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V.N. Swaminathan Vs. Commissioner of Income-tax, Tamil Nadu-iii - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberWrit Petition No. 10 of 1978
Judge
Reported in[1984]150ITR375(Mad)
ActsVoluntary Disclosure of Income and Wealth Tax Act, 1976; Wealth Tax Act, 1957 - Sections 14, 14(5), 15(1) and 15(5A); Finance Act, 1977
AppellantV.N. Swaminathan
RespondentCommissioner of Income-tax, Tamil Nadu-iii
Appellant AdvocateM. Kalyanasundram, Adv.
Respondent AdvocateJ. Jayaraman, Adv.
Excerpt:
.....impugned order sum of rs. 9000 demanded from petitioner as interest on second instalment of tax on wealth paid by petitioner - when petitioner requires immunity in respect of wealth disclosed by him under act of 1976 he has to comply with section 15 (a) by paying interest on amount remained unpaid on 01.04.1976 till date of payment - if he fails to pay interest he will not get immunity under section 15 (1) - demand for payment of interest cannot be said to be illegal demand - facility given by statute to petitioner so as to enable him to get immunity under act in respect of net wealth disclosed by him in his returns - when petitioner does not require any immunity it is open to him to ignore demand for payment of interest - it is in interest of petitioner himself to pay interest and get..........demanding a sum of rs. 9,000 from the petitioner as interest on the second instalment of tax on wealth paid by the petitioner. 2. the circumstances under which the writ petition came to be filed are as follows :- the petitioner herein submitted returns under the voluntary disclosure of income and wealth act (8 of 1976) disclosing escaped wealth of rs. 5,77,742 for 1971-72, rs. 5,57,815 for 1972-73, rs. 6,77,198 for 1973-74 and rs. 6,05,942 for 1974-75 aggregating to rs. 24,18,697 on which the wealth-tax payable was rs. 1,64,944. along with the return, the paid only a sum of rs. 14,944 towards tax payable. he later paid on march 22, 1976, a sum of rs. 75,000 out of the balance of rs. 1,50,000 which stood outstanding as the tax payable. the other half of rs. 75,000 was paid by the.....
Judgment:

Ramanujam, J.

1. The petitioner herein seeks in this writ petition the issue of a writ of certiorari to quash the order dated May 30, 1977, of the respondent, the Commissioner of Income-tax, Tamil Nadu-III, Madras demanding a sum of Rs. 9,000 from the petitioner as interest on the second instalment of tax on wealth paid by the petitioner.

2. The circumstances under which the writ petition came to be filed are as follows :-

The petitioner herein submitted returns under the Voluntary Disclosure of Income and Wealth Act (8 of 1976) disclosing escaped wealth of Rs. 5,77,742 for 1971-72, Rs. 5,57,815 for 1972-73, Rs. 6,77,198 for 1973-74 and Rs. 6,05,942 for 1974-75 aggregating to Rs. 24,18,697 on which the wealth-tax payable was Rs. 1,64,944. Along with the return, the paid only a sum of Rs. 14,944 towards tax payable. He later paid on March 22, 1976, a sum of Rs. 75,000 out of the balance of Rs. 1,50,000 which stood outstanding as the tax payable. The other half of Rs. 75,000 was paid by the assessee in March 28, 1977. The petitioner has also invested a sum of Rs. 15,150 on Government securities as and by way of security. The petitioner has been under the impression that as he has paid the as as per s. 5(2) read with s. 15(5) of the Central Act (8 of 1976), he is entitled to claim immunity under the said Act without any further obligation on his part. At that stage, the respondent herein by an order dated May 30, 1977, required the petitioner to pay a sum of Rs. 9,000 as interest at 12% per annum on the amount of Rs. 75,000 which the petitioner failed to pay before March 31, 1976 but actually paid on March 28, 1977. The petitioner immediately sent a reply on June 18, 1977, stating that he is not liable to pay any interest on the sum of Rs. 75,000 which he paid on March 28, 1977 under the provisions of the said Act. The respondent, however by a communication dated November 29, 1977, addressed to the petitioner, informed him about the provisions of the Finance (No. 2) Act of 1977 and also the press note issued by the Central Board of Direct Taxes in connection therewith and calling upon the petitioner to remit the said sum of Rs. 9,000 if he wants to claim immunity under the provisions of the said Act in respect of the wealth-tax returns filed by him under the Voluntary Disclosure Scheme. The petitioner, instead of paying the said sum of Rs. 9,000 which was claimed as interest, chose to file the present writ petition challenging the said demand mainly on three grounds :

