has conferred a benefit on those who had not disclosed their income earlier by affording them protection against the possible legal consequences of such non-disclosure under the provisions of the Income-tax Act. Where the assessees seek to claim the benefit under the statutory Scheme they are bound to comply strictly with the conditions under which the benefit is granted. There is no scope for the application of any equitable consideration when the statutory provisions of the Scheme are stated in such plain language.
Seen from the angle of the designated authority, which is created under the Scheme, it is clear that the authority cannot act beyond the provisions of the Scheme itself. The power to accept payment under the Scheme has been prescribed by the statute. There is no scope for the Revenue authorities to imply a provision not specifically provided for which, would in any way modify the explicit terms of the Scheme.”
29. The apex court further observes (page 8):
“In none of the decisions of the High Courts which have held that the time prescribed under section 67(1) was not rigid has any legal basis been relied on. The decision to extend the time appears to have been arrived at on considerations of equity. This approach, in our opinion, was incorrect, as the court had no power to act beyond the terms of the statutory Scheme under which benefits had been granted to the assessee. By so holding we make it clear we do not intend to reopen those decisions which have become final in favour of the assessees. It may also be noted that in one of such decisions, the Revenue had sought to prefer an appeal before this court by way of a special leave petition which was dismissed in limine. It needs hardly to be stated that such dismissal would not operate as confirmation of the reasoning in the decision sought to be appealed against, nor does such dismissal by itself operate as an argument in favour of the assessee and against the Revenue.
The decisions of this court in Union of India v. Kaumudini Narayan Dalai, [2001] 249 ITR 219 and Union Of India v. Satish Panalal Shah., [2001] 249 ITR 221, do not, as contended by the assessees, hold that the Revenue can never challenge an interpretation which they have not chosen to do so earlier. First, it appears to us that the principle appears to be limited to decisions of the jurisdictional High Court. Additionally, the decisions make it clear that given ‘just cause’, the Department could challenge the interpretation subsequently. We accept the submission of the Revenue that in this case, the decisions of other High Courts holding to the contrary as well as the subsequent conflicting decision of the Punjab and Haryana High Court itself would come within the phrase ‘just cause’.”
30. Finally, the Supreme Court has ruled as under (page 9):
“As a consequence, in our view, the appeals preferred by the assessees must be and are hereby dismissed whereas the appeals preferred by the Revenue authorities must be and are hereby allowed. However, having held that the assessees are not entitled to the benefit of the Scheme since the payments made by them were not in terms of the Scheme, we direct the Revenue authorities to refund or adjust the amounts already deposited by the assessees in purported compliance with the provisions of the Scheme to the concerned assessees in accordance with law. All the appeals are accordingly disposed of without any order as to costs.”
31. In the light of the binding apex court ruling, this court has no option but to reject the theory of equity and also deny the benefit of extension to the petitioner for the purpose of the benefit under the Scheme, particularly when payments are not made within the time-frame of 30 days in terms of the Scheme. In the circumstances, and in the given set of facts, I have no hesitation in holding that the impugned endorsement does not require my interference. The petitioners' case cannot be considered in the light of a clear ruling in favour of the Revenue and against the petitioners.
32. Sri Sarangan, learned senior counsel, however, invited my attention to a subsequent judgment in Hemalatha Gargya v. CIT, [2003] 259 ITR 1 (SC), to contend that extension can be granted. Though extension can be granted in terms of the recent judgment of the Supreme Court in the given set of facts, extension cannot be granted on the facts of this case in the light of non-availability of adjustment clause and in the light of non-payment within the timeframe of 30 days. Sri Sarangan, learned senior counsel, however, tried to distinguish the said judgment of the Supreme Court by contending that there is a difference between the Voluntary Disclosure of Income Scheme and the Kar Vivad Sama-dhan Scheme. According to learned counsel, the Voluntary Disclosure of Income Scheme has provided for interest and that is not the case in the case on hand. He also relies on a circular/instruction. I am afraid that this argument is not available to the petitioner particularly in the light of the binding apex court ruling in somewhat identical circumstances. The object of the Voluntary Disclosure of Income Scheme and the Kar Vivad Samadhan Scheme are almost the same or similar. Both the Schemes provide for one-time settlement with certain benefits. The minute difference that has been suggested by learned counsel is not acceptable to me. Both are independent Schemes and the apex court after noticing the Voluntary Disclosure of Income Scheme has chosen to rule that equity is not available and delay cannot be condoned. In the light of the apex court judgment, I am not inclined to dissect the Scheme for the purpose of this case as suggested by learned counsel. When a Scheme is interpreted in identical circumstances by the apex court, this court, in my view, is not justified in dissecting the Scheme thereby diluting the judgment of the Supreme Court. I am not inclined in the given set of circumstances to accept this “difference” argument.
33. Both the questions are answered against the assessee and answered in favour of the Revenue. The petitions stand rejected. The parties are to bear their own costs.
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