{"id":68821,"date":"1998-11-01T00:00:00","date_gmt":"1998-10-31T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/all-india-federation-of-tax-vs-union-of-india-ors-on-1-november-1998"},"modified":"2016-03-04T23:11:44","modified_gmt":"2016-03-04T17:41:44","slug":"all-india-federation-of-tax-vs-union-of-india-ors-on-1-november-1998","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/all-india-federation-of-tax-vs-union-of-india-ors-on-1-november-1998","title":{"rendered":"All India Federation Of Tax … vs Union Of India & Ors. on 1 November, 1998"},"content":{"rendered":"
Delhi High Court<\/div>\n
All India Federation Of Tax … vs Union Of India & Ors. on 1 November, 1998<\/div>\n
Equivalent citations: 1998 VIIAD Delhi 566, 76 (1998) DLT 602, 1998 (104) ELT 595 Del, 1999 236 ITR 1 Delhi<\/div>\n
Author: R Lahoti<\/div>\n
Bench: R Lahoti, C Mahajan<\/div>\n<\/p>\n
<\/pre>\n
ORDER<\/p>\n
 R.C. Lahoti, J. <\/p>\n
 1.     All India Federation of Tax Practitioners, the petitioner, is a regis-\n<\/p>\n
tered  body  having individual members from all over the country  and  also represents many associations having the object of protecting the  interests of  tax payers and tax consultants and to ensure that the direct  tax  laws are  just and fair and are administered justly and fairly. The  association is  aggrieved by Kar Vivad Smadhan Scheme, 1998 and seeks to lay  challenge to its constitutional validity.\n<\/p>\n
 2.   Kar Vivad Samadhan Scheme, 1998 (hereinafter the Scheme, for short) is contained in Sections 86 to 98 of the Finance No. (2) Act, 1998. The object of the scheme as explained by the Finance Minister in his speech is :-\n<\/p>\n
  “Litigation has been the bane of both direct and indirect  taxes. A  lot of energy of the Revenue Department is being frittered  in pursuing large number of itigations pending at different  levels for  long periods of time. Considerable revenue also gets  locked up in such disputes. Declassing the system will not only incentivise honest taxpayers, enable Government to realise its  reasonable  dues much earlier but coupled with administrative  measures, would  also  make the system more  user-friendly.  I,  therefore,
\npropose to introduce a new Scheme called Samadhan.”\n<\/p>\n
 3.   We will shortly notice the grounds of challenge. At the outset, we may set  out briefly the contents of the Scheme and extract and reproduced  the relevant  parts  of the Scheme to the extent necessary  to  appreciate  and adjudicate upon the grounds of allenge.\n<\/p>\n
 4.   Section  86  specifies  that the Scheme may be called  the  Kar  Vivad
\nSamadhan,  1998.  It shall come into force on the first day  of  September,
\n1998.\n<\/p>\n
 4.1  Section 87 defines a few terms unless the context otherwise  requires. The relevant ones are :-\n<\/p>\n
      “(e) “Disputed income”, in relation to an assessment year,  means
\n     the  whole or so much of the total income as is relatable to  the disputed tax;\n<\/p><\/blockquote>\n
      (f)  “disputed  tax” means the total tax determined and  payable,
\n     in  respect of an assessment year under any direct tax  enactment but which remains unpaid as on the date of making the declaration under section 88;\n<\/p><\/blockquote>\n
      xxxx       xxxxx           xxxxx\n     xxxx       xxxxx           xxxxx\n \n\n      (m)  \"tax arrears\" means, _  \n \n\n<\/pre>\n
      (i)  in  relation  to direct tax enactment, the  amount  of  tax, penalty  or  interest  determined on or before the  31st  day  of March, 1998 under that enactment in respect of an assessment year as modified in consequence of giving effect to an appellate order but remaining unpaid on the date of declaration;\n<\/p><\/blockquote>\n
      (ii) in relation to indirect tax enactment, _ <\/p>\n<\/blockquote>\n
      (a)  the amount of duties (including drawback of duty, credit  of duty  or any amount presenting duty), cesses, interest,  fine  or penalty  determined as due or payable under that enactment as  on the  31st day of March, 1998 but remaining unpaid as on the  date of making a declaration under section 88; or  <\/p>\n<\/blockquote>\n
      (b)  the the amount of duties (including drawback of duty, credit of duty or any amount representing duty), cesses, interest,  fine or  penalty  which  constitutes the subject matter  of  a  demand notice or a show-cause notice issued on or before the 31st day of March, 1998 under that enactment but remaining unpaid on the date of  making a declaration under section 88, but does  not  include any  demand relating to erroneous refund and where a  show-cause notice is issued to the declarant in respect of seizure of  goods and demand of duties, the tax arrear shall not include the duties on such seized goods where such duties on the seized goods  have not been quantified. <\/p><\/blockquote>\n
      Explanation._Where a 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 the date of making  a declaration by him under section 88 which includes  any
\ndeposit made by him pending any appeal or in pursuance of a court order  in  relation  to such duties, cesses,  interest,  fine  or penalty, such payment shall not be deemed to be the amount unpaid for the purposes of determining tax arrear under this sub-clause;\n<\/p>\n
      (n)  All other words and expressions used and not defined in this Scheme  but defined in any direct tax enactment or  indirect  tax enactment  shall have the meanings respectively assigned to  them in those enactments. ”\n<\/p>\n
 4.2  Sections 89 and 90 deal with the manner in which declaration has to be made  and  the manner in which the payment of tax arrears is  to  be  made. Section  91  provides that the designated authority shall, subject  to  the conditions  provided  in Section 90, grant immunity  from  instituting  any proceedings for prosecution for any offence under any direct tax  enactment or  indirect tax enactment or from the imposition of penalty under  any  of
\nsuch  enactments,  in respect of matters covered in the  declaration  under
\nsection  86.  The provisions of section 94 make explicitly clear  that  any benefit,  concession or immunity to the declarant shall be  available  only for  the year in which the declaration has been made. Further,  section  95 specifies certain circumstances, cases, situations in which the benefit  of the Scheme shall not be available.\n<\/p>\n
 4.3  Sections 90 to 94 are of relevance and hence are extracted and  repro-\n<\/p>\n
duced as under :-\n<\/p>\n
       Time and manner of payment of tax arrears.\n<\/p><\/blockquote>\n
      90.(1) Within sixty days from the date of receipt of the declaration  under section 91, the designated authority shall by  order, determine the amount payable by the declarant in accordance  with the  provisions  of this Scheme and grant a certificate  in  such form as may be prescribed to the declarant setting forth  therein the particulars of the tax arrear and the sum payable after  such determination towards full and final settlement of tax arrears :\n<\/p><\/blockquote>\n
      Provided  that  where any material particular  furnished  in  the declaration is found to be false, by the designated authority  at any  stage, it shall be presumed as if the declaration was  never made  and all the consequences under the direct tax enactment  or indirect  tax enactment under which the proceedings  against  the declarant  are or were pending shall be deemed to have  been  revived :\n<\/p><\/blockquote>\n
      Provided  further  that the designated authority  may  amend  the certificate for reasons to be recorded in writing.\n<\/p><\/blockquote>\n