(i) Section 15 of the Act dealing with the voluntary disclosure of wealth does not contemplate the payment of interest on the wealth-tax payable on the wealth disclosed and section 6 provides for payment of interest only on the income-tax payable on income disclosed, and, therefore, the demand for interest on the wealth-tax not paid before March 31, 1977, cannot legally be sustained and the provision for payment of interest on the income-tax payable on or before March 31, 1976, will not apply to the wealth-tax payable on the return voluntarily disclosing the wealth;

(ii) The provision in the Finance (No. 2) Act, 1977, will not apply to persons like the petitioner, who has complied with both section 5(1) and section 5(2) of the Act and that will apply only to persons who have not paid the entire wealth-tax due on the return before March 31, 1977, there is no liability on his part to pay interest on the sum of Rs. 75,000 which he has paid on March 28, 1977; and

(iii) In any event, the press note issued by the Central Board of Direct Taxes on August 22, 1977, clearly indicates that persons like the petitioner who has paid the entire wealth-tax before March 31, 1977 are not under any liability to pay interest and that the amended provision will apply only to the persons who have not paid the wealth-tax due either in full or in part before March 31, 1977.

3. In the counter-affidavit filed by the respondent, it has been pointed out that though the petitioner has paid along with the return a sum of Rs. 14,944 he paid the balance of the tax in two instalments, the first one on March 22, 1976 and the other one on March 28, 1977, that the said payments cannot be said to be in accordance with s. 5(1) or s. 5(2) of the Act and that though there was no provision for charging interest under the provisions of the principal Act, yet in view of the amendment brought in by Finance (No. 2) Act of 1977 with retrospective effect from April 1, 1976, the liability to pay interest has been imposed on all parsons who have not complied with s. 5(1) or 5(2) of the principal Act for the purpose of getting immunity under the provisions of the principal Act and that in the face of the said retrospective amendment, the petitioner, if he wants immunity as contemplated by the provisions of the Act as regards the wealth disclosed in his returns, he has to pay the interest as contemplated under sub-s. (5A) in s. 15, Thus, the substantial question that arises for consideration is as regards the scope and ambit of sub-s. (5A) of s. 15 which was introduced by the Finance (No. 2) Act of 1977 with retrospective effect from April 1, 1976.

4. It is not in dispute between the parties that before the introduction of sub-section (5A) in s. 15, there was no provision for charging interest on the wealth-tax on wealth voluntarily disclosed by the petitioner and the liability for payment of interest was brought in for the first time under sub-s. (5A) of s. 15 if the assessee wants the benefit of the immunity conferred by the provisions of the Act. Therefore, it is unnecessary to deal with the other provisions of the Act dealing with the liability of an assessee to pay interest on the income tax on income disclosed in the voluntary returns submitted by the assessee. We, therefore, proceed to consider the scope of sub-s. (5A) of s. 15 in the light of the other relevant provision of the Act.

