JUDGMENT
M. B. SHAH, C.J. :
The All India Federation of Tax Practitioners and a practising Advocate have filed this Petition for a declaration that ss. 64 to 78 of the Finance Act, 1997 are non est, void, unconstitutional and ultra vires in entirety, with a further prayer that the respondents be directed not to implement the same. In the alternative, it is prayed that, by suitable writ or direction, the respondents be directed to treat all the normal and honest tax-payers on par with the declarants under the Voluntary Disclosure of Income Scheme (hereinafter referred to as “the scheme”) in respect of the tax charged or chargeable to them and the amount of interest pertaining thereto and evolve a mechanism whereby the respondents are compelled to refund the excess amount collected from the normal tax-payers during earlier years.
2. This petition was filed on 2nd July, 1997 and it pertains to Finance scheme which is to operate upto 31st December, 1997 as declared at present. If the matter is admitted and kept pending as submitted by the learned counsel for the petitioners, it may affect its implementation, as the time schedule for disclosure thereunder is upto 31st December, 1997. Because of the pendency of litigation, some persons may not like to avail of the benefit of the scheme as they may carry an impression that, if the petition is allowed, their disclosure would be in vain and they may be trapped; they may also think that it is better to await the decision. Hence the matter was heard expeditiously. The respondents were directed to file necessary affidavit. On behalf of the Union of India, affidavit is filed by the Chief CIT. The learned counsel for the parties were heard extensively for more than two days, as it was repeatedly contended that first the matter be admitted and thereafter it be finally decided. Learned counsel have submitted their detailed written submissions, which are directed to be kept on record. They have referred to various decisions in support of their contentions.
3. Before dealing with the contentions, at the outset, we state that it is the say of the petitioners that, while dishonest tax-payers are given more benefit, honest tax-payers, who have paid the tax all throughout, are at a discount. Various immunities are given to the dishonest tax-payers, which would have overall effect on the moral fabric of the society. The main thrust of the argument of the learned counsel for the petitioners was that honest tax-payers have paid tax as per the prevailing rate during previous years from 90 per cent to 40 per cent. As against this, a dishonest tax-payer is given full immunity and would be required to pay only 30 per cent. It has also been pointed out that, apart from paying 30 per cent tax, various ways and means could be devised by the dishonest tax-payer so that the said taxation rate can be further reduced.
4. In our view, there is much force in the contention of the learned counsel for the petitioners that, by such type of schemes dishonest tax-payers get advantage. It is also true that the honest tax-payers suffer, but, at the same time, we have to consider well-established limitations under the Constitution to interfere in such matters. We have also to take into consideration the fact that, when Parliament adopts a particular mode or method for unearthing unaccounted or black money and considers it to be efficacious, it would not be permissible for the Court while exercising jurisdiction under Art. 226 of the Constitution to substitute its own decision in place of the policy decision taken by the Parliament by enacting the scheme. In our view, this course is not permissible. It is well-established law that, with regard to taxation matters and economic affairs, it is for the executive and the Parliament to decide a suitable method and take policy decisions for the purpose of taxation. It is also established law that, with regard to policy matters, it is for the Parliament to enact appropriate law after taking into consideration various aspects.
