IN HIGH COURT OF DELHI AT NEW DELHI Reserved on: 08.03.2017 Pronounced on: 30.03.2017 W.P.(C) 11216/2016 KUMUDAM PUBLICATIONS PVT. LTD. ACTING THROUGH ITS MANAGING DIRECTOR MR. P. VARADARAJAN ..... Appellant Through: Sh. S. Ganesh, Sr. Advocate with Ms. Pooja Mehra Saigal, Sh. Jitendra Ratta and Ms. Jasmine Kottai, Advocates. Versus CENTRAL BOARD OF DIRECT TAXES AND ORS. ..... Respondents Through: Sh. Ruchir Bhatia, Sr. Standing Counsel with Sh. Puneet Rai, Jr. Standing Counsel. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE NAJMI WAZIRI MR. JUSTICE S. RAVINDRA BHAT 1. petitioner impugns order dated 16th September 2016 of third respondent which failed to give credit for advance tax deposited for AY 2010-2011 and AY 2016-2017 and tax deducted at source (TDS) to total extent of ` 16.49 crores. 2. petitioner-company incorporated under Companies Act, has its registered office at Chennai. It has been filing its Return of Income till financial year 2008-09, i.e. AY 2009-10. Serious disputes amongst its directors, ex-directors and certain shareholders, which arose in financial year 2008-2009, resulted in litigations against company and its W.P.(C) 11216/2016 Page 1 of 17 directors etc. from financial year 2009-2010. As consequence, petitioner could not appoint any statutory auditor. Accounts could not be made ready for subsequent years in deference to disputes and pending litigation. disputes related to petitioner s share capital. Resultantly, in absence of audited accounts, no return of income was filed from financial year 2009-10, i.e. assessment year (AY) 2010-11 till date. petitioner avers that despite its inability to file income tax returns, it paid advance tax through various amounts, on 23 occasions in past 5 years or so; details thereof are furnished in tabular chart, which reveals that total sum of `14,98,30,000/- was paid through advance tax. petitioner says that in addition, total sum of ` 1,50,93,433/- was paid on its account, for same period. Thus total sum of ` 16,49,23,433/- has been paid towards income tax liabilities by or on behalf of petitioner. 3. Anticipating that proceedings may be initiated by Income Tax Department for Petitioner's failure to file returns required under Section 139 of Income Tax Act, petitioner applied under Section 119(2)(b) of Income-Tax Act on 7th July, 2016 to Revenue seeking permission to file Return of Income "based on unaudited accounts or in any other manner" in view of compelling circumstances. Revenue issued notice of hearing dated 22.09.2016 posting application for hearing on 17.10.2016, but that notice was subsequently cancelled. As on date, application has not been decided. In meanwhile, Income Declaration Scheme, 2016 (IDS) [hereafter referred to variously as IDS or Scheme ] was notified in May 2016 W.P.(C) 11216/2016 Page 2 of 17 by Central Government with effect from 1st June, 2016. Thereafter, by Circular No. 25 of 2016 dated 30th June, 2016 issued by Union Ministry of Finance issued certain clarifications, on matters relating to IDS. Pending disposal of petitioner s application under Section 119(2)(b), it also made declaration in Form 1 dated 15.09.2016 under scheme, for all assessment years. income so disclosed under scheme in terms of unaudited accounts was disclosed as ` 43.55 crores. total tax payable including interest and penalty as under Scheme was ` 19.60 crores, against which advance tax paid by petitioner and TDS deducted to its benefit was ` 16.49 crores, leaving net tax payable of ` 3.11 crores. These details had to be mentioned in Form 1 at serial No.11 and were duly disclosed (by Petitioner) in its application. In this background, petitioner received impugned order from Principal Commissioner of Income-Tax, (PCIT) in response to its declaration in Form 1, demanding tax of ` 19.60 crores. 4. In terms of impugned order, 25 /o of tax liability was payable by 30.11.2016, next 25% is payable by 31.03.2017 and balance by 30.09.2017. Immediately on receipt of impugned order, petitioner submitted letter dated 16.09.2016 to PCIT requesting clarification that net tax payable was ` 3.11 crores only. Simultaneously, representation was also forwarded by email to Chairman, CBDT. No response was, however, forthcoming from respondents, on that representation. petitioner sent reminders by email on 22.09.2016 and 29.09.2016. W.P.(C) 11216/2016 Page 3 of 17 5. petitioner relies on circular (No. 25 of 2016), which clarified that credit for TDS shall be given while computing tax liability under IDS the. However, impugned order of respondents disregards said credit even though complete details of same were stated by Petitioner in declaration in Form 1 along with required proof. Therefore, petitioner urges that impugned order is in disregard of intent and ambit of IDS and cannot be sustained. When TDS credit is specifically permissible, denial of credit to advance tax paid, is illogical and illegal. petitioner argues that there is no justification for denying credit of advance tax paid and TDS paid on its behalf of Petitioner in determining tax payable under Scheme. Any other interpretation would fall foul of provisions of Income Tax Act and would result in unjust enrichment of Revenue and petitioner assessee being subjected to double taxation without authority of law. 6. Mr. S. Ganesh, learned senior counsel for petitioner argued that terms of IDS and its intent is to deal with situation that tax would have been paid before declaration is made under Form I and assessee is required to make disclosure of same in point 11 of Form 1. Counsel states that petitioner made complete disclosure of advance tax paid and TDS and therefore, reasonably expects due credit to be given for same while computing liability under IDS. Learned senior counsel argued that since Revenue admitted that TDS credit is to be given to assessee under Scheme, there is no intelligible differentia for treating advance tax paid any differently from TDS as W.P.