      (2)  The declarant shall pay, the sum determined by the designated authority within thirty days of the passing of an order by the designated authority and intimate the fact of such payment of the designated authority along with proof thereof and the  designated authority shall thereupon issue the certificate to the declarant.\n<\/p><\/blockquote>\n
 (3)  Every  order passed under sub-section (1),  determining  the sum  payable  under this Scheme, shall be conclusive  as  to  the matters stated therein and no matter covered by such order  shall be  reopened in any other proceeding under the direct tax  enactment  or  indirect tax enactment or under any other law  for  the time being in force.\n<\/p>\n
      (4)  Where  the declarant has filed an appeal or reference  or  a reply to the show-cause notice against any order or notice giving rise to the tax arrear before any authority or Tribunal or Court, then, notwithstanding anything contained in any other  provisions of any law for the time being in force, such appeal or  reference or  reply  shall be deemed to have been withdrawn on the  day  on which the order referred to in sub-section (2) is passed :\n<\/p>\n
 Provided that where the declarant has filed a writ petition or  appeal or reference before any High Court or the Supreme Court against any order in respect of the tax arrear, the declarant  shall file an application before such High Court or the Supreme  Court for withdrawing such writ petition, appeal or reference and  after withdrawal of such writ petition, appeal or reference with  the leave of the Court, furnish proof of such withdrawal along  with the intimation referred to in sub-section (2).\n<\/p>\n
      Immunity  from the prosecution and imposition of penalty in  certain cases.\n<\/p>\n
      91.  The  designated authority shall, subject to  the  conditions provided  in  section  90, grant immunity  from  instituting  any proceeding  for prosecution for any offence under any direct  tax
\nenactment  or indirect tax enactment, or from the  imposition  of penalty  under any of such enactment, in respect of matters  covered in the declaration under section 88.\n<\/p>\n
      Appellate authority not to proceed in certain cases.\n<\/p>\n
      92.  No  appellate  authority shall proceed to decide  any  issue relating to the disputed chargeable expenditure, disputed chargeable interest, disputed income, disputed wealth, disputed value of gift or tax arrear specified in the declaration and in respect  of which  an order had been made under section 90 by the  designated
\n     authority or the payment of the sum determined under that section
\n     :\n<\/p>\n
      Provided  that in case an appeal is filed by a Department of  the Central  government  in  respect of such issue  relating  to  the disputed  chargeable expenditure, disputed  chargeable  interest, disputed  income, disputed wealth, disputed value of gift or  tax arrear (except where the tax arrear comprises only penalty,  fine or  interest),  the appellate authority shall decide  the  appeal irrespective or such declaration.\n<\/p>\n
      No refund of amount paid under the Scheme.\n<\/p>\n
      93.  Any  amount paid in pursuance of a  declaration  made  under
\n     Section 88 shall not be refundable under any circumstances.\n<\/p>\n
 4.4  Section 88 provides for settlement of tax payable. Section 89 provides
\nfor particulars to be to be furnished in a declaration under Section 88.\n<\/p>\n
 5.   The Memorandum to Finance ( No.2) Bill, 1998 thus explains the scheme_ Kar Vivad Samadhan Scheme seeks to provide a quick and voluntary settlement of tax dues outstanding as on 31.3.1998, both in various direct tax  enactents as well as indirect taxes enactments by offering waiver of a part  of the arrear taxes and interest and providing immunity against institution of prosecution and imposition of penalty. The assessee on his part shall  seek to  withdraw  appeals  pending before  various  appellate  authorities  and
\nCourts. The Scheme comes into force on the first day of September, 1998 and
\nends  on 31st day of December, 1998.  It will have following  salient  features.\n<\/p>\n
      The  scheme is applicable to tax arrears outstanding as  on  31.3.1998
\nunder various direct tax enactments and indirect tax enactments. The amount payable by the applicants termed as declarants shall be determined as under :-\n<\/p>\n
      (a)  Direct Taxes  <\/p>\n<\/blockquote>\n
      (i)  The declarant shall be required to pay tax @ 30% (35% in the case  of firms and companies) on the amount of income in  dispute (in other than search and seizure cases).\n<\/p><\/blockquote>\n
      (ii)  Where tax arrears include income-tax, interest  payable  or penalty  levied, the amount payable shall be 30% of the  disputed income (35% in the case of firms and companies).\n<\/p><\/blockquote>\n
      (iii) Where tax arrears comprise only interest payable or penalty levied, the amount payable shall be 50% of the tax arrear.\n<\/p><\/blockquote>\n
      (vi)  Where  tax  arrears include the tax,  interest  or  penalty determined  in any assessment on the basis of search and  seizure  proceedings under section 132 or section 132A of Income-tax  Act, the  amount payable shall be 40% of the disputed income  (45%  in the case of firms and companies). <\/p><\/blockquote>\n
      (v)  In respect of arrears under Wealth-tax Act, the amount  payable  shall  be 1% of disputed wealth where the tax  arrears  includes wealth-tax or interest and penalty levied the addition  to wealth-tax. Where tax arrear is only interest payable or  penalty
\nlevied,  50% of such amount is to be paid. Where the tax  arrears are  determined  on the basis of search and  seizure  proceedings under section 37A or 37B of Wealth tax Act, the tax payable shall be @ 2% of the disputed wealth.\n<\/p>\n
      (vi) In respect of tax arrears payable under the Gift tax Act the amount  payable  shall be 30% of the disputed value of  the  gift where  the  tax arrears includes gift-tax. Where tax  arrears  is only interest payable or penalty levied, 50% of such amount shall
\n     be paid.\n<\/p>\n
      (vii)  In  respect of tax arrears payable  under  Expenditure-tax Act,  the amount payable shall be 10% of the disputed  chargeable expenditure where the tax arrears is expenditure-tax or  includes interest  payable  and penalty, in addition where the  arrear  is only in respect of interest or penalty, only 50% of the arrear is only  in respect of interest or penalty, only 50% of  the  arrear shall be payable.\n<\/p>\n
      (viii) In respect of tax arrears payable under Interest-tax  Act, the  amount  payable  shall be @ 2% of  the  disputed  chargeable interest  where  tax  arrear includes  interest-tax  or  interest payable  and  penalty  levied, in addition. If  the  tax  rrears
\nincludes only interest or penalty levied, in addition. If the tax arrears  includes  only interest or penalty, the  amount  payable will be 50% of the tax arrear.\n<\/p>\n
      (b) Indirect taxes   <\/p>\n
      Under  indirect taxes the amount payable shall be 50% of the  tax
\n     arrear and including interest payable, fine or penalty levied.\n<\/p>\n