5. It has been pointed out that unaccounted money of Rs. 5,00,000 crores approximately is in circulation in this country. Various committees were appointed by the Government. After considering the reports and the overall economic picture, if the Parliament decided to enact law, it is not for the Court to sit in appeal over the said policy decision. It is true that some provisions of the scheme could be abused by human ingenuity, but that cannot be helped. Admittedly, unearthing of unaccounted money is a complex economic problem faced by this country since years. Even experts would not be in a position to find out an easy solution to this complex problem. There would be divergent opinions of experts with regard to tackling of this problem and cannot be easily solved even by experts. Hence, for solving this problem to some extent if the Parliament decided to enact the law, the Court cannot substitute its judgment in place of the legislative judgment in the field of economic regulations or in taxation matters. It is well-settled that the function of the Court is to see that lawful authority is not abused and with regard to legislation, the provisions are not against the Constitution. But, it would not be open to the Court to substitute its decision on economic policy matters. It was repeatedly pointed out during the course of arguments that dishonest tax-payers are given undue benefits and much more immunities by the present enactment. As against this, it has to be borne in mind that even at present the taxation laws are admittedly very stringent. Still, it is difficult for the authorities to take appropriate action against those persons who amass unaccounted wealth to a large extent. For this issue, it may be that someone can state that the Administrative Department which had to implement the Act is not taking appropriate actions; some may allege that the prevailing atmosphere in the society is such that persons are tempted to accumulate unaccounted money; some may say that the administrative set up is such that for an honest man it is difficult to get his work done without parting with accounted or unaccounted money; some may say that, uptil now, the taxation rates were so heavy that persons were not prepared to pay legitimate tax; and some may reiterate that greed in human nature is inherent and that it varies from person to person, but the difference is only of degrees. Whatever may be the reasons, at least it is a known fact that in the present day economy, there is parallel economy of unaccounted money. For this purpose, if the Parliament enacts a law by which even a dishonest tax-payer is induced to pay certain amount of tax, it cannot be said that the said legislative policy is palpably arbitrary and should be interfered with by the Court. Admittedly, Courts are not having necessary competence and expertise to adjudicate upon such economic and social issues. We are saying that, apart from this economic issue, it is also a social issue because of the prevailing moral standards in the society. Further, it has also been repeatedly stated that human ingenuity is so great that, when it comes to tax avoidance, it would be almost impossible to frame such legislation which cannot be abused, and a trial and error method is inherent in every such legislation which deals with unearthing of unaccounted wealth.
6. With the above observations, we would deal with the contentions raised by the learned counsel for the petitioners.
7. Before dealing with the contentions raised by the petitioners, we would state that all the contentions which are raised in this petition at the time of hearing are virtually covered and are dealt with by the Supreme Court in the case of R. K. Garg vs. Union of India & Ors. (1982) 133 ITR 239 (SC). In that case, the Court dealt with the constitutional validity of the provisions of the Special Bearer Bonds (Immunities and Exemptions) Act, 1981. We may also state that all the contentions which are raised by the petitioners to show the drawbacks of this type of scheme are known to the Parliament and to the executive. Various committees have also observed that this type of schemes gives premium to the dishonest tax-payer. Despite the suggestions by the various committees, after taking into consideration the economic scene prevailing in the country, the Parliament has enacted the aforesaid scheme.
8. The affidavit filed in support of this Petition contains the contentions raised at the final hearing of the matter. It has been pointed out that, by a Resolution dt. 2nd March, 1970, the Government of India appointed a committee, inter alia, to examine and suggest all legal and administrative measures for countering evasion and avoidance of direct taxation and to recommend concrete and effective measures to unearth black money and to prevent proliferation through further evasion. That committees report, which is known as Wanchoo Committee Report, was published in December, 1971. The report concluded that money value of the sum involved in unaccounted income was in excess of Rs. 7,000 crores in Financial Year 1968-69. The learned counsel emphasised that in the said report, it has been specifically stated that majority of persons who have replied to the questionnaire do not favour another Scheme of Voluntary Disclosure, the general feeling was that such schemes place a premium on fraud and are unfair to the honest tax-payers. It is also pointed out that the results of the two earlier schemes have been disappointing and the total income disclosed in all the three schemes put together was a mere Rs. 267 crores, which, to say the least, is only a small fraction of even the modest estimate of concealed income for the period of 15 years from 1951 to 1965. The report also indicates that the CBDT has pointed out several instances of the same set of persons getting advantage of all the three Voluntary Disclosure Scheme, which would belie the theory that such schemes help to rehabilitate the repentant tax evader who is desirous of mending his ways. The committee has observed that the Disclosure Scheme is an extra ordinary measure meant for abnormal situations and resorting to such schemes would only shake the confidence of the honest tax-payers and would invite contempt for the enforcement machinery. The committee has also observed that it was opposed to the idea of introduction of any general scheme of disclosure either now or in the future.