5. As already stated, the petitioner had submitted returns voluntarily under the Voluntary Disclosure of Income and Wealth Act., 1976 (Central Act 8 of 1976) Section 3 of that Act provides that where any person makes on or after the date of commencement of that Act but before January 1, 1976, a declaration in accordance with the provisions of s. 4 in respect of any income chargeable to tax under the I.T. Act, 1922, or the I.T. Act, 1961, for any assessment year, then, notwithstanding anything contained in the Indian I.T.Act, 1922, or the I.T.Act, 1961, or in any Finance Act, the income-tax shall be charged in respect of the income so declared voluntarily at the rage or rates specified in the Schedule, Section 5 provides for the payment of income-tax and for investment in notified securities. Section 6 provides for payment of interest by the declarant if the amount of income-tax payable in respect of the voluntarily disclosed income is not paid on or before March 31, 1976, Sections 10, 11, 12 and 13 provide for certain immunities in relation to voluntarily disclosed income. Section 216 confers immunity from penalty, prosecution etc. Section 15 deals with the voluntary disclosure wealth and it said that where any person makes, on or after the date of commencement of the Act but before the January 1, 1976, a declaration in respect of the net wealth a chargeable to wealth-tax for any assessment year for which he has failed to furnish a return under s. 14 of the W.T. Act, then, notwithstanding anything contained in that Act, the net wealth, or as the case may be, the value so declared, shall not be taken into account for the purpose of any proceedings relating to imposition of penalty on the person making the declaration under this sub-section. Section 14(5) says that immunity provided under sub-s. (1) shall not be available to a declarant unless the tax chargeable in respect of the income of the previous year or years for which the declaration has been made is paid by the declarant in accordance with the provisions of s. 5. A similar provision has been introduced in s. 15 and that provision is sub-s. (5A) by the Finance (No. 2) Act of 1977 and that provision is as follows :

'(5A) A declarant -

(a) who has not paid, in accordance with the provisions of section 5, the wealth-tax chargeable in respect of the net wealth for the assessment year or years for which the declaration has been made; or

(b) who has not invested in the securities, referred to in sub-section (3) of section 3 within the time specified in sub-section (4) of section 5 the sum specified in sub-section (6); or

(c) who has neither so paid such wealth-tax nor so invested such sum, shall. notwithstanding anything contained in sub-section (5), be entitled to the immunity provided under sub-section (1), if the declarant :-

(i) in a case falling under clause (a), pays before the January 1, 1978 (hereafter in this sub-section referred to as the said date), the amount of such wealth-tax remaining unpaid and also simple interest at the rate of twelve percent, per annum, on the amount of such wealth-tax remaining unpaid on the March 31, 1976, from the April 1, 1976 to the date of payment of such wealth-tax;

(ii) in a case falling under clause (b), invests before the said date in the securities aforesaid the sum specified in sub-section (6) or, as the case may be the amount which falls short of the sum required to be invested;

(iii) in a case falling under clause (c), pays before the said date the amount of such wealth-tax remaining unpaid and also simple interest at the rate of twelve percent, per annum on the amount of wealth-tax remaining unpaid on the March 31, 1976, from the April 1, 1976, to the date of payment of such wealth-tax and invests before the said date in the securities aforesaid the sum specified in sub-section (6) or, as the case may be, the amount which falls short of the sum required to he invested.'

6. This sub-section says that declarant who has not paid the wealth-tax in respect of the net wealth for the assessment year or years for which a declaration has been made in accordance with provisions of s. 5 or who has not invested in the securities referred to sub-s. (3) of s. 3 within the time specified in sub-section (4) of s. 5 the sum specified in sub-s. (6), or who has neither so paid such wealth-tax nor so invested such sum, shall be entitled to the immunity provided under sub s. (1) notwithstanding any thing contained in sub-s. (5) Thus, though sub-s. (5) purports to confer some immunity on the declarant, this section says that unless the declarant pays the income-tax or the wealth-tax within the time stipulated in s. 5, he is not entitled to the immunity provided under sub-s. (1) of s. 15. According to the petitioner, he has paid the wealth-tax in accordance with provisions of as. 5 and, therefore, he is not bound to pay any interest as provided in s. 5A. The learned counsel for the respondent, however, contends that the petitioner has not paid the wealth-tax due by him as per his declaration in accordance with the provisions of s. 5 along with or on the date of the filing of the return and he has not paid the wealth-tax in two instalments as contemplated by sub-s. (2) after getting the requisite permission or direction from the concerned authority, viz., the Commissioner of Income-tax. In this case, though the petitioner has paid the two instalments, one before March 31, 1976, and the other before March 31, 1977, as contemplated by sub-s. (2) of s. 5, he has not obtained the requisite permission form the concerned authority. The question is whether the payment of instalments of wealth-tax by the assessee could be taken to be in accordance with s. 5. Section 5(1) says that the income-tax payable under the Act in respect of the voluntary disclosure of the income shall be paid by the declarant before making the declaration and the declaration shall be accompanied by the proof of payment of such tax. Section 5(2) says that if the Commissioner is satisfied, on an application made in this behalf by the declarant, that the declarant is unable, for good and sufficient reasons, to pay the full amount of income-tax in respect of the voluntarily disclosed income in accordance with sub-s. (1), he may extend the time for payment of the amount which remains unpaid or allow payment thereof in two instalments, one before March 31, 1976, and the other before March 31, 1977. Though s. 5 in terms applies only to the income-tax payable under the Act in respect of the voluntarily disclosed income, that provision also applies to the wealth-tax payable on the disclosed wealth in that, s. 15(5) which says that the immunity provided in sub-s. (1) s. 15 will not be available to a declarant unless the wealth-tax chargeable in respect of the wealth disclosed is paid by the declarant in accordance with s. 5.