      A  person desiring to avail the scheme is required to file a  declaration  in the prescribed form before the designated authority  notified  for this  purpose.  The designated authority shall pass an order  within  sixty days of the declaration determining the amount payable in accordance  with the provisions of the Scheme and grant a certificate indicating the particulars  of  tax  arrears and the sum payable and intimate the  same  to  the declarant.  The declarant will pay the sum payable as determined by  designated authority within thirty days of the passing of such order. The  order passed  by  the designated authority shall be conclusive and shall  not  be reopened  in any other proceedings or under any law for the time  being  in force.  Where  the declarant has filed an appeal or  reference  before  any Authority,  Tribunal  or Court, notwithstanding anything contained  in  any other provision of law for the time being in force, such appeal,  reference or reply shall be deemed to have been withdrawn. Where writ petitions  have been filed before the High Court or Supreme Court the declarant shall  move an application for withdrawing such petitions and furnish the proof of  the same alongwith the intimation. Any amount paid in pursuance of  declaration made under the Scheme shall not be refundable under any circumstances.\n<\/p>\n
      The  designated authority shall subject to the conditions provided  in the  Scheme grant immunity from prosecution or penalty under  the  relevant Acts in respect of matters covered in the declaration.\n<\/p>\n
      The  Scheme shall not be applicable in respect of tax arrears in  following cases :\n<\/p>\n
      (a)  In respect of direct taxes, _ <\/p>\n
      (i)  in  a  case  where  prosecution  for  concealment  has  been launched under any direct tax enactment;\n<\/p>\n
      (ii) in  a case where Settlement Commission has passed the  order on disputed income;\n<\/p>\n
      (iii)  in a case where no appeal or reference is  pending  before any  appellate authority or Court or revision application  before the Commissioner.\n<\/p>\n
      (b)  In respect of indirect tax enactments _ <\/p>\n
      (i)  in  a  case where prosecution has been  launched  under  any indirect tax enactment;\n<\/p>\n
      (ii) in a case where show-cause notice or notice of demand  under Customs Act or the Central Excise Act has not been issued.\n<\/p>\n
      (c)  In  respect  of a person against whom  prosecution  for  any offence  punishable under Ch.IX and Ch.XVII of the  Indian  Penal Code,  Narcotics Drugs and Psychotropic Act, 1985  the  Terrorist and  Disruptive Activities Prevention Act, 1987 or Prevention  of Corruption Act, 1988 has been instituted.\n<\/p>\n
      (d)  In  respect of a person against whom an order  of  detention has been made under Conservation of Foreign Exchange and  Prevention of Smuggling Activities Act, 1974.\n<\/p>\n
      (e)  In  respect  of a person notified  under  sub-section(2)  of
\n     Section 3 of Special Court (Trial of Offences Relating to  Transactions in Securities) Act, 1992.\n<\/p>\n
      Where  the declarant has filed an appeal or reference or reply to  the
\nshow-cause  notice  against any order or notice giving rise to  tax  arrear before  any authority or Tribunal, such appeal or reference or reply  shall be deemed to have been withdrawn. No appellate authority or court shall try in a suit or issue relating to arrear tax specified in the declaration.\n<\/p>\n
 6.   On  behalf of the petitioners it is submitted that the  entire  scheme falls foul of Article 14 and Entry 82 in List I of Seventh Schedule to  the
\nConstitution. The grounds of challenge laid in the petition are very  many. However,  Mr.G.C.Sharma, the learned senior counsel for the petitioner,  in his  usual style of which lucidity and brevity are the hallmark,  submitted that  the petitioners propose to canvass the following contentions for  the consideration  of this Court which only need to be adjudicated upon.  Entry 82  of List-I_ Union List-in Schedule-VII to the Constitution provides  for taxes on income other than agricultural income. Firstly, the scheme  treats
\nwith  hostile  discrimination  by meting out  discriminatory  treatment  to different  assessees though falling into one class i.e.  several  assessees falling into one class are treated unequally. Secondly, artificial  categories have been brought into existence and treated with difference i.e.  out of  the assessees falling into one category, some have been brought in  and same have been left out of the Scheme without their being any  intelligible differentia.  The object of the scheme is two fold : “(i) reducing the  tax
\narrears,  and  (ii)  reducing the tax litigation”. The  categories  of  the assessees should have been so carved out as to achieve the twin  objective. The  categorisation as evidenced by the Scheme frustrates the  very  objective.\n<\/p>\n
 6.1  The learned senior counsel for the petitioner gave an illustration  in the form of a table to demonstrate the validity of his contention which  is as under :- <\/p>\n
\n CASES  TOTAL  TAX       TAX  DISPUTED  DISPUTED  TAX TOTAL AMOUNT INCOME PAYABLE   PAID TAX       INCOME    PAYABLE   INCIDENCE WRITTEN DETER- ON OR   (UNPAID AS PER   UNDER     OF TAX    OFF. MINED  AFTER   ON THE  SEC.87(e)  THE\n       AS PER 31.3.98  DATE OF          SCHEME\n       ASSESS-        DECLARA-         (AS PER\n       MENT AND       TION AS          SECTION \n       DISPUTED       PER SEC.         88(ii)\n       ON 31ST         87(f)\n       MARCH'98\nA.     100    40        20        20   50(100X 20)    15   35   5\n                                       40<\/span>\nB.     100    40        10        30   75(100X30)     22.5 32.5 7.5\n                                       40<\/span>\nC.     100    40        -         40   100(100X40)    30   30   10\n                                       40<\/span>\nD.     100    40        40        -    -              -    40   -\n                             (ARTIFICIALLY\n                             ALTHOUGH WHOLE\n                             DISPUTED)\n \n\n 6.1.1     The  learned  counsel  submitted that there  is  no  intelligible \ndifferentia to distinguish the cases of A,B and C. They all fall under  the \nScheme but the impact of the Scheme on the assessees falling in each of the \n3  categories is different. Though each of the assessees is liable  to  pay \nthe  tax of Rs.40\/- each, the incidence of tax is eliminated  at  different \nrates  solely  by reference to the factum of the tax having  been  actually \npaid or not on or after 31.3.1998. This is violative of Entry 82 above said. \n \n\n 6.1.2     The assessees falling under Category-D are deprived of the  bene-\nfit of the Scheme merely because they have been honest and candid enough to \npay  the tax in its entirety though after 31.3.1998. Out of  the  assessees \nwho  have incurred the same amount of liability to pay the tax, a  distinc-\ntion  cannot be drawn amongst themselves by formulating classes  solely  by \nfinding  out whether the tax has been paid or not paid and if paid then  to \nwhat extent. Such a classification is without any intelligible differentia. \n \n\n 7.   Developing the arguments further, the learned senior counsel Shri G.C. \nSharma put forth the following contentions :- \n  \n\n<\/pre>\n
      (i)  The provisions of Section 95(1)(c) of the Act read with  the objects  as  declared by the Finance Minister in para 95  of  his speech  clearly show that the object of the scheme is  to  reduce the volume of litigation pending before the appellate authorities established  under Income Tax Act and the Courts which  has  been pending since long -as a result of which considerable Revenue has been locked up in the disputes.\n<\/p>\n