9. It is seen that the final recommendations of the committee are as stated above; but, at the same time, the committee has also taken into consideration the fact that, as tax evasion or avoidance is indulged in only by few individuals on a small scale and the administration is both alert and efficient in dealing with the same, there need be no cause for anxiety. As against this, the situation in the present day society is quite opposite. Tax evasion is not indulged in only by few individuals on a small scale, but it is indulged by large section of the society on a large scale. With regard to the administration, it will be difficult to say that it is alert in reducing tax evasion. Hence, the Wanchoo Committee, in its introductory remarks, observed that, when the malady becomes endemic and manifests itself even in quarters where it is least expected, there arises the need not only for greater vigilance but also for drastic preventive and remedial measures. The committee noted that even an enlightened class like the members of the legal profession does not seem to be free from this malady as has been pointed out by M. C. Setalvad in his autobiographical work, “My Life, Law, and other things” -p. 622 :
“Standards of professional conduct have woefully fallen and tax evasion is freely practised by prominent seniors.”
10. Same is the position with regard to the report known as “Aspects of the Black Money in India” by Shankar N. Acharya in year 1985. One of the observations in the said report is as under :
“Simultaneously with the announcement of one or both of these schemes or some other scheme which the Government may devise, it should be made clear to those liable to taxation that having brought down the tax rates to reasonable levels and having given an opportunity to those who have erred in the past to disclose their black wealth and to return to the straight path, Government would strongly come down on tax-evaders in the future. In order to make people believe that the Government means serious business and that they would ignore the Governments warning at their own peril, it is necessary that the enforcement machinery and the penal provisions should be suitably strengthened.”
The committee has further observed as under :
“To make prosecution an effective deterrent and to reduce risks of manipulation by the accused, trials of evasion cases have to be speedy and, in guilty cases, the award of punishment effective. We showed in Chapter 10 how present procedures militate against these objectives. A possible remedy is to establish Special Courts for tax offenders, along with special rules of procedures and evidence, which would reduce delays and require the accused to make a statement of his defence as soon as the charge has been framed and copies of the prosecutions documentary evidence have been furnished. A possible model along these lines is the West Bengal Special Courts Act, 1950. which was commended by the Law Commission for trial of economic offences.
Special Courts, special procedures and special rules of evidence may all be necessary, but they cannot substitute for effective prosecution of evasion cases by the IT Department. To reduce the incidence of administrative lapses, noted in Chapter 10, it is necessary for the Department to make use of better legal expertise at every level. Furthermore, in selecting cases for prosecution, the Department should be motivated less by the number of prosecutions launched and more by the number of convictions obtained for serious tax evasion. Prosecutions of minor cases should be eschewed.
Finally, effective administration of tax codes requires integrity and probity among Revenue officials at all levels, to the extent this is lacking, there is no shortcut to the long haul of restoring these necessary virtues through exemplary leadership and disciplinary actions against errant Revenue officials. Much will depend on the integrity of the political leadership, including its willingness to abstain from using the fiscal administration for narrow political ends.”
11. It is the submission of the learned counsel for the Respondents that there is a total reduction in the tax rates. Hence, there is sufficient inducement to the dishonest tax-payers to declare their true income and it is hoped that the scheme would give good results. As against this, there is a scathing criticism by the learned counsel for the petitioners with regard to immunities given to dishonest tax-evaders. In our view, it is true that various Expert Committees have suggested other measures for unearthing unaccounted money, viz., imposing deterrent punishment, establishing Special Courts for dealing with tax-evaders by enacting special tax rules and suitable moral atmosphere in the society but, at present, it is an impossibility or in any case a long term measure. This would not mean that the Parliament cannot take short term measures to unearth unaccounted black money. It is known fact that, at present, the atmosphere is not so healthy wherein dishonest tax-evaders would feel ashamed or would be reluctant to avoid legitimate payment of tax. In such an atmosphere, if the Parliament decides to enact law giving certain immunities as inducement for declaration of income to such tax-evaders, it cannot be said that it is palpably arbitrary. Other reasonable view also could be, stringent or deterrent laws alone may not be sufficient to deter such tax-evaders.
