By TIOL News Service

MUMBAI, FEB 07, 2019: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether declarant under Income Declaration Scheme can seek condonation of delay while paying installments of his undisclosed income, if reasons for condonation are attributable to him. NO IS THE VERDICT.

Facts of the case:

The assessee is an individual. During the relevant year under consideration, she had applied to the competent authority on Sep 28, 2016 by making necessary declaration under the Income Declaration Scheme of 2016. In terms of such declaration, the assessee had to deposit a minimum 25% of the total sums payable pursuant to such declaration, latest by Nov 30, 2016. The total tax payable by assessee on such declaration was Rs.17,40,855/- along with surcharge & penalty of Rs.4,35,213/-. The assessee therefore, on Dec 12, 2016 conveyed to the CBDT that due to medical complications and unavoidable circumstances, she could not deposit the first installment within the time permitted. She therefore, requested for condonation of delay and pleaded that in absence of condonation, her declaration would be treated as invalid/ void resulting into genuine hardship to her. She also stated that she was in a position to make the payment within first week of December, 2016 itself. Since there was no response to this application by the CBDT, the assessee approached this Court. Thereafter, pursuent to the directions of this Court, the CBDT passed an order rejecting the application of assessee for condonation. This was on the ground that IDS was the opportunity provided by the Government to noncompliant tax payers to come clean after paying tax at the higher rate, and granting any further relaxation under the IDS, would de-motivate the honest tax payers who were paying taxes promptly.

High Court held that:

++ it is seen that the IDS was framed by the legislature by incorporating Chapter IX in Finance Act, 2016. The provisions of this Chapter enabled the Assessees who had undisclosed income, to make a declaration. Broadly stated, the Scheme provided that upon such a declaration being accepted, the declearant would pay tax with surcharge and penalty at prescribed rates in three installments. Upon payment of such sums, the Assessee would receive certain immunities. It is true that unlike the earlier Schemes, making similar provisions, Section 195 of the Finance Act, 2016 contained a provision, clarifying that, besides others, the applicability of Section 119 was specifically retained in relation to the provisions of the Scheme. It was in this context that the CBDT had issued its Circular dated Mar 28, 2017. Such Circular aimed to obviate certain difficulties faced by the Assesses in depositing first installment. Circular provided for accepting late payment of the first installment in cases where the remittance was made through cheque, RTGS and electronic transfer etc before Nov 30, 2016 but the same was to be credited by the Bank before Dec 05, 2016. Thus, the CBDT recognized the limited area where though the payment was made within time, but the bank had not credited the same in the Government revenue. Under such circumstances, the time would be relaxed in favour of the declarant. While doing so, the CBDT also considered the cases of individual hardship for reasons such as personal reasons or emergency reasons, lack of liquidity etc. The board, however, took a conscious decision not to grant any extension in such situations;

++ from perusal of the Board's Circular, it would clearly emerge that while providing for a limited window, in cases where payments were made through banking channels but the deposit was made by the bank in the Government revenue few days after Nov 30, 2016 to condone the delay in such circumstances, no relaxation was granted in other cases, particularly involving individual reasons, which can be attributable to the declarants. Therefore, the decision of the Board is well within the four corners of the Circular. The IDS itself did not make any provisions for relaxation. The Scheme did retain the power of Board u/s 119(2) and in exercise of such powers, the Board has laid down the areas where relaxation would be granted and consciously decided not to grant extension or condone delay in cases where reasons were attributable to the declarants. The CBDT Circular dated Mar 28, 2017, therefore, cannot be treated as the decision of the Board abdicating its power u/s 119(2). In any case, when the legislature frames a special Scheme giving certain concession to the Assesses who had till then not declared their incomes truly and fully, legislature can always lay down its limits of the concession to be granted.

(See 2019-TIOL-312-HC-MUM-IT)