SHRI. SABEEL MKOHAMMED SIRAJAHMED UMACHIGI V. THE INCOME TAX OFFICER

WP/104866/2018

AI Insights

The case revolves around the petitioner's attempt to avail benefits under the Pradhan Mantri Garib Kalyan Deposit Scheme (PMGK Scheme) following the seizure of undisclosed income by the Income Tax Department. The petitioner had complied with most requirements of the PMGK Scheme but was unable to deposit 25% of the undisclosed income due to circumstances beyond their control, specifically banking issues on the deadline day. The Income Tax Department's refusal to grant the benefits of the scheme despite substantial compliance led to this writ petition. The court found that the petitioner had made substantial efforts to comply with the scheme and that the non-compliance with the final deposit was due to circumstances beyond their control.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 766839 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 12-11-2021
• Assessment Year: misc
• Laws Referred To: Income Tax Act, PMGKY Scheme 2016
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: Y V RAVIRAJ; M B KANAVI; NARAYAN YAJI; K L PATIL; S S BETRUMATH
• Assessee Lawyers: H R KAMBIYAVAR; K R PRASAD PATRI
• Keywords: Certiorari; Certiorari; Income Tax; Mandamus; PMGKY scheme; Undisclosed income
• Section: 199(1); 199A; 199D; 199E; 199F; 199C(1)

Judgement Text

" : 1 : IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 12TH DAY OF NOVEMBER, 2021 BEFORE THE HON’BLE MR.JUSTICE SURAJ GOVINDARAJ WRIT PETITION No.104866/2018 (T-IT) BETWEEN: SHRI. SABEEL MKOHAMMED SIRAJAHMED UMACHIGI AGED ABOUT: 33 YAERS, 1, UMACHIGI COMPLEX, COEN ROAD, HUBBALLI-580020. ...PETITIONER (BY SRI.: H R KAMBIYAVAR, ADV. M/S.K.R.PRASAD PATRI, SRI. PATRI S.K, SRI. ASHOK A.KULKARNI, ADVS. ) AND 1 . THE INCOME TAX OFFICER WARD-3(4), INCOME TAX OFFICES, NAVANAGAR, HUBBALLI-580025. 2 . THE PRINCIPAL COMMISSIONER OF INCOME TAX INCOME TAX OFFICES, NAVANAGAR, HUBBALLI-580025. 3 . THE SECRETARY DEPARTMENT OF ECONOMIC AFFAIRS, MINISTRY OF FINANCE, NORTH BLOCK, NEW DELHI-110001. : 2 : 4 . THE MANAGER STATE BANK OF INDIA, SAMYUKTHA KARNATAKA MAIN GATE, KOPPIKAR ROAD BRANCH, HUBBALLI-580020. 5 . THE MANAGER STATE BANK OF INDIA, KESHAVAPUR BRANCH, HUBBALLI-580023. Respondents (BY SRI. Y. V. RAVIRAJ, ADV. FOR R1 AND R2 SRI. M.B.KANAVI, STANDING COUNSEL FOR R3 SRI.NARAYAN V.YAJI, ADV. FOR R3 SRI.K.L.PATIL, & SRI. S.S. BETRUMATH, ADVS. FOR R4 & R5) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO THIS WP IS FILED PRAYING TO:- A.QUASH BY AN ORDER, WRIT OR DIRECTION IN THE NATURE OF CERTIORARI THE COMMUNICATION DATED:20.03.2018 BEARING NO.ITO/W.3(4)/HBL/153A/2017-18 (ANNEXURE-\"J\") OF THE 1ST RESPONDENT WHERE THE DECISION OF THE 2ND RESPONDENT TO THE EFFECT THAT THE PMGKY SCHEME IS INAPPLICABLE TO THE PETITIONER IS COMMUNICATED. B.DIRECT TO THE 1ST RESPONDENT THAT THE PETITIONER QUALIFIES FOR THE BENEFITS ENUMERATED IN SECTION 199-1 OF THE ACT NO.48 OF 2016 GRANTING IMMUNITY FROM THE PROVISIONS OF THE INCOME TAX ACT. C.ISSUE A WRIT ORDER OR DIRECTION IN THE NATURE OF MANDAMUS TO THE 2ND RESPONDENT THAT THE PETITIONER QUALIFIES FOR THE BENEFITS ENUMERATED IN SECTION 199-1 OF THE ACT OF 48 OF 2016 GRANTING IMMUNITY FROM THE PROVISIONS OF THE INCOME TAX : 3 : ACT. D.DIRECT AS THE CASE MAY BE TO THE 4TH RESPONDENT TO ISSUE ACERTIFICATE FO HOLDING THE DEPOSIT AS PER CLAUSE 3(2) OF THE NOTIFICATION NO.S.O.4061(E) DATED:16.12.2016 UNDER THE PMGKY SCHEME 2016 (389 ITR 56) ON THE REPAYMENT TO THE BANK OF A SUM OF RS.7.50 LAKHS WHICH THE PETITIONER WILL DO FORTHWITH. E.IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO WHAT IS STATED IN PARA-31 ABOVE ISSUE A WRIT, ORDER OR DIRECTION IN THE NATUE OF MANDAMUS OR ANY OTHER SRIT, ORDER OR DIRECTION AS THE CASE MAY BE TO THE 5TH RESPONDENT TO ISSUE A CERTIFICATE OF HOLDING THE DEPOSIT AS PER CLAUSE 3(2) OF THE NOTIFICATION NO.S.O.4061(3) DATED:16.12.2016 UNDER THE PMGKY SCHEME, 2016 (389 ITR 56) ON THE REPAYMENT OF RS.7.50 LAKHS BY WAY OF DEPOSIT UNDER THE SCHEME WITH THE ABOVE RESPONDENT. F. ISSUE A WRIT ORDER OR DIRECTION OF MANDAMUS TO THE 2ND RESPONDENT DIRECTING HIM TO ISSUE A CERTIFICATE IN FORM NO.II AS PER NOTIFICATION NO.225/ 231/2017-ITA-II DATED:27.09.2017 ENABLING THE PETITIONER TO AVAIL ALL THE BENEFITS UNDER THE PMGKY SCHEME. G.ISSUE A WRIT, ORDER OR DIRECTION IN THE NATURE OF MANDAMUS OR ANY OTHER WRIT, ORDER OR DIRECTION OF ANY NATURE TO THE 2ND RESPONDENT DIRECTING HIM TO ISSUE A CERTIFICATE IN FORM 2 AS ENVISAGED UNDER RULE 3(3) AS PER NOTIFICATION NO.S.O.4059(E) DATED:16.12.2016 UNDER SECTION 199C(1) OF CHAPTER IX-A OF ACT NO.48 OF 2016 (389 ITR (St) 63). THIS WRIT PETITION COMING ON FOR HEARING ON INTERLOCUTORY APPLICAITON, THIS DAY, THE COURT MADE THE FOLLOWING: : 4 : ORDER 1. The petitioner is before this Court seeking for the following relief: “A. Quash by an order, writ or direction in the nature of certiorari the communication dated:20.03.2018 bearing NO. ITO/W.3(4)/HBL/153A/2017-18 (ANNEXURE-\"J\") of the 1st respondent where the decision of the 2nd respondent to the effect that the PMGKY scheme is inapplicable to the petitioner is communicated. B. Direct to the 1st respondent that the petitioner qualifies for the benefits enumerated in section 199-1 of the act no.48 of 2016 granting immunity from the provisions of the income tax act. C Issue a writ order or direction in the nature of mandamus to the 2nd respondent that the petitioner qualifies for the benefits enumerated in section 199-1 of the act of 48 of 2016 granting immunity from the provisions of the income tax act . D. Direct as the case may be to the 4th respondent to issue a certificate of holding the deposit as per clause 3(2) of the notification Nno.S.O.4061(E) dated:16.12.2016 under the PMGKY scheme 2016 (389 ITR 56) on the repayment to the bank of a sum of rs.7.50 lakhs which the petitioner will do forthwith. E In the alternative and without prejudice to what is stated in para-31 above issue a writ, order or direction in the nature of mandamus or any other writ, order or direction as the case may be to the 5th respondent to issue a certificate of holding the deposit as per clause 3(2) of the notification no.s.o.4061(3) dated:16.12.2016 under the PMGKY scheme, 2016 (389 ITR 56) on the repayment of Rs.7.50 lakhs by way of deposit under the scheme with the above respondent. f. Issue a writ order or direction of mandamus to the : 5 : 2nd respondent directing him to issue a certificate in Form No.II as per notification No.225/ 231/2017-ITA-II dated:27.09.2017 enabling the petitioner to avail all the benefits under the PMGKY scheme. g .issue a writ, order or direction in the nature of mandamus or any other writ, order or direction of any nature to the 2nd respondent directing him to issue a certificate in form 2 as envisaged under rule 3(3) as per notification No.S.O.4059(E) dated:16.12.2016 under section 199C(1) of chapter ix-a of act no.48 of 2016 (389 itr (st) 63).” 2. On 21/12/2016, office of the Police Department seized an amount of R.29,98,000/- from the employee of the petitioner. The said amount was taken over by the Income Tax Department who proceeded in the matter by issuing summons under Section 13 of the Income Tax 1961, recorded a statement on 26/12/2016. Similar statements were recorded from several other persons who are stated to be involved in the said transaction or otherwise. 3. The petitioner wished to avail the benefit under Pradhan Mantri Garib Kalyan Deposit Scheme 2016 : 6 : (PMGK Scheme), which had been then introduced more particularly providing that in the event of undisclosed income being declared the same could be compounded by making payment of certain tax amount, cess and penalty which amount once collected were to be used for the PMGK Scheme. 4. In terms of Section 199D of the Act, the unclosed income would be chargeable tax at the rate of 33%, a surcharge at 33% on the tax and further an amount was 10% towards penalty in terms of Section 199A of the Act. 5. Interms of Section 199F an amount equal to 25% of the undisclosed income was to be deposited in the PMGK Scheme, which deposit would bear no interest and the amount would be permitted to be withdrawn after 4 years from the date of deposit. 6. Thus in effect approximately 50% would have to be appropriate towards tax, cess, penalty and 25% : 7 : would be retained by the income tax department for a period of 4 years and returned to the assessee disclosing undisclosed income without interest, this being a methodology resorted to by the state to raise monies without interest. 