12. On behalf of the petitioners, it has been pointed out that the unaccounted money in circulation in India today may amount to at least Rs. 500,000 crores and the said figure would exceed by adding together the figures of unaccounted income for financial years 1992-93 to 1996-97. If such is the magnitude of black money in circulation in the country, it would be difficult to find out any short-cut method for unearthing the same. Making law or making more stringent law may or may not achieve its objective. These are all trial and error methods which are required to be adopted in dealing with economic affairs and it is not for the Courts to decide whether it is likely to succeed in achieving the object. It can certainly be said that it has nexus with the object sought to be achieved.
13. In affidavit filed on behalf of the respondents, it has been stated as under :
“On resource mobilisation, the Dy. Chairman stated that the much needed public investment in various sectors would be available only if the requisite will was shown in exploring new sources of Revenue at the Central, State and local levels and in bringing vast unaccounted money into productive channels. This would call for serious effort to ensure better tax compliance and also bringing presumptive incomes, computed from high expenditures of creamy layers, under the tax net.”
It has also been stated that the Parliament was of the considered opinion that the current situation warranted introduction of a disclosure scheme. In order to harness unaccounted money to reduce the fiscal deficit and to utilise the same in priority sectors of the economy, Voluntary Disclosure of Income Scheme, 1997 is introduced. It has been pointed out that the scheme is a simple scheme which grants immunity from any action under the IT Act, WT Act and Foreign Exchange Regulations Act (FERA). The relevant extract of the memorandum explains the provisions of the scheme as appearing in Finance Bill, 1997, as follows :
“In order to mobilise resources and to channelise funds into priority sectors of the economy, and to offer an opportunity to persons who have evaded tax in the past, to declare their undisclosed income, pay a reasonable tax and in future adopt the path of rectitude and civil responsibility, a voluntary disclosure of income and wealth scheme is proposed to be introduced.”
14. Mr. Dastur, the learned counsel appearing for the petitioners, submitted that :
(a) The judgment in the case of R. K. Garg (supra) does not cover the issue raised in the present petition, viz., that :
(i) the said case was decided on the basis of limited immunity, and
(ii) the Bonds Scheme and the Voluntary Disclosure Scheme are wholly different in scope and nature.
(b) Present scheme does not fall within the morality exception carved out in R. K. Gargs case.
(c) The scheme is arbitrary and violative of Art. 14 of the Constitution as it is not based on intelligible differentia having rational relation to the object sought to be achieved.
(d) Even amongst the so-called class of the dishonest tax-payers, there is discrimination.
(e) The scheme is against the reports submitted by Expert Committees.
(f) The IT Act is subject to this scheme and immunities are given to dishonest tax-payer.
15. With regard to the contention that there is violation of Art. 14 of the Constitution, we refer to the observations of the Supreme Court in the case of R. K. Garg vs. Union of India & Ors. (supra). In the said case, the Court held that, while dealing with such a question the first test is that there is always a presumption in favour of the constitutionality of a statute and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. The presumption of constitutionality is so strong that in order to sustain it, the Court may take into consideration matter of common knowledge, matter of common report, the history of the time and may assume every state of facts which can be conceived existing at the time of legislation.
16. The Court further observed that laws relating to economic activity should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc.; and the Court should be more inclined to give judicial deference to legislative judgment in the field of economic regulations than in the area where fundamental human rights are involved. In this connection, the Court observed as under :
“The Court must always remember that legislation is directed to practical problem, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry that exact wisdom and nice adoption of remedy are not always possible and that judgment is largely a prophecy based on meagre and uninterpreted experience. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and, therefore, it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The Courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture vs. Central Reio Refining Company (1950) 94 L.ED. 381, be converted into Tribunals for relief from such crudities and inequities. There may even be possibilities of abuse but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation, which may be made by those subject to its provisions, and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must, therefore, adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues.”
17. The Court further held that the validity of a classification of those persons having black money and unaccounted income have to be judged with reference to the object of the legislation and, if that was done, there can be no doubt that the classification made by the Act was rational and intelligible and the operation of the provisions of the Act was rightly confined to the persons in possession of black money. The Court held that the contention of the petitioner that classification made by the Act was discriminatory as it excluded persons with white money from taking advantage of the provisions of the Act by subscribing to or acquiring Special Bearer Bonds, was totally unfounded.
