Court directs processing of petitioner's Income Declaration Scheme application, adjusting tax credits and payments accordingly.

Kumudam Publications Pvt. Ltd. Acting Through its Managing Director Mr. P. Varadarajan Versus Central Board Of Direct Taxes And Ors.

Kumudam Publications Pvt. Ltd. Acting Through its Managing Director Mr. P. Varadarajan Versus Central Board Of Direct Taxes And Ors. - [2017] 393 ITR 599 Issues Involved:
1. Credit for advance tax and TDS under the Income Declaration Scheme, 2016.
2. Interpretation of the Scheme's provisions regarding previously paid amounts.
3. The legality of the Revenue's demand for tax without accounting for advance tax and TDS.

Issue-wise Detailed Analysis:

1. Credit for Advance Tax and TDS under the Income Declaration Scheme, 2016:
The petitioner challenged an order dated 16th September 2016, which failed to give credit for advance tax and TDS totaling Rs. 16.49 crores for AY 2010-2011 and AY 2016-2017. The petitioner, a company incorporated under the Companies Act, had been unable to file returns due to internal disputes and litigation. Despite this, it paid advance tax and TDS. The petitioner argued that under the Income Declaration Scheme (IDS), 2016, it should receive credit for these payments. The Revenue's impugned order demanded a tax of Rs. 19.60 crores without accounting for the advance tax and TDS already paid, which the petitioner contended was against the Scheme's intent and provisions.

2. Interpretation of the Scheme's Provisions Regarding Previously Paid Amounts:
The petitioner relied on Circular No. 25 of 2016, which clarified that credit for TDS should be given under the IDS. The petitioner argued that there was no logical reason to treat advance tax differently from TDS, as both are forms of "tax paid in advance." The Revenue argued that the IDS is a self-contained code, independent of other provisions of the Income Tax Act, and that advance tax credit is only given in regular assessments, not under the IDS. The court analyzed the provisions of the Scheme, including Sections 183, 184, 185, 187, and 188, and found no express bar to including previously paid amounts in the tax calculation under the IDS. The court noted that the Scheme's objective is to allow assessees to declare undisclosed income and pay the corresponding tax, surcharge, and penalty.

3. The Legality of the Revenue's Demand for Tax Without Accounting for Advance Tax and TDS:
The court examined the Revenue's contention that the Scheme should be interpreted strictly and independently of other tax provisions. However, it found that the Scheme did not explicitly exclude previously paid taxes from being credited. The court emphasized that the Scheme's provisions should be interpreted to allow credit for advance tax and TDS paid for the relevant assessment years. The court referenced the Supreme Court's decision in Shelly Products, which stated that advance tax is a mode of tax recovery and should be credited accordingly. The court also noted that the Revenue's own clarification allowed for TDS credit under the Scheme, further supporting the petitioner's argument for advance tax credit.

Conclusion:
The court directed the respondents to process the petitioner's application under the IDS, 2016, and give credit for the advance tax and TDS paid. The balance tax payable should be adjusted accordingly. The writ petition was allowed, and the respondents were instructed to ensure compliance with the IDS, 2016, in processing the petitioