Case: Hemalatha Gargya Vs. Commnr. Of Income Tax, A.P.

2. The issue has given rise to conflicting views taken not only by different High Court but also by different Benches of the same High Court. On the one hand, the decisions Smt. Laxmi Mittal v. Commissioner of Income Tax reported in 238 ITR 97 (P&H), E. Prahalathua Babu v. Commissioner of Income Tax 241 ITR 457 (Mad) and Commissioner of Income Tax v. E. Prahalatha Babu 249 ITR 309 (Mad) have held that the period is extendable, whereas on the other hand, the decisions in Kamal Sood v. Union of India 241 ITR 567 (P&H); Vsshnavi Appliances Pvt. Ltd. v. Central Board of Direct Taxes and Anr., 243 ITR 101 (AP), Smt. Alamjit Singh v. Commissioner of Income Tax 247 ITR 356 (Kam) and M. Kuppan v. Commissioner of Income Tax, 249 ITR 543 (Mad); K. Dilip Kumar v. Asstt. Commr. of Income Tax and Ors. 241 ITR 16 (Ker), have held that the period mentioned for payment of the tax due on the undisclosed income was inflexible.3. The scheme was introduced by and is contained in the Finance Act 1997. It came into force with effect from 1st July 1997 and remained in operation till 31st March, 1998. Section 64 of the Scheme provides that subject to the provisions of the Scheme, where any person makes on or after the date of the commencement of the Scheme, but on or before the 31st December, 1997, a declaration in accordance with the provisions of Section 65 in respect of any income chargeable to tax under the Income Tax Act. 1961 for any assessment year in respect of which such person had either (a) failed to furnish a return or(b) failed to disclose in his return such income or which has escaped assessment by reason of commission or failure on the part of such person to make a return under the Income Tax Act or (c) to disclose fully and truly all material facts necessary for the assessment, then such person would be entitled to pay tax on such undisclosed income, if the assessee is an individual, at the rate of 30% thereof. We need not consider the case of a company or a firm, as the assessee before us are all individuals.4. Section 65 deals with the particulars to be furnished in such declaration. These need not be set out in detail as there is no dispute with regard to the declaration filed by the assessee in the appeals before us.

Reasoning: 8. 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 2% 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.9. The use of the word "shall" be 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 the 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 state itself, there can be no manner of doubt that such statutory requirement must be interpreted asBesides 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 seeks 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.11. Seen from the angle of the Designated authority, which is created under the Scheme, it 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.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 consideration 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 the 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.There is no question of imposition of penalty under the Scheme. What has been prescribed under Section. 67(2) is merely the consequence of the failure to comply with Section 67(1). There is as such no question of importing the doctrine of mens rea or exercising any discretion contrary to the provisions of Section 67(2).17. The submission of the assessees that this Court should not interfere under Article 136 of the Constitution in those cases where the Revenue is in appeal is unacceptable because the issue is purely one of law and given the divergent opinions of the different High Courts, it is an appropriate case where this Court should interfere and settle the difference finally.