18. In the present case also, same is the position. The classification between persons who are having unaccounted money and honest tax-payers cannot be said to be in anyway unreasonable and it has nexus with the object sought to be achieved, i.e., for unearthing unaccounted money by giving some inducement and immunities to such persons. This legislation is directed to solve practical problems. This Court cannot be converted into a Tribunal or appellate forum for deciding that the expectation of the legislature to achieve the object sought to be achieved would not be achieved and, therefore, it is violative of Art. 14 of the Constitution. As stated above, there may be even scope for abuse of the Act, but that would not be a ground for invalidating the legislation.
19. In that case, the Court also dealt with similar contention which is raised in the petition that by the impugned legislation, the moral of the honest tax-payer would be affected and a dishonest tax-payer would get premium as well as immunity from various proceedings, including prosecution. Negativing the said contention, the Court held as under :
“It is necessary to remember that we are concerned here only with the constitutional validity of the Act and not with its morality. Of course, when we say this we do not wish to suggest that morality can in no case have relevance to the constitutional validity of a legislation. There may be cases where the provisions of a statute may be so reeking with immorality that the legislation can be readily condemned as arbitrary or irrational and, hence, violative of Art. 14. But the test in every such case would be not whether the provisions of the statute offend against morality but whether they are arbitrary and irrational having regard to all the facts and circumstances of the case. Immorality by itself is not a ground of constitutional challenge and it obviously cannot be, because morality is essentially a subjective value, except in so far as it may be reflected in any provision of the Constitution or may have crystallised into some well-accepted norm of social behaviour.”
20. However, the learned counsel Mr. Dastur vehemently submitted that in the aforesaid observation, it has been stated that the provision of a statute may be so reeking with immorality that the legislation can be readily condemned as arbitrary or irrational. He submitted that, considering the fact that number of such Voluntary Disclosure Schemes have failed, the Parliament, by enacting similar scheme, has added premium on dishonesty which is bound to affect the honest tax-payer. We agree that honest tax-payer in the society is at a discount. However, considering the present social and economic scenario in the country, it cannot be said that the Government was having other alternative, efficacious remedy and yet it has selected this method to unearth unaccounted money. Admittedly, there is manifold increase in unaccounted money and wealth. Despite stringent taxation laws, as stated earlier, for various reasons, it appears that it is not possible for the executive to unearth unaccounted money. In such a situation, if the Parliament decided to give some inducement to holders of black money and allow them to join the mainstream by disclosing their unaccounted income, it cannot be said that the impugned legislation is so reeking with immorality that it could be condemned as arbitrary or irrational.
21. Dealing with the immunities given and exemptions granted to persons having unaccounted money who have evaded taxation and concealed their income despite stringent tax laws, the Court held that it would be outside the province of the Court to consider if any particular immunity or exemption is necessary or not for the purpose of inducing the disclosure of black money; it depends upon diverse fiscal and economic considerations based on practical necessity and administrative expediency; and it would also involve certain amount of experimentation on which the Court would be least fit to pronounce.
22. It has been contended that tax-evaders would take undue advantage of the present scheme and they would avoid even payment of 30 per cent of the tax by using some method or device or advantage of loopholes in the scheme. We would say that this cannot be helped. In taxation matters, persons would try to find out as many devices as possible to get benefit and it is not possible for the legislature to plug all the loopholes. For this purpose, we would only quote the observations made in the aforesaid case while dealing with the said contention :
“But that cannot be helped because human ingenuity is so great when it comes to tax avoidance that it would be almost impossible to frame a tax legislation which cannot be abused.”
23. Considering the aforesaid discussion, in our view, all the contentions which are raised in this petition are covered by the aforesaid judgment of the apex Court.
