Accused of 'Misreporting' Rs 1.06-Cr Earnings, Ex-SC Judge Availed of Amnesty Scheme: Report

Justice Arijit Pasayat, vice-chair of the SIT on black money, availed himself of the VSV scheme for resolution of direct tax disputes after the Cuttack I-T department found that he had "misrepresented his income to the extent of Rs 1.06 crore" in 2017-18, Indian Express reports.

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New Delhi: Former Supreme Court judge and deputy chairman of a special investigation team (SIT) on black money, Justice Arijit Pasayat, availed himself of a government amnesty scheme for the resolution of income tax disputes in 2020, Indian Express has reported.

The SIT on black money is chaired by retired Justice M. B. Shah. Justice Pasayat’s appointment to the same in 2014 was the Narendra Modi government’s first cabinet decision. 

In 2019, the Cuttack unit of the Income Tax (I-T) Department had reportedly sent Justice Pasayat an order noting that he had “misreported his income for 2017-18 to the extent of Rs 1.06 crore.”

A year later, Justice Pasayat availed himself of the Direct Tax Vivad se Vishwas Act, 2020, which sought to minimise litigation related to direct tax disputes by requiring individuals to pay only the disputed amount, without having to pay interest or penalty amounts, provided they did so before March 31, 2020.

Also read: New ‘Transparent Taxation’ Platform Aims to Reduce Graft, to Allow Faceless Assessments

The scheme was, however, extended to 2021 and came to be known simply as the VSV scheme. 

Notably, Section 6 of the act states: “the designated authority shall not institute any proceeding in respect of an offence; or impose or levy any penalty; or charge any interest under the Income-tax Act in respect of tax arrear.”

‘Returned income’

The Express report details findings from the 21-page order of the Cuttack I-T Department, passed on December 31, 2019, by the deputy commissioner of I-T. 

The order shows that a sum of Rs 1,06,49,760 was added to the “returned” income of Justice Pasayat. This sum was added for “excess claim of expenses from Arbitration and Dispute Resolution work,” the newspaper quoted the order as saying.

The order goes on to detail that in 2017-18, Justice Pasayat had declared Rs 26.85 lakh as income from his salary, coming from his government position as the deputy chairman of the black money SIT; and Rs 3.66 crore as income from his arbitration and dispute resolution work. 

Also read: SIT on Black Money Is a Public Authority Open to Scrutiny, Information Commission Rules

However, the order states that Justice Pasayat included the latter as “income from other sources” rather than “professional income”. 

Further, the order notes a mismatch between the fund flow prepared by the I-T Department and the claimed “expenses” – to the tune of Rs 2.01 crore – for dispute and arbitration work the former judge had shown. There were no bills or vouchers made to substantiate these expenses.

In fact, Justice Pasayat’s bank statements revealed payments amounting to Rs 1.36 crore as loans or gifts made to his daughter, who was described in the order as a Central Bureau of Investigation (CBI) public prosecutor. 

Since these expenditures were “not substantiated by any evidence” and there was no bank withdrawal to support the expenditure, the aforementioned Rs 1,06,49,760 was “not found eligible for deductions u/s 57 (iii) of the IT Act,” the Express quoted the order as saying.

 “Accordingly, the same is added back to the returned income of the assessee,” the order continued.

The I-T Department also initiated penalty proceedings under Section 270A(1) of the IT Act for misreporting income to the tune of Rs 1,06,49,760, which Justice Pasayat appealed.

The VSV scheme

The newspaper’s report cites government officials as saying that the former judge paid Rs 37.90 lakh under the VSV scheme for the “disputed” tax amount of Rs 38.28 lakh.

This disputed tax was calculated as 30% additional tax from the Rs 1,06,49,760 “returned income (amounting to Rs 31.95 lakh); 15% additional surcharge (Rs 4.79 lakh); 3% education and higher education cess (Rs 1.10 lakh); and interest under Section 234 of the I-T Act (43,616). 

Justice Pasayat confirmed that he paid Rs 37.90 lakh under the VSV scheme and also told the newspaper that he didn’t know how a private 2019 income tax order was leaked. He opined that it could have been done by someone who was hurt by some order he had passed in the past.

He further confirmed that he had filed an appeal in the matter but was later advised to avail of the VSV scheme to “pay tax and end the matter”.

“Why should a settled matter be raked up now?” the newspaper quoted him as saying.