      (ii)  These  disputes  may be resolved either in  favour  of  the assessee  or in favour of the Revenue. This would result  either in  enforcing the recovery of balance outstanding tax demands  or in  refunds  where taxes have been recovered more  than  what  is determined on the final settlement of disputes. This would be the final  outcome of all disputes pending before the  Appellate  Authorities or the Court. To accelerate the process of arriving  at  such  outcome  the  scheme has been brought into  force  but  the denial  to  the person who has paid the entire tax to  arrive  at such an outcome is discriminatory under the Scheme.\n<\/p>\n
      (iii) Thus a well defined class of persons under the scheme is  a tax  litigant who has raised a tax dispute before  the  Appellate Authorities  or a Court with regard to determination of  his  tax liability.  The further classification between this well  efined
\nclass clearly identified making a division between those who have paid  their  tax fully or partly, although  still  disputed,  and others who have not paid tax at all, although likewise disputed – is  discriminatory,  arbitrary,  unreasonable  and  violative  of Article  14  of the constitution on the ground that there  is  no intelligible  difference  between the  said  sub-divided  classes having regard to the object of the scheme.\n<\/p>\n
 (iv) The definition of “disputed tax” as enacted in Section 87(f)
\nwhich means only unpaid tax but still disputed and excluding tax paid, which is also disputed and is likely to be refunded wholly or partly on the result of appellate decision or Court’s judgment and orders is ultravires the very concept of taxes on income per entry 82 of the List 1 of the Consititution, apart from being in conflict with the objects of the schemes and Section 95(ii) of the Act. If the scheme applies only to litigant – it must be equal to all of them Imposition of taxes on income under Entry 82 of the Constitution does not permit inequality of any kind in this respect. No taxation law can be held to be constitutional unless it fulfillls this test.\n<\/p>\n
 (v) The inequality is glaring and obvious in as much as an assessee who succeeded before ITAT or a High Court on a certain question of law relating to assessment year being 1995-96 having a certain tax impact of Y, but has to lose finally on the basis of law laid down by the Supreme Court – the Department having carried forward the dispute till the end shall have to pay the tax X, whereas another assessee who has failed till today on the
\nquestion of imposition of X amount of tax in respect of the same assessment Year 1995-96 and is bound to fail till the end to which the dispute is taken-can escape with the lesser burden of tax @ 30% of the disputed income. This is unequal imposition of tax on the two assessees falling into same class.\n<\/p>\n
      (vi)  The  object  of the scheme is to reduce  tax  arrears.  For writing off tax arrears for any class of assesses no  legislation is  necessary.  But here the writing off is  conditioned  by  the assessee withdrawing his appeal against the demand of tax  levied
\non him. In substance, therefore, the scheme is for speedy  recovery  which ultimately results in an unequal imposition of tax  on person identically situated. This offends the principle of equality enshrined in the Constitution under Article 14.\n<\/p>\n
      (vii) In its final analysis, it will be observed, that the scheme imposes  a  higher incidence of taxation on one  assessee  and  a lesser incidence of taxation on another assessee although both of them possess the same characteristics. That is to say, that  both have disputed the assessments of their total income with  respect to  the same amount of tax liable for the same  assessment  year. The  scheme  attributes  a further quality to  the  tax-payer  of having  not paid fully or partly the amount demanded and  reduces thereby  the  incidence of tax falling on such an  assessee.  The question is – Can the entry 82 in the List I of Seventh  Schedule to  the  constitution which imposes taxes on  income  permit  the legislature  to  vary the incidence of  taxation  retrospectively
\ndependent only upon the amount of taxes not paid.\n<\/p>\n
 8.   Shri Madan Lokur, the learned Addl. Solicitor General assisted by Shri R.C.Pandey and Ms.Premlata Bansal for the respondents disputed the validity of  submissions made on behalf of the petitioners. The  learned  Additional Solicitor General brought to the notice of the Court the following  statistics  showing  pendency of litigations at several stages as  shown  in  the chart:\n<\/p>\n
                               Pendency of Appeals
\n     A.   DIRECT TAXES             Filed by       Filed by  Total
\n                              Department     Assessee\n<\/p><\/blockquote>\n
     (i) Before DCIT(A)\/CIT(A)          –         2,15,313  2,15,313
\n     (As on 31.3.97)\n<\/p><\/blockquote>\n
     (ii) Before ITAT              1,54,874       1,51,716  3,06,690
\n     (As on 31.3.97)\n<\/p><\/blockquote>\n
     (iii) Before High Court       40,959         3,437     54,396
\n     (As on 31.3.98)\n<\/p><\/blockquote>\n
     (iv) Before Supreme Cour      7,068          720       7,788
\n     (As on 31.3.98)
\n     B. INDIRECT TAXES
\n     Total number of cases
\n     pending in adjudication
\n     at various stages                                      135000
\n     Tax arrears involved in disputes    Realisation
\n     A. Direct Taxes     2,947 crores         38,000 crores 1997-98
\n     B. Indirect Taxes   12,000 crores<\/p>\n
      (It  was pointed out by the learned ASG that the sources of  above said statistics are CAG’s report, and report of the Departmental Committee).\n<\/p><\/blockquote>\n
 9.   The  learned  Addl.  Solicitor General submitted that  the  Scheme  is neither  discriminatory  nor violative of fundamental  rights.  The  scheme seeks  to  address  the twin problem of large number of  tax  disputes  and mounting tax arrears defying realisation. The Scheme is open to such assessees  who  have  disputes pending as well as tax arrears  linked  to  those disputes.  This  is well defined category and a  reasonable  classification tailored to achieve the twin objective of the scheme.\n<\/p>\n
 9.1  The  learned  Addl.Solicitor  General further submitted  that  if  the submission  of  the learned counsel for the petitioner was to  be  accepted then  the Government would end up refunding the tax collected\/realized  and that would defeat the very objective sought to be achieved if the assessees who  have paid the taxes and hence had ceased to be in arrears were  to  be included  in the scheme solely because they were keeping alive  their  disputes.  The assessees who have disputes pending but no tax arrears  pending
\ncould  be  due to a number of reasons viz. (i) lost in  appeal  before  the competent  authority; (ii) no stay granted by the competent  authority  and thus  left with no alternative but to pay; (iii) any arrears  recovered  by process of recovery; (iv) payments made to avoid penalty and interest; (vi) voluntary payments &c.\n<\/p>\n
 9.2  Payment  made  or  not is a relevant factor as the  objective  of  the
\nscheme is to realise the tax arrears alongwith reducing the litigation  and not  reducing the tax litigation merely. The two qualifications  taken  to-gether make one and it is incorrect to attempt at treating the twin  object as  two  objects to be seen in isolation with each other or to  assign  one ingredient more weight than the other.\n<\/p>\n