24. The additional contention canvassed in this petition is that various committees have given reports against such Voluntary Disclosure Schemes and yet, for reasons best known to it, the Government has moved the Bill for enacting Voluntary Disclosure Scheme. It has also been submitted that repeatedly such schemes are framed and the disclosure of black money, which is in circulation in this country, has not gone down, but the increase is manifold. With regard to the framing of this type of schemes, it is not disputed that the schemes are framed periodically. It is also not disputed that, because of the schemes, there is not much reduction in black money in the country. But it has been pointed out that the Government is hopeful of unearthing black money on a large scale, because of reduction in tax rate. It has been submitted that because the tax is reduced to 30 per cent, number of persons who have evaded the tax net till today would be tempted or induced to declare their unaccounted income. It has also been submitted that, if there is no declaration of unaccounted money on the part of some persons despite inducement, the Government has decided to take appropriate steps under the various tax laws which are likely to deter dishonest persons. In our view, these submissions on the part of the petitioners and respondents are required only to be narrated, because it will be difficult for us to decide how much unaccounted money would be unearthed by this type of scheme. It would also be difficult for us to imagine and find out whether the respondents herein have sufficient administrative set up to prosecute and punish dishonest persons evading payment of tax, but that would hardly be a ground for holding that this scheme is bound to fail and, therefore, it should be held to be ultra vires Art. 14 of the Constitution or that the said scheme is arbitrary or irrational. Further, it cannot be said that because Expert Committees have opined against such type of schemes, the Government or Parliament is bound by such recommendations and should not frame such schemes. After all, committees report is to be considered as an opinion of expert body. The Parliament has a duty to decide how to implement such reports by considering all practical problems faced by the society. If two or more methods of adjustment of economic measures are available, it is the discretion of the legislature to prefer one of them. This would be further clear from the various other judgments of the apex Court. Still, however, we would reiterate here that, apart from Voluntary Disclosure Scheme, only other alternative method is to take deterrent measures, so that taxation laws can be implemented with vigour and the dishonest tax-evaders can be appropriately punished, but this would be a long term measure and it depends on how it is implemented by the administrative set up. But, by experience and in the atmosphere prevailing in the society, it cannot be said that such scheme is palpably arbitrary or irrational.
25. In the case of Peerless General Finance & Investment Co. Ltd. & Anr. vs. Reserve Bank of India AIR 1992 SC 1033, the apex Court observed :
“It is not the function of the Courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies. In such matters even experts can seriously and doubtlessly differ. Courts cannot be expected to decide them without even the aid of experts.”
26. Similarly, in the case of Secretary to Government of Madras & Anr. vs. P. R. Sriramulu & Anr. (1996) 1 SCC 345, the Court held that it is settled law that, in view of the inherent complexity of the fiscal adjustments, the Courts give a large discretion to the legislature in the matter of its preferences of economic and social policy and effectuate the chosen system in all possible and reasonable ways. The Court pertinently observed as under :
“If two or more methods of adjustments of an economic measure are available, the legislative preference in favour of one of them cannot be questioned on the ground of lack of legislative wisdom or that the method adopted is not the best or there are better ways of adjusting the competing interests and the claims as the legislature possesses the greatest freedom in such cases. It is also well-settled that lack of perfection in a legislative measure does not necessarily imply its constitutionality as no economic measure has so far been discovered which is free from all discriminatory impact and that in such a complex area in which no foolproof device exists, the Court should be slow in imposing strict and rigorous standard of scrutiny by reason of which all local fiscal schemes may be subjected to criticism under the Equal Protection clause.”
27. At this stage, it would be worthwhile to quote some observations in the decision rendered by the Supreme Court in the case of Federation of Hotel & Restaurant vs. Union of India & Ors. AIR 1990 SC 1637, where the Court was dealing with the constitutional validity of Expenditure Tax Act, 1987. Referring to the flexibility in the modes of effectuating a tax in view of innate complexities in the fiscal adjustment of diverse economic factors inherent in the formulation of a policy of taxation and the variety of policy options open to the State, the Court referred to the following observations by J. Rauls in “Modern Trends in Analytical and Normative Jurisprudence” [Introduction to Jurisprudence by Lord Llyod of Hampstead a Freeman, 5th Edn.] :
“… In practice, we must usually choose between several unjust, or second best, arrangements; and then we look to non-deal theory to find the least unjust scheme. Sometimes this scheme will include measures and policies that a perfectly just system would reject. Two wrongs can make a right in the sense that the best available arrangement may contain a balance of imperfections, and adjustment of compensating injustices.”