7. The Commissioner of the income tax appropriated an amount of Rs.15,00,000/- towards tax amount out of the seized amount of Rs.29,98,000/- and instruction thereto were issued to the Manager of the State Bank of India on 30/3/2017. Thus, the requirement of Section 199D and 199E had been met. What was left for the petitioner to comply with the provisions of 199F in as much as an amount equivalent to 25% of the undisclosed income was to be deposited in the PMGK Scheme. Initially, the said deposit was required to be made by 31/3/2017. 8. The grievance of the petitioner is that though the petitioner tried to deposit the said amount on : 8 : 31/3/2017 with the State Bank of India, Koppikar road, branch Hubli. The said bank informed the petitioner that the said branch was not identified or permitted to accept the deposit under the PMGK Scheme and therefore, referred the petitioner to Keshavapur branch. Petitioner immediately went to the Keshavapur branch to deposit the money. However, by then, the Bank terminal was closed and the amount could not be accepted by the Keshavapur branch even though the petitioner was ready to deposit the amount. 9. It is on account of the non deposit of the balance amount of Rs.7.50 lakh that the respondent authority has held that the petitioner is not entitled to the benefit of PMGK Schemeand denied the petitioner refund of the amount which were held with the income tax department i.e. the balance of 14.98 lakh. : 9 : 10. It is this that the petitioner has challenged before this Court and sought for relief as afore mentioned. 11. The contention of the learned counsel for the petitioner is that the petitioner is entitled to the benefit of the scheme when the petitioner was ready and willing to deposit the amount. The amount could not be deposited solely on account of the fact that the first bank that the petitioner went to was not authorised to collect the money and the second bank that the petitioner went to could not accept the money since the banking hours had closed. 12. It is further contended that an amount of Rs.15,00,000/- has already been appropriated towards, tax, surcharge and penalty interms of Section 199D and 199E, when there is such a substantial compliance made by the petitioner, the alleged non compliance of the requirement of Section 199F cannot be a ground for disentitling : 10 : the petitioner of the benefit. More so, when the respondent authorities having in their possession, an amount double the amount required to be deposited under Section 199F. 13. Learned counsel for the petitioner further submits that the petitioner is even as on today ready to deposit the amount with the authorities to be adjusted. The period of deposit under Section 199F can be taken into consideration from today, the petitioner would not seek for withdrawal of the amount for a period of four years from today nor seek for interest from the year 2017 till now or going further for a period of four years. On these grounds, learned counsel for the petitioner submits that writ petition requires to be allowed. 14. Per contra, Sri. Y.V.Raviraj, learned counsel appearing for the department would contend that the benefits of the PMGK Scheme, is more in the nature of a compounding scheme which is time : 11 : bound and it was required for the petitioner to comply with the same within the time frame so prescribed. The petitioner not having deposited 25% of the undisclosed income interms of Section 199F cannot claim the benefit of the said scheme. The deposit of the said 25% is pre-requisite for the considered of the Petitioner to be eligible for the scheme. The deposit of 25% was required to be accompanied by declaration in Form No.1 as required under Section 199D(1) which has not been done and thereafter, Form No.2 to be filed with the income tax authorities. Both of these not having been done, the respondent-department has rightly rejected the claim of the petitioner and therefore, he submits that the petition is liable to be rejected. 