(C) 11216/2016 Page 4 of 17 nature of both taxes is that of "tax paid in advance . Thus, interpretation advanced by Revenue is untenable. Furthermore, petitioner s applications and representations under Section 119(2)(b) of Income Tax Act and representations in respect of impugned order are pending adjudication till date and in compliance with covenants of IDS, 25% of tax assessed has to be paid by 30th November, 2016 in order to avail benefit of Scheme. If case of Petitioner is correct then total balance tax liability is only ` 3.11 crores out which 25% will be due and payable by 30th November 2016. 7. petitioner s senior counsel argued that, in event there is no response with respect to clarification sought from CBDT by 30th November, 2016, Petitioner, who desires to avail benefit of IDS will be compelled to pay 25% of tax liability determined under impugned order by 30 November, 2016 failing which Petitioner shall be completely denied benefits of scheme. At stage of filing of petition, it was argued that if payment of 25% of tax liability as incorrectly determined by third respondent is made without prejudice to its rights, Petitioner would have been unable to seek refund of it in event issue were ultimately decided in its favour as scheme makes any payment made under Scheme as non- refundable. 8. Revenue s contention to oppose relief claim is that Income Declaration Scheme, 2016 enacted under Chapter IX of Finance Act, 2016 is self-contained and complete code exclusive from W.P.(C) 11216/2016 Page 5 of 17 other provisions of Income Tax Act (hereafter Act ). Revenue refers to Section 183 which enables declaration of income chargeable to tax for any assessment year prior to assessment year beginning 01.04.2017, in respect of eventualities mentioned in Sections183(a) to (c). It then refers to Section 184 which is charging section providing for tax and surcharge at specified rates. Revenue emphasizes and highlights Section 184(1), especially non-obstante clause which overrides provisions of Act or in any Finance Act. Likewise, it is urged that Section 185 being non-obstante clause to override other provisions of Act or other Finance Acts, directs that one declaring undisclosed income in addition to tax and surcharge under Section 184 shall be liable to penalty @ 25% of such tax. Section 187 again is emphasized to say that it mandates that tax surcharge and penalty should be paid on or before date notified by Central Government. 9. It is submitted that Central Government issued notification no. 32/2016 on 19.05.2016 which was amended later on 20.07.2016. These provided for time for payment of tax, surcharge and penalty. Similarly, reliance is placed upon Section 188 which states that income declared in accordance with Section 183 will not be included in total income of declarant in any assessment year under Income Tax Act if surcharge and penalty is paid by specified date under Section 187. To say that in such cases where Parliament intended that provisions of self-contained code are to operate independently of other existing laws, learned counsel relies upon decision of Supreme Court in W.P.(C) 11216/2016 Page 6 of 17 Hemalatha Gargya v. CIT and Anr. 2003 (253) ITR 1 (SC); Union of India v. Nitdip Textile Processors Private Limited 2011 (273) ELT 321 (SC) and that of Madras High Court in Smt. Jayapradha vs. Chief CIT and Anr. 2006 (284) ITR 385 (Mad). 10. Revenue also relies upon Section 140A of Act that mandates that self-assessment tax is payable at time of paying returns under various provisions, including Sections 139, 142 and 148. Referring next to Section 219, it is submitted that tax credit for advance tax is no doubt given but that is in case of regular assessment as defined in Section 2(40). definition clause merely refers to assessments under Section 143(3) or default assessments under Section 144. Again, in support of this submission, reliance is placed upon CIT v. Shelly Products 2003 (261) ITR 367 (SC). Revenue refers to and relies upon recent ruling of this Court in Intercraft Ltd. v Commissioner of Income Tax 2017 (78) Taxmann.com 141 (Del) which dealt with Kar Vivad Samadhan Scheme, 1998 and submits that Court had rejected assessee s argument that advance tax could be adjusted while determining amounts payable under Scheme. 11. Revenue also resists petitioner s contention to extent that it drew analogy from TDS based upon its circulars and instructions. It is pointed out that instruction clarified that credit for TDS shall be allowed only in those cases where relative income is declared under Scheme and credit for tax has not already been claimed in return of income. Revenue argues that by seeking stay W.P.(C) 11216/2016 Page 7 of 17 of or credit of advance tax which was payable on estimated basis, what petitioner is seeking to achieve is to really evade provisions of Income Tax Act even in respect of income for which it has not established transaction trail for corresponding receipt of income. In case Court were to grant relief, Revenue, it is stated, would be remedy-less. 12. Lastly it was argued that Scheme is only option available to petitioner and is not mandatory. In event petitioner desires to obtain credit for all taxes paid under Act, it is open to file application for condonation of delay under Section 119(2)(b) of Act which it has chosen to apply under. In short, submits Revenue, if petitioner were to be allowed to opt to Scheme and given credit for amounts paid as advance tax, it would be allowed to achieve indirectly what it is forbidden to secure directly. 13. relevant provision of Scheme in Finance Act, 2016 are as follows: Provisions of Scheme contained in Finance Act, 2016 182. In this Scheme, unless context otherwise requires, (a) declarant means person making declaration under sub-section (1) of section 183; (b) Income-tax Act means Income-tax Act, 1961; (c) all other words and expressions used herein but not defined and defined in Income-tax Act shall have meanings respectively assigned to them in that Act.Declaration of undisclosed income. 183 . (1) Subject to provisions of this Scheme, any person may make, on or after date of commencement of this Scheme but before date to be notified by Central W.P.(C) 11216/2016 Page 8 of 17 Government in Official Gazette, declaration in respect of any income chargeable to tax under Income-tax Act for any assessment year prior to assessment year beginning on 1st day of April, 2017 (a) for which he has failed to furnish return under section 139 of Income-tax Act; (b) which he has failed to disclose in return of income furnished by him under Income-tax Act before date of commencement of this Scheme; (c) which has escaped assessment by reason of omission or failure on part of such person to furnish return under Income-tax Act or to disclose fully and truly all material facts necessary for assessment or otherwise. (2) Where income chargeable to tax is declared in form of investment in any asset, fair market value of such asset as on date of commencement of this Scheme shall be deemed to be undisclosed income for purposes of sub- section (1). (3) fair market value of any asset shall be determined in such manner, as may be prescribed. (4) No deduction in respect of any expenditure or allowance shall be allowed against income in respect of which declaration under this section is made. Charge of tax and surcharge. 184 . (1) Notwithstanding anything contained in Income-tax Act or in any Finance Act, undisclosed income declared under section 183 within time specified therein shall be chargeable to tax at rate of thirty per cent of such undisclosed income. (2) amount of tax chargeable under sub-section (1) shall be increased by surcharge, for purposes of Union, to be W.P.(C) 11216/2016 Page 9 of 17 called Krishi Kalyan Cess on tax calculated at rate of twenty-five per cent of such tax so as to fulfill commitment of Government for welfare of farmers. Penalty. 185. Notwithstanding anything contained in Income-tax Act or in any Finance Act, person making declaration of undisclosed income shall, in addition to tax and surcharge under section 184, be liable to penalty at rate of twenty-five per cent of such tax. 186. (1) declaration under section 183 shall be made to Principal Commissioner or Commissioner and shall be in such form and be verified in such manner, as may be prescribed. (2) declaration shall be signed, (a) where declarant is individual, by individual himself; where such individual is absent from India, by individual concerned or by some person duly authorised by him in this behalf; and where individual is mentally incapacitated from attending to his affairs, by his guardian or by any other person competent to act on his behalf; (b) where declarant is Hindu undivided family, by Karta, and where Karta is absent from India or is mentally incapacitated from attending to his affairs, by any other adult member of such family; (c) where declarant is company, by managing director thereof, or where for any unavoidable reason such managing director is not able to sign declaration or where there is no managing director, by any director thereof; (d) where declarant is firm, by managing partner thereof, or where for any unavoidable reason such managing partner is not able to sign declaration, or where there is no managing partner as such, by any partner thereof, not being minor; (e) where declarant is any other association, by any W.P.