 9.3  As to the cut off dates having been assigned as 31.3.98 for  determining the tax in arrears and the date of declaration on or after first day of September, 1998 but on or before 31st December, 1998 for the arrears having remained  unpaid, so as to be eligible to take benefit of the scheme  ,  it was  submitted  by the learned ASG that they have been so appointed  as  no other alternative was practical or possible. A tax paid or realised  though disputed  could  not be included in the scheme solely on account  of  being disputed. It was submitted that the target of the scheme was not all  litigating  assessees  but the litigating assessees with  outstanding  arrears. Such a classification is fully justified and is reasonable one. It has been carved  out  keeping in view the ground realities and as a  rational  nexus with  the  objective sought to be achieved by the Scheme.  The  leaned  ASG pointed  out  that the realisation of tax by ordinary methods in  the  year 1997-98  was Rs.38,000\/ approximately while the disputed arrears were  Rs.\/43,000 crores approximately and that shows the magnitude of the problem  of arrears persuading the Govt to frame the Scheme.\n<\/p>\n
 9.4  As to the plea of Entry 82 having been contravened and the  arbitrariness allegedly flowing into the scheme by reference thereto it was  submitted by the learned ASG that the incidence of the tax on the assessees shown as  categories A,B, C & D in the illustration given by the  learned  senior counsel for the petitioner remains the same; what is altered is the  extent of  realisation  guided by the factor of the tax having not  been  realised inspite of the lapse of time and the need for collection felt by the State.\n<\/p>\n
It  was  submitted that the Parliament is well within its  rights  granting relief  to certain assessees from recovering the tax by enacting a  formula which  would tempt or incentives the defaulters into clearing of  the  arrears. This has nothing to do with the aspect of taxability of income.\n<\/p>\n
10.  Before proceeding further, we may place on record that looking at  the wide  implications  which  the scheme has and the  consequences  which  are likely  to  flow on the public exchequer depending on the  challenge  being upheld or turned down, Mr.M.S.Syali and Mr.J.R.Goel, the two learned  advocates practicing on taxation side sought leave of the Court for  addressing it which was allowed. The contentions raised by Mr.Syali deserve  appropriately  to be taken note here itself. We would revert to the plea raised  by
\nShri Goel, a little later.\n<\/p>\n
 11.  Mr.Syali submitted that the Scheme sub-classifies the largest class of
\nlitigating assessees into two by referance to the following factors :\n<\/p>\n
   (i)     Whether the tax was or was not in arrears as on 31.3.98; \n \n\n         (ii)    whether the arrears have continued to remain so till the date of making a declaration or were cleared by them.  \n \n\n<\/pre>\n
 11.1  Mr.Syali further submitted that the dividing line drawn by the above-said classification is between a litigant in arrears and a litigant not  in arrears.   The  learned counsel further submitted that  a  litigant  though capable  of being classified into a category of ‘litigant’ in  arrears  has been further artificially sub-classified into two – a ‘litigation  attacking or prosecuting’ and a’litigant-in- defense’. Artificially a distinction has been drawn within the class of assessee litigating before a competent forum by trying to find out whether the litigation is being pursued by the
\nassessee or by the Department though in both such sub-classifications the assessee  satisfies  the  principal twin test of being a litigant  and  also  in arrears. The learned counsel submitted that this is violative of Article 14
\nof the Constitution.\n<\/p>\n
 11.2  The learned counsel further submitted that there are several modes by which  the  tax though levied ceases to be in arrears. There may be  (i)  a voluntary payment, which may either be unconditional or under protest, (ii) a  recovery made by Department by resorting to coercive  methods  (Sections 222),  and (iii) a recovery made by adjusting the amount of tax in  arrears from  out  of  the amount liable to be refunded by the  Department  to  the assessee by reference to Section 245 of the Income-tax Act. It was  submitted  that  coercive  recovery and adjustment are acts  of  the  Department. Assuming  that  voluntary payment of tax by the assessee  deprives  him  of
\navailing  the benefit of these Scheme, it is his own voluntary act which  he cannot plead for availing a benefit to himself. But there is no  justification  for denying the benefit of scheme to the assessee who was in  arrears of  tax on 31.3.1998 but the arrears have stood wiped out by an act of  the Department  by  affecting the recovery resorting to coercive  steps  or  by making  an adjustment, exercising the powers statutorily conferred  on  the revenue  by Sections 222 and 245 of the Income-tax Act in which  cases  the free will or voluntary act of the assessee does not come into play at  all. Such  a  situation suffers from the vice of unjustness  or  unfairness  and
\nirrationality.\n<\/p>\n
 12.  Before  we may deal with merits of the contentions advanced, we  would like to refer to the Constitutional Bench decision in R.K.Garg Vs. Union of India  , the leading authority on the subject,  which  has been  referred  to invariably in subsequent cases raising  similar  issues.  Challenge  was  laid to the constitutional validity of the  Special  Bearer Bonds (Immunities and Exemptions) Ordinance, 1981, later on repealed by  an Act  of identical description. The test of classification by  reference  to Article 14 was laid down as under :-\n<\/p>\n
     “The  classification must not be arbitrary but must be  rational,
\nthat  is to say, it must not only be based on some  qualities  or characteristics which are to be found in all the persons  grouped together  and not in others who are left out but those  qualities or characteristics must have a reasonable relation to the  object of  the  legislation. In order to pass the test,  two  conditions must  be fulfillled, namely, (1) that the classification  must  be founded on an intelligible differentia which istinguishes those that  are grouped together from others and (2)  that  differentia must have a rational relation to the object sought to be achieved by the Act.\n<\/p>\n
      The differentia which is the basis of the classification and  the object  of the Act are distinct things and what is  necessary  is that there must be a nexus between them. In short, while  Article 14  forbids  class  discrimination by  conferring  privileges  or imposing  liabilities upon persons arbitrarily selected out of  a large  number of other persons similarly situated in relation  to the privileges sought to be conferred or the liabilities proposed to be imposed, it does not forbid classification for the  purpose of legislation, provided such classification is not arbitrary  in the  sense above mentioned. It is clear that Article 14 does  not forbid reasonable classification of persons, objects and transactions  by the legislature for the purpose of  attaining  specific ends. What is necessary in order to pass the test of  permissible classification  under Article 14 is that the classification  must not  be, “arbitrary, artificial or evasive” but must be based  on
\nsome real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved by the  legislature.”\n<\/p>\n
 12.1 Their Lordships stated certain well established principles evolved  by the Courts as rules of guidance in discharge of the constitutional function of judicial review by the courts :-\n<\/p>\n
      “The  first rule is that there is always a presumption in  favour
\nof the constitutionality of a statute and burden is upon him  who attacks  it to show that there has been a clear transgression  of the constitutional principles. This rule is based on the  assumption,  judicially recognised and accepted, that  the  legislature understands  and correctly appreciates the needs of its own  people, its law are directed to problems made manifest by experience and  its discrimination are based on adequate grounds.  The  presumption of constitutionality is indeed too strong that in  order to  sustain it, the Court may take into consideration matters  of common  knowledge, matters of common report, the history  of  the times and may assume every state of facts which can be  conceived
\nexisting at the time of legislation.\n<\/p>\n
      Another rule of equal importance is that laws relating to economic  activities should be viewed with greater latitude  than  laws touching  civil rights such as freedom of speech,  religion  etc.  It  has  been said by no less a person than Holmes, J.  that  the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of  solution through  any  doctrinaire or strait-jacket formula  and  this  is particularly  true in case of legislation dealing  with  economic
\nmatters,  where,  having  regard to the nature  of  the  problems required  to be dealt with, greater play in the joints has to  be allowed  to the legislature. The court should feel more  inclined to  give judicial deference to legislative judgment in the  field
\nof  economic  regulation than in other  areas  where  fundamental human rights are involved.”\n<\/p>\n
 13.  A few other decisions which were relied on by the learned ASG may also
\nbe noticed.\n<\/p>\n
 13.1   In Shanker Lal Vs. ITO , and United  Credit  and Investment Vs. DIT 1998 (231) ITR 660 Kant vires of Voluntary Disclosure of Income Scheme introduced by Section 64 of the Finance Act, 1997 were  challenged.  The object of the Scheme was to give concessional rate of tax  and
\nimmunity  in respect of disclosure of concealed income, though the  benefit was  not  available  if the concealed income was  already  detected  before making a disclosure.The classification was held to be valid and appropriate for the purpose of the scheme.\n<\/p>\n
 13.2 In  Hari  Krishna  Bhargawa Vs. UOI, (1965) 59 ITR  243,  the  annuity deposit  as an alternative to paying income tax and means to  reduction  in the  amount of income was held to be intra vires. Their  Lordships  further held that merely because the scheme applied to upper income groups only was not discriminatory.\n<\/p>\n
 13.3 In D.Kumara Siddanna Vs. ITO, 1986 (161) ITR 642 Kant, the classification  of  tax  payers with current income above Rs. 15,000\/-  who  were  in economically superior position and making compulsory deposits resulted into mobilisation of private savings for public purposes and imposition curbs on the  inflationary trend in the economy of the country. The scheme was  held to  be  valid. The exclusion of tax payers with current  income  not  above 15000\/- was held not to be discriminatory.\n<\/p>\n
 14.  We now proceed to deal with the issues arising for decision.\n<\/p>\n
 Whether the impugned legislation i.e. the scheme is violative of Entry 82 List 1 schedule Seven of the Constitution ?\n<\/p>\n
 15.  The  plea raised on behalf of the petitioners suffers from a  fallacy.\n<\/p>\n
It is one thing to say that different assessees liable to pay tax are being taxed at different rates or differently though similarly situated. Such  is not the case here. And it is another thing to say that though by  reference to a legislation framed under Entry 82 above said persons identically  situated have been taxed identically and have incurred an identical tax liability but in the matter of realisation of tax the revenue has come out with a legislation to waive the recovery in part so as to incentives the recovery
\nof the balance. Such is the case at hand.\n<\/p>\n
 16.  The components which enter into concept of a tax are: (i) the  character  of  the imposition known by its nature which  prescribes  the  taxable event attracting the levy;(ii)   a clear indication of the person on whom the levy is imposed resulting into obligation to pay the tax, (iii) the  rate of tax,  and (iv) the measure or value to which the rate will be  applied  for computing  the tax liability (M\/S Govind Saran Ganga Saran Vs. CST,  (1985) 60 STC 1). Recovery or realisation of tax is not an essential component  of the  concept  of tax and hence validity of a tax legislation would  not  be
\ndecided by keeping in view the reliability of tax.\n<\/p>\n
 17.  In J.K. Spg & Wvg Mills Ltd Vs. UOI , their  Lordship  have said ( vide pr.10) there is a distinction between levy and  collection  of duty. In Federation of Hotel & Restaurant Association of  India Vs. UOI,  it has been held that subject of tax is different from  the measure of levy. The measure of the tax is not  determinative  of its essential character or of the competence of the legislature. 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 variety of policy options open to the State  is
\npermissible.\n<\/p>\n
 18.  Merely because the scheme permits waiver of recovery of tax  partially and  by adopting a certain formula which in its application will result  in different quantum of relief being allowed to different litigants in different  percentage depending on quantum of arrears of tax does not render  the scheme falling foul of the Entry 82 above said or Article 14 of the  Consti-\n<\/p>\n
tution.\n<\/p>\n
      Whether  the impugned classification between the ‘assessee  litigating
\nand  also in arrears’ is discriminatory as it denies benefit of the  scheme
\nto such assessees from whom recovery was effected either by coercive  methods or by making adjustments?.\n<\/p>\n
 19.  The main plank of attack is that the scheme places an honest and peace loving assessee in a position more worse than a dishonest and\/or  belligerent  assessee.  It was submitted that an honest and  peace-loving  assessee though  disputing his liability to pay the tax still makes the payment  but continues  his legal battle in the hope of succeeding in a manner known  to law  planking his hopes on a favorable decision by a Tribunal or Court.  On the  other hand, an unscrupulous assessee plays every possible card in  his
\ndeck  to resist the demand for payment of tax and so he continues to be  in arrears and like a windfall get the benefit of the Scheme. The first  category  of  assessee succumbs to pressure of the department  which  is  after enforcing  the  recovery. He does not wish to face the  attachment  etc  as coercive  process for recovery always creates an unpleasant  situation  for the assessee. So also, an assessee who had paid surplus tax to the  Department  and  who could not or did not post haste realise his  dues  from  the
\ndepartment also suffers denial of the benefit of the scheme because his tax arrears  are adjusted by the department out of the amount of refund due  to him.\n<\/p>\n
 20.  The  classification between persons who are having  unaccounted  money and honest tax payers was held to be not unreasonable in All India  Federation  of  Income-tax Practitioners Vs. UOI 1997 ( 228) ITR 68 by  the  High Court  of Bombay as the object sought to be achieved was  unearthing  unaccounted  money  by giving some inducement and immunities to  such  persons. Bombay  High  Court decision has been upheld by the Supreme  Court  in  the appeal preferred by the petitioners and is reported as 1998 (231) ITR 24.\n<\/p>\n