7. Admittedly, the assessee did not pay the wealth-tax payable on the wealth disclosed in the petitioner's voluntary returns before the declaration was made. Nor did he file proof of payment along with the declaration. Therefore, the petitioner's voluntary returns before the declaration was made. Nor did he file proof of payment along with the declaration. Therefore, the petitioner cannot be taken to have paid the wealth-tax in accordance with s. 5(1). Then we have to consider whether the petitioner has paid the wealth-tax accordance with s. 5(2) Section 5(2) contemplates a case where a declarant is not in a portion to pay the wealth-tax along with the return for good and sufficient reasons and the Commissioner can extend the time for payment of the wealth-tax which remains unpaid or allow payment of the same in two equal instalments, one by March 31, 1976, and the other by March 31, 1977. Though the assessee in fact has paid the wealth-tax substantially in two instalments, one before March 31, 1976, and the other before March 31, 1977, he has not filed any application seeking permission to pay the amount of wealth-tax in instalments after showing good and sufficient reason for not paying the full amount of wealth-tax in respect of the voluntarily disclosed wealth in accordance with sub-s. (1). Since the payment of wealth-tax has been made by the petitioner without following the procedure contemplated by sub-s. (2), as he did not file any application for extension of time or for payment of instalments after satisfying the Commissioner, the payment of the wealth-tax by the petitioner cannot be said to be in accordance with s. 5(2). Since the payment has not been made in accordance with s. 5(2) the petitioner will not be entitled to the immunity under s. 15(1) in respect of the wealth disclosed by him in his voluntarily disclosed returns, and he has to pay the interest as contemplated by sub-s. (5A) of s. 15 as amended by the Finance (No. 2) Act of 1977, if he wants to get the immunity. Therefore, if the petitioner requires immunity in respect of the wealth disclosed by him under the provisions of the Central Act 8 of 1976, he has to comply with sub-s. (5A) of s. 15 by paying interest on the amount which remained unpaid on April 1, 1976, till the date of payment which in this case is on March 28, 1977. If he fails to pay interest, he will not get the immunity under s. 15(1). Therefore, the demand in this case for payment of interest cannot be said to be an illegal demand. That is a facility given by the statute to the petitioner so as to enable him to get immunity under the provisions of the Act in respect of the net wealth disclosed by him in his returns. If the petitioner does not require any immunity, it is open to him to ignore the demand for payment of interest. Hence, it is in the interest of the petitioner himself to pay interest and get immunity under the provisions of the Act.

8. The learned counsel for the petitioner submits before us that the petitioner is keen in getting immunity and, therefore, he cannot ignore the demand, once if is found that the demand for payment of interest is in accordance with the provisions of Central Act 8 of 1976 as amended.

9. In this view of the matter, we are of the view that the demand for payment of interest made on the petitioner cannot be said to be invalid. The writ petition, therefore, fails and is dismissed. There will, however, be no order as to costs.


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