(C) 11216/2016 Page 10 of 17 member of association or principal officer thereof; and (f) where declarant is any other person, by that person or by some other person competent to act on his behalf. (3) Any person, who has made declaration under sub-section (1) of section 183 in respect of his income or as representative assessee in respect of income of any other person, shall not be entitled to make any other declaration, under that sub-section in respect of his income or income of such other person, and any such other declaration, if made, shall be void. Time for payment of tax. 187. (1) tax and surcharge payable under section 184 and penalty payable under section 185 in respect of undisclosed income, shall be paid on or before date to be notified by Central Government in Official Gazette. (2) declarant shall file proof of payment of tax, surcharge and penalty on or before date notified under sub- section (1), with Principal Commissioner or Commissioner, as case may be, before whom declaration under section 183 was made. (3) If declarant fails to pay tax, surcharge and penalty in respect of declaration made under section 183 on or before date specified under sub-section (1), declaration filed by him shall be deemed never to have been made under this Scheme. Undisclosed income declared not to be included in total income. 188. amount of undisclosed income declared in accordance with section 183 shall not be included in total income of declarant for any assessment year under Income-tax Act, if declarant makes payment of tax and surcharge referred to in section 184 and penalty referred to in section 185, by date specified under sub-section (1) of section 187. W.P.(C) 11216/2016 Page 11 of 17 Undisclosed income declared not to affect finality of completed assessments. 189. declarant under this Scheme shall not be entitled, in respect of undisclosed income declared or any amount of tax and surcharge paid thereon, to re-open any assessment or reassessment made under Income-tax Act or Wealth-tax Act, 1957 (27 of 1957), or claim any set off or relief in any appeal, reference or other proceeding in relation to any such assessment or reassessment. XXXXXX XXXXXX XXXXXX 192. Notwithstanding anything contained in any other law for time being in force, nothing contained in any declaration made under section 183 shall be admissible in evidence against declarant for purpose of any proceeding relating to imposition of penalty, other than penalty leviable under section 185, or for purposes of prosecution under Income-tax Act or Wealth-tax Act, 1957. avowed objective of Scheme is to enable assessees who did not file their returns, opportunity to do so. In words of Supreme Court in various decisions (primarily relied upon by Revenue) such schemes are tax composition schemes or tax litigation settlement schemes, by their nature and effect. 14. salient- and perhaps most distinguishing feature which sets apart present Scheme from Kar Vivad Samadhan Scheme,1998 [hereafter 1998 Scheme ] is that there is no express bar to inclusion of previously paid amounts, or tax arrears. In 1998 scheme, to extent it provided for direct tax settlement, following condition was stipulated: "(i) in relation to direct tax enactment, amount of tax, penalty or interest determined on or before 31st day of March, 1998 under that enactment in respect of assessment W.P.(C) 11216/2016 Page 12 of 17 year as modified in consequence of giving effect to appellate order but remaining unpaid on date of declaration;" Likewise, Explanation to Section 2 (m) of Finance Act (No. 2) of 1998, which introduced scheme (of 1998) provided that: "EXPLANATION.- Where declarant has already paid either voluntarily or under protest, any amount of duties, cesses, interest, fine or penalty specified in this sub-clause, on or before date of making declaration by him under section 88 which includes any deposit made by him pending any appeal or in pursuance of court order in relation to such duties, cesses, interest, fine or penalty, such payment shall not be deemed to be amount unpaid for purposes of - determining tax arrear under this sub-clause;" above feature alone, in opinion of this court is sufficient to distinguish ratio of decisions cited by Revenue; there is no provision similar to Section 2 (m) or Explanation thereto, of 1998 Scheme, that debars giving adjustment or credits to amounts paid in past in respect of period or assessment years sought to be covered by declaration under IDS. That apart, decisions also are in context of entirely different facts. Nitdip (supra) was in context of challenge to statutory scheme on ground of discrimination; court had no occasion to deal with past paid amounts. Jayapradha (supra) was case where assessee was facing pending prosecution when scheme was brought into force; it contained express bar preventing such accused from benefits under it. Hemalatha (supra) no doubt states that those who seek benefits under scheme such as present one are strictly bound to comply with its terms. W.P.(C) 11216/2016 Page 13 of 17 15. Does expression (the) "tax and surcharge payable under section 184 and penalty payable under section 185 in respect of undisclosed income, shall be paid on or before date to be notified by Central Government in Official Gazette" mean only amounts paid immediately prior to declaration count, thus precluding any amounts paid for relative or corresponding period, or does it include all such payments? Thereby hangs tale. In opinion of this court, there is no bar, express or implied, which precludes reckoning or taking into account of previously paid amounts which have nexus with periods sought to be covered by scheme. 