15. Heard the learned counsel for the petitioner and learned counsel for respondent. Perused the papers. : 12 : 16. Though lengthy petition, lengthy objection and statement of objections have been filed as also arguments advanced, the short question that arises is: “Can an assessee be denied benefit of scheme when there is partial fulfillment of the requirement of the scheme?” 17. In the present case, it is not that the assessee has not complied with any portion of the scheme. Admittedly, the assessee complied with the requirement of Section 199D and 199E in as much as the tax at the rate of 33%, surcharge at the rate of 33% on the income tax and penalty at the rate of 10% has been received by the respondent- department and credited to the respective authority. It is only 25% of the penalty which is required to be deposited with the respondent authorities for a period of four years in terms of Section 199F which has not been complied with. Since the matter is relating to tax, if the : 13 : percentage is determined, the petitioner has complied with 66% of the requirement leaving a balance of 33% to be complied with. Which 33% also the petitioner sought to comply with by depositing with the bank but was unable to do so for the reasons aforesaid which are not in dispute. 18. It is also not in dispute that the respondent department continues to have within its possession a sum of Rs.14.98 lakh. 19. It is an oft repeated and oft stated fact that the Income Tax Act, the provision thereunder, the rules, circulars, notification issued thereunder are very burdensome and many a time are not assessee friendly. 20. In the present matter, the scheme could have been simplified in as much as from and out of the undisclosed amount seized, the amount required to be adjusted under Section 199D, E and F could : 14 : have been so adjusted and the balance returned to the assessee as long as the assessee wished to avail the benefit of the PMGK Scheme. Instead of doing so, the scheme is being made burdensome in as much as the amount has been seized and thereafter, the assessee would be required to make payment of tax, surcharge and penalty as also deposit the amount under 199F in the particular scheme. This only results in unnecessary administrative burden and cots. 21. Be that as it may. In the present case, the petitioner assessee has tried to deposit the amount and in support thereof has produced Annexures-C and D to the writ petition. Annexure-D is the application Form in Form No.2 as required under the PMGK Scheme 2016. If at all the amount had been accepted by the Bank, this application and declaration could have been subsequently submitted by the petitioner to the respondent : 15 : department. It is only on account of the Bank not accepting the deposit that Form No.2 could not be got counter signed with an acknowledgement from the bank and not be submitted by the petitioner to the respondent department. 22. In the peculiar nature of the facts of the present case, I am of the considered opinion that the petitioner has made all efforts to try and comply with the requirement of the PMKGK Scheme. In such a situation, 66% of the compliance having been done, the petitioner ought not be denied the benefit of the scheme more so that the learned counsel for the petitioner has made a submission that he is still willing to deposit the amount for a period of four years from today and would not claim any interest on the same. 23. In the above facts, the petition stands allowed. The communication dated 23/3/2018 bearing No.ITO/W-3(4)/HBL/153A/2017-18-Annexure-J is : 16 : hereby quashed, a mandamus is issued directing the respondents to appropriate the sum equivalent to Rs.7,50,000/- of the amount held by the respondent to the PMGK Scheme and return the balance amount of Rs.7,50,000/- to the petitioner within a period of 30 days from the date of receipt of certified copy of this order. The said amount of Rs.7,50,000/- deposited in the PMGK Schemeshall be held by the respondent for a period of 4 years calculated from the date of deposit made and returned to the petitioner after expiry of four years without any interest. Needless to say that the concerned Bank to which the respondent department corresponds to will hold the said amount of Rs.7,50,000/- under PMGK Schemefor period of four years. Sd/- JUDGE Vmb "