Refund entitlement under the Voluntary Disclosure Scheme: tax paid on a void declaration could not be retained

Tax paid beyond the Voluntary Disclosure of Income Scheme, 1997 time limit could not be retained where the declaration was deemed never to have been made under section 67(2). Section 70's bar on refund applied only to a valid declaration under the Scheme, not to one rendered void and non-est by default for failure to pay within the prescribed period. In the absence of authority to keep tax paid on such a void declaration, continued retention was contrary to law and Article 265 of the Constitution. The declarant was therefore entitled to refund of the tax paid after the permitted period.

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Issues: Whether tax paid beyond the period prescribed under the Voluntary Disclosure of Income Scheme, 1997 could be retained by the Revenue, or whether the declarant was entitled to refund on the footing that the declaration was deemed never to have been made.

Analysis: The Scheme required payment of tax with the declaration or, at the latest, within three months from the date of declaration with interest. Failure to comply with that outer limit attracted the deeming fiction under section 67(2) that the declaration was never made under the Scheme. Section 70, which bars refund of tax paid in pursuance of a declaration, was held to apply only to a valid declaration under the Scheme and not to a declaration rendered void and non-est by section 67(2). In the absence of any authority under the Scheme to retain tax paid on such a void declaration, continued retention was held to be contrary to law and inconsistent with Article 265 of the Constitution of India.

Conclusion: The declarant was entitled to refund of the tax paid beyond the prescribed period, and the Revenue could not retain the amount under section 70.

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