16. Granted, such schemes are to be seen as containing special dispensations, etc and interpreted in "stand alone" or sui generis manner. Equally, those who seek its benefits are to go by it. But there should be something which provides clear insight that Parliament wished that such past amounts are not to be reckoned at all, for purposes of payments. All that words of statute enjoin are that tax and surcharge amounts under scheme "shall be paid on or before 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 proximity of declaration filed. 17. provision of Section 182 itself states that for purposes of IDS, undefined terms and expressions shall be in terms of Income Tax Act, by incorporating those into Finance Act and scheme. "Undisclosed income" which is foundational provision to be invoked by declarants, thus is based on definition under Income Tax Act (Section W.P.(C) 11216/2016 Page 14 of 17 132 (1) (c)) 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 purposes of Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as undisclosed income or property)". Undisclosed income is also defined in Section 158B (for purposes of chapter in which that provision is located) and Section 271 (for purposes of that section). That apart, only bar discernable under scheme in question is evident from Section 189 is that no person declaring under Act shall not be entitled to "claim any set off or relief in any appeal, reference or other proceeding in relation to any such assessment or reassessment." Also, under that provision person so declaring shall not be entitled to " to re-open any assessment or reassessment made under Income-tax Act or Wealth- tax Act, 1957 (27 of 1957)". Therefore, court is of opinion that there is no bar for assessee or declarant to claim credit of advance tax amounts paid previously relative to assessment years or periods for which it seeks benefits under scheme. This interpretation is in no way inconsonant with ratio of Supreme Court's rulings, relied upon by Revenue. 18. decision in Shelly (supra) is decisive that advance tax is mode of tax recovery, which assessee is bound to pay under scheme of Income Tax Act. court, after considering Section 140A, Section 4, Section 139 and Section 240 of Income tax Act, observed as follows: "Section 4 of Act creates charge and provides inter alia for payment of tax in advance or deduction of tax at source. Act provides for manner in which advance tax is to be paid W.P.(C) 11216/2016 Page 15 of 17 and penalises any assessee who makes default or delays payment thereof. Similarly deduction of tax at source is also provided for in Act and failure to comply with provisions attracts penal provisions against person responsible for making payment. It is, therefore, quite apparent that Act itself provides for payment of tax in this manner by assessee. Act also enjoins upon assessee duty to file return of income disclosing his true income. On basis of income so disclosed, assessee is required to make self-assessment and to compute tax payable on such income and to pay same in manner provided by Act. Thus filing of return and payment of tax thereon computed at prescribed rates amounts to admission of tax liability which assessee admits to have incurred in accordance with provisions of Finance Act and Income Tax Act. Both quantum of tax payable and its mode of recovery are authorized by law. liability to pay income tax chargeable under Section 4 (1) of Act thus, does not depend on assessment being made. As soon as Finance Act prescribes rate or rates for any assessment year, liability to pay tax arises. assessee is himself required to compute his total income and pay income tax thereon which involves process of self-assessment." 19. Furthermore, court also is of opinion that clarification by Revenue, that credit for TDS paid, can be enjoyed for availing benefit (under scheme in question) precludes any meaningful argument by it that advance tax payments relative for assessment years covered by declaration cannot be taken into consideration as payments under and for purposes of availing benefits of scheme. 20. In light of above findings, petition has to succeed. Accordingly direction is issued to respondents to process petitioner s application under IDS, 2016, and give adjustment or credit to amounts paid as advance tax and TDS to its account, under Income W.P.(C) 11216/2016 Page 16 of 17 Tax Act, and accept balance amounts (after also giving credit to amounts paid during interregnum, pursuant to interim order of this court dated 29th November, 2016). respondents shall ensure that petitioner s payments and declarations are processed in accordance with IDS, 2016. writ petition is allowed in these terms; there shall be no order as to costs. Issue judgment dasti under signatures of Court Master. S. RAVINDRA BHAT (JUDGE) NAJMI WAZIRI (JUDGE) MARCH 30, 2017 W.P.(C) 11216/2016 Page 17 of 17 Kumudam Publications Pvt. Ltd. v. Central Board of Direct Taxes and Or