VDIS Scheme — Certificate under s 68(2) of Finance Act, 1997 cannot be issued if the

VDIS Scheme — Certificate under s 68(2) of Finance Act, 1997 cannot be issued if the assessee fails to deposit tax within the stipulated period provided under the VDIS Scheme — as held by GujHC in Kalpesh Ratilal Kalathia v CIT; Special Civil Application No. 3283 of 2001, 13 April 2011

Decided on: 4 March 2011 — In favour of: The Assessee (Partly).

The petitioner filed a declaration on 22 December 1997, disclosing income of Rs.4,74,584/- for A.Y 1969–1970, 1989–1990 and 1990–1091 u/s 64 of the Finance Act, 1997. Under s 64 of the Act, the declaration in accordance with the provisions of s 65 was required to be filed on or before 31 December 1997. Section 65 of the Act made provision for the particulars to be furnished in the declaration. Section 66 of the Act which prescribed the time for payment of tax under the Scheme laid down that the tax payable under the Scheme in respect of the voluntarily disclosed income shall be paid by the declarant and the declaration shall be accompanied by proof of such tax. Section 67 of the Act, however, laid down that notwithstanding anything contained in s 66, the declarant may file a declaration without the tax under that section and may file the declaration and pay the tax within three months from the date of filing of the declaration with simple interest at the rate of two percent for every month or part of a month comprised in the period beginning from the date of filing the declaration and ending on the date of payment of such tax and file the proof of such payment within the said period of three months. It was the case of the petitioner that under a wrong impression that such delayed payment could be made upto 31 March 1998, he made a payment of tax and interest on 27 March 1998. Thus, there was a delay of four days though interest for this delay at the rate of 2% per month had already been paid. Vide the impugned communication dated 5 October 1998 , the petitioner was informed that the payment was to be made within three months of filing of the declaration and his declaration was therefore rejected. The petitioner thereafter made an application to the CBDT, stating that neither at the time of receipt of the declaration nor at any later point of time was the petitioner informed that he must make payment within 90 days of the declaration. The petitioner, therefore, represented to the Board to accept the declaration, but nothing was heard from the Board one way or the other. Being aggrieved, the petitioner has filed the present writ petition.

The issue is whether the revenue was justified in denying the issue of certificate under s 68(2) of the Finance Act, 1997 as the assessee has failed to deposit tax within the stipulated period of the VDIS Scheme.

The issue is covered by the decision of the Supreme Court in the case of Hemalatha Gargya v Commissioner of Income-Tax and Another (2003) 259 ITR 1.

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 s 66, namely, payment prior to the making of a declaration. The exception to this general rule has been carved out by s 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.

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 s 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 s 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.

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.

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 the law.

Following the course of action adopted by the Supreme Court, having held that the petitioner is not entitled to the benefit of the Scheme since the payment was not made in terms of the Scheme, the respondent authority is directed to either refund or adjust the amount of Rs.4,74,584/- already deposited by the assessee in purported compliance of the provisions of the Scheme, in accordance with the law.