While dealing with the contention with regard to arbitrariness, the Court observed :
“The test could only be one of palpable arbitrariness applied in the context of the felt needs of the times and societal exigencies informed by experience.”
28. Same is the position in the present case. It is difficult to find out the best solutions of unearthing black money. The scheme may be unjust, to some extent, to honest tax-payers, but, according to the Parliament, that is required for adjustment or compensating for further injustices to the society by parallel economy of unaccounted money.
29. Similarly, the Court referred to its earlier decision in the case of State of Gujarat vs. Sri Ambika Mills Ltd. AIR 1974 SC 1300, wherein the Court observed :
“To recognise marked differences that exist in fact is living law; to disregard practical differences and concentrate on some abstract identities is lifeless logic.”
Applying this test laid down by the Supreme Court in the aforesaid case, it is required to be recognised that there is parallel economy of unaccounted money. It is submitted by the petitioners and respondents that it is roughly estimated at Rs. 500,000 crores. In such a situation, if the Parliament arrives at a conclusion, considering the social exigencies, that such scheme is necessary, it would be difficult to hold that it is palpably an arbitrary enactment. It is true that dishonesty is given premium and honesty is discounted, but this is required to be recognised as it exists in the society. It would be lifeless logic to concentrate only upon abstract concept of inequity between honest and dishonest tax-payers. Between the two, inequity exists and could not be ignored in present social set up.
30. In our view, it is not necessary to multiply similar observations made by the apex Court in various other decisions, as the law on this subject is well-settled.
31. It has been repeatedly contended that, if periodically such types of schemes are to be enacted, even honest tax-payer would feel that it is better not to pay income-tax when due, but to wait for immunity which will enable him to pay tax on his income at a lower rate and after some period. This submission is on the assumption that the honest tax-payer pays his tax because of some inducement and it is forgotten that honest tax-payer pays his tax not because of inducement, but because he believes that it is his duty to the State to pay tax for better living in a civilised society.
32. Some parties in person intervened and submitted that they are honest tax payers; they are paying tax since years. If dishonest tax-payers, who have not paid tax since years, are given this advantage, the tax which they have paid be refunded or such benefit should not be given to dishonest tax-evaders. In our view, these are all arguments against such type of Voluntary Disclosure Scheme. In our view, all these contentions are known to the legislature and, after knowing them it has decided to introduce the scheme. Apart from this aspect, in our view, the Courts platform cannot be used for having a debate whether such scheme would yield results. In no set of circumstances, this Court has jurisdiction to legislate and direct the refund of taxes paid by the honest tax-payers. It is true that honest tax-payers have to pay some premium, but that cannot be helped. As against this, Mr. Daga, learned counsel, who appeared on behalf of the interveners, submitted that such type of schemes are required to be introduced so as to unearth unaccounted or black money. As discussed above, in our view, it is for the Parliament to enact laws pertaining to tax law, giving benefits or immunities to tax-evaders or tax-payers, but it is not for the Court to evolve a scheme and direct the Parliament to enact such schemes on the basis of the view expressed by persons affected and to evolve any such scheme.
33. Keeping the aforesaid well-settled law in mind, it will be difficult for us to arrive at a conclusion that, as more benefits are given to tax-evaders, the provisions of the scheme are arbitrary and violative of Art. 14 of the Constitution. It is adopted by the Parliament after taking into consideration the economic and social conditions prevailing in the society.
34. For the foregoing reasons, we find no merit in this petition and hence the same is dismissed.
35. In this view of the matter, no order is required to be made on the Chamber Summons. Chamber Summons stands disposed of accordingly.
36. The learned counsel appearing on behalf of the petitioners submitted that leave to appeal to the Supreme Court under Art. 134A of the Constitution be granted. Considering the law discussed above, in our view, this is not a fit case for grant of leave as sought for. Hence, this prayer is rejected.
37. Issuance of certified copy of this judgment is expedited.