 21.  In  R.K. Garg’s case ( supra) their Lordships have also held  that  in economic matters legislation cannot be struck down on account of crudities, inequities and even possibility of abuse. Immorality by itself cannot  also be a ground of constitutional challenge unless the immorality be so  reeking as  to condemn the legislation as arbitrary or irrational and hence  violative of Art.14.\n<\/p>\n
 22.  The  validity  of classification has to be decided and judged  in  the light of the object sought to be achieved. The objective is twofold.  While judging  the validity of the classification we have to keep both the  limbs of  the object in view. The learned ASG has very rightly pointed  out  that allowing  the benefit of the scheme to such litigating assessees from  whom the  Revenue has succeeded in effecting recovery even by adopting  coercive methods  or by making adjustments would have been destructive of  the  very
\nobjective sought to be achieved. It is immaterial whether the tax was  paid voluntarily  by  the assessee or realised involuntarily by  the  Department resorting  to coercive means of recovery or by making adjustment; the  fact remains that the assessee ceases to be in arrears. By giving benefit of the scheme  to such class of assesses the Revenue does not stand to  gain  anything rather it stand to lose inasmuch as what has been realised shall have to be refunded. In our opinion, the basis of classification adopted by  the scheme  to this extent is guided by the objective sought to be achieved  by the legislation and therefore cannot be held to be arbitrary or  unreasonable.\n<\/p>\n
      Whether  the classification between the assessee litigating as  appellant\/petitioner  and the assessee litigating as respondents or  in  defense can be said to be arbitrary or unreal ?\n<\/p>\n
 23.  To test the submission so made we would immediately give an example.\n<\/p>\n
 23.1 There  are two assessees A and B identically situated in all  respects
\nin the matter of nature of income, quantum of taxable income and the  category  of  tax but they are situated at two different places, say  X  and  Y respectively. Two assessing officers finalising their assessments at X  and Y  finds their incomes and taxable incomes identical and levy an  identical amount  of tax on the two. Both file appeals before the  Commissioner  (Appeals). The legal plea raised by A before the Commissioner at X find favour with  him and the appeal is allowed. The Commissioner at Y does  not  agree with the same plea raised by B as an appellant and dismisses the appeal.  B prefers his appeal before the Income-tax Appellate Tribunal. In the case of A the Department comes up in appeal to the Tribunal. The appeals are  pending on the date of coming into force of the Scheme.\n<\/p>\n
 23.2 The  Tribunal would take the same view on the legal issue arising  for decision in the two appeals and therefore the decision would be the same in both  the appeals. B is covered by the scheme and may take benefit  thereof where after his appeal shall not be decided by the Tribunal. A cannot  take the  benefit of the Scheme for he will not be treated as in arrears  .  The appeal preferred by the department shall be heard and decided on merits  on account of proviso enacted to Section 92.\n<\/p>\n
 23.3 A and B are both are litigating assessees. Both are in arrears of tax.\n<\/p>\n
From  none of the two the Revenue has realised the amount of tax. The  case
\nof  the  two are ought to be distinguished solely by applying  the  distinguishing feature of who is the appellant. Here the distinction between  the two  becomes unreal and artificial and in any case arbitrary. In our  opinion,  both  the cases should have been covered by the Scheme. In  both  the cases the legislature would achieve the twin object : the litigation  would come to an end and the arrears of tax will be realised in the same quantity from  the two assessees. In fact, the Revenue should show more  inclination
\nin  favour of the assesses-A who in spite of having succeeded at one  stage of  the litigation is still prepared to give up his fight though by way  of defense  and is prepared to accept his liability to pay the tax  which  was quantified at one stage.\n<\/p>\n
 24.  The  learned  ASG  submitted that even here the  distinction  is  well defined and intelligible. As against B, his having lost in the tax  litigation, the amount of tax levied on income would be treated to be in  arrears by the Revenue so long as it is not realised. In the case of A, his  having succeeded  in appeal before the Commissioner, the tax ceases to be  in  arrears  and it would assume the character of arrears only on the  appeal  by the Tribunal being decided favourably to the Revenue. Therefore, where  the
\ndepartment is the appellant, an assessee though litigating cannot be treated to be in arrears. We find it difficult to agree.\n<\/p>\n
 25.  The  above said  submission puts a narrow and too rigid  a  meaning  on
\n‘arrears’  which does not fit in the context. The term ‘arrears’  means  an amount or quantity which still needs to be paid. It refers to money that is owed. Wharton’s Law Lexicon ( Fourteenth Edition) defines ‘arrear’ to mean-money unpaid at the due time: as sent behind;… money in the hands of an accounting  party.’ It is true that ‘tax arrears’ has been defined  as  the amount of tax, penalty or interest “determined” on or before 31.3.98  under clause  (m)  of Section 87. Still it cannot be denied in  the  illustration given  hereinabove that at one point of time the tax was determined  though such  determination was reversed in appeal by the Commissioner (Appeals). The  determination is sought to be restored in the appeal preferred by  the
\nDepartment before the Tribunal. Once the appeal is allowed, the  determination  would  relate back to the date of original  determinaion.  Under  the scheme of Income-tax Act. It is well known that a determination of liability to pay tax does not necessarily call for an order of adjudication.  Take the  cases of self assessment, payment of advance tax, deduction of tax  at source  and  so on. Several provisions prescribe for  penalty  or  interest which liability is incurred automatically and by operation of law even  when
\nan  order  of adjudication has not been made though there may be  need  for quantification  which may be a mathematical exercise merely. The  provision of  Section 90(1) throws light on this aspect. On declaration  being  made, the designated authority shall determine the amount payable by the  declarant. The previous ‘determination’ which is sought to be restored in  appeal by Department may be finalised by the designated authority .\n<\/p>\n
 26.  In  our  opinion, no sub-classification can therefore, be made  in  the class  of litigating assessees in arrears merely by reference to  the  fact whether they are prosecuting the litigation or defending themselves. In our opinion, once a liability to pay the tax was incurred and determined on  or before  31.3.98, the assessee would be treated to be in arrears inspite  of his  having succeeded at one stage of litigation if the evenue has  chosen to  continue with litigation and there is no reason why the benefit of  the
