Voluntary Compliance Scheme declaration cannot be rejected contrary to scheme conditions, clarificatory circular, and prescribed notice timeline.

Under the Voluntary Compliance Encouragement Scheme, 2013, a declaration could not be rejected where inquiry, investigation, or audit had been initiated after 1 March 2013, as the scheme and its clarificatory circular permitted such declarations. Rejection was also procedurally defective because the show cause notice was issued far beyond the scheme's prescribed 30-day period after the declaration. The article states that refusal of the declaration was contrary to the scheme conditions and the circular, making the rejection erroneous and unsustainable.

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Issues: Whether the rejection of the declaration made under the Voluntary Compliance Encouragement Scheme, 2013 was valid when proceedings were initiated after 1 March 2013 and the show cause notice was issued beyond the prescribed period.

Analysis: Section 106 of the Finance Act, 2013 required that the declarant should not have been subjected to investigation or served with notice as on 31 March 2013. The circular issued under the scheme clarified that there was no bar on filing of declaration where inquiry, investigation, or audit had been initiated after 1 March 2013. The record further showed that the show cause notice rejecting the declaration was issued only on 18 August 2015, whereas the scheme contemplated issuance of such notice within 30 days of the declaration.

Conclusion: The rejection of the declaration was erroneous and unsustainable; the declaration ought not to have been rejected.

Final Conclusion: The impugned order was set aside and the assessee's appeal succeeded.

Ratio Decidendi: A declaration under the Voluntary Compliance Encouragement Scheme cannot be rejected contrary to the scheme conditions and the clarificatory circular, and rejection must also conform to the prescribed time limit for issuing notice.

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