\nScheme should be denied to him. To this extent, the scheme is discriminatory  and  violative  of Article 14 of the Constitution.  All  the  assessees litigating  and in arrears belong to one class. Any attempt at carving  out further classes by reference to who is the prosecutor  \/appellant\/applicant in the pending litigation is void as based on no intelligible  differentia. It  is arbitrary irrational and evasive. It will have no rational  relation
\nto the object sought to be achieved by the Act. The twin test laid down  in R.K.  Garg’s case would fail. On the other hand keeping them in  one  class would  enable  the twin objective of legislation being  achieved  -(i)  the reduction of litigation, and (ii) the realisation of revenue.\n<\/p>\n
 27.  In the view we have taken hereinabove we are fortified by the  principle  laid down by the Supreme Court in the case of Shashi Kant Laxman  Kale Vs. UOI 1990 (185) ITR 104. Their Lordships have held :\n<\/p>\n
       “In  order to see whether classification in a  particular  taxing
\n     provision  is  valid, the court must look beyond  the  ostensible classification  and to the purpose of the law and apply the  test of  “palpable arbitrariness” in the context of the felt needs  of the  times  and  societal exigencies informed  by  experience  to
\ndetermine the reasonableness of the classification”\n<\/p>\n
 28.  Where a plain literal interpretation of a statutory provision  creates a  manifestly  unjust result which could never have been  intended  by  the legislature the court might modify the language used by the legislature  so as  to  achieve the intention of the legislature and  produce  a  rationale construction (CIT Bangalore Vs.J.A.Gotla ).\n<\/p>\n
 29.  It  is  the  stand of the respondents themselves before  us  that  the objective  of  the scheme is to reduce the litigation  and  strengthen  the coffers of the State by realising tax. The interpretation which we  propose to place on the definition of ‘tax arrears’ would better achieve the legislative  intent and object of the Scheme. It would avoid the charge of  hostile discrimination based on an attempted artificial division of  assessees belonging to one class and would produce a rational result.\n<\/p>\n
 30.  Having formed an opinion as above said, is it necessary to strike  down the  definition of ‘tax arrears’ as occurring in sub clause (i)  of  Clause (m)  of Section 87 and the proviso enacted to Section 92 ? In  our  opinion
\nthe object sought to be achieved can be so done by striking out the proviso to  Section 92 and reading down the definition of ‘tax arrears’  in  clause (m) of Section 87.\n<\/p>\n
 31.  The theory of reading down is a rule of interpretation resorted by the Court where a provision read literally seems to offend a fundamental  right or  falls outside the competence of a particular legislature. Reading  down meaning of words with loose lexical amplitude is permissible as part of the judicial process (A. Sanyasi Rao Vs. Govt of AP, 1989 (178) ITR 31 DB.\n<\/p>\n
 32.  Shri J.R. Goel, advocate submitted that the scheme is unworkable under Section  92. Take an example. An assessee disputing his liability to pay  a tax  suffers determination of a levy of Rs. 10,000\/-. He pays Rs. 4000  and does not pay Rs. 6000\/ He pursues the dispute in litigation. The benefit of scheme is available to him to the extent of Rs.6000\/- but not to the extent of  Rs. 4000\/- being the tax paid or realised. In the appeal, preferred  by
\nthe assessee, the dispute involved is tax of Rs. 10,000\/. Once the assessee chooses  to take the advantage of the scheme to the extent of  Rs.  6,000\/- which  only  is permissible, what will happen to the amount of  Rs.  4000\/- which  has been paid or realised? The amount cannot be refunded unless  the issue is decided. And the issue will not be decided because of Section 92.\n<\/p>\n
 32.1 The  learned ASG submitted that the plea suffers from a  fallacy.  The scheme  is optional and not compulsory. The assessee who is  disputing  the tax liability of Rs. 10,000\/- knows well that tax in arrears is Rs. 6,000\/- only and that his availing of the scheme to the extent of Rs. 6000\/-  would result  in excluding his right to have the issue decided to the  extent  of the entire of Rs. 10,000\/-.  Keeping this factor in view he may opt for the scheme or he may not. Nobody compels him to do so. He is the master of  his
\nown discretion.\n<\/p>\n
 32.3 In our opinion, the learned ASG is right. There is yet another way  of looking  at the riddle. In the fact situation as  demonstrated  hereinabove Section  92  can be so read as to hold that the  issue  though  common  to Rs.6000\/-  and Rs. 4000\/- both, would not be available for decision to  the extent  of  Rs.6000\/-  covered by the scheme and shall not  be  decided  or deemed  to  have  been decided to that extent. But it would  not  have  any
\neffect  by  virtue  of Section 92 on the amount of tax  to  the  extent  of Rs.4000\/-.  We do not propose to express any final opinion on this plea  in this  judgment  and leave the same to be determined in an  appropriate  and concrete  case.  This  we say for two reasons. Firstly, we do  not  have  a specific  case  before us. Secondly, the plea has been raised  not  in  the petition but only by way of intervention at the hearing. For the purpose of this case suffice it to observe that the scheme is not rendered  unworkable on account of Section 92.\n<\/p>\n
 33.  To  sum  up, our conclusions are : (1) The proviso to  Section  92  is
\nultra vires Article 14 of the Constitution as it results into creating  two artificial classes between the same class of assessees i.e. the  litigating assesses  in arrears; (2) the definition of ‘tax arrears’ in clause (m)  of Section  87  should  be so read as to mean the amount of  tax,  penalty  or interest determined by any competent authority on or before 31.3.98  though such  determination  might  have been set aside at a later  stage  if  such setting  aside  has not been accepted by the Department  and  continues  to remain  under  challenge before a court or Tribunal. (3) The  rest  of  the Scheme is intra vires the Constitution.\n<\/p>\n
 34.  We  would like to place on record that the entire case before  us  was argued  solely by reference to the provisions of Income-tax Act,  1961  and our judgment deals with the submissions so made.\n<\/p>\n
 35.  The  petition  is allowed in part. The provisio to Section 92  of  the Finance (No.2) Act, 1998 is struck down as violative of Art.14 of the  Constitution.  Rest of the Scheme is held to be intra vires  the  Constitution subject to reading down the definition of ‘tax arrears’ as indicated hereinabove. No order as to costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Delhi High Court All India Federation Of Tax … vs Union Of India & Ors. on 1 November, 1998 Equivalent citations: 1998 VIIAD Delhi 566, 76 (1998) DLT 602, 1998 (104) ELT 595 Del, 1999 236 ITR 1 Delhi Author: R Lahoti Bench: R Lahoti, C Mahajan ORDER R.C. Lahoti, J. 1. All India Federation […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[14,8],"tags":[],"class_list":["post-68821","post","type-post","status-publish","format-standard","hentry","category-delhi-high-court","category-high-court"],"yoast_head":"\nAll India Federation Of Tax ... vs Union Of India & Ors. on 1 November, 1998 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/all-india-federation-of-tax-vs-union-of-india-ors-on-1-november-1998\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"All India Federation Of Tax ... vs Union Of India & Ors. on 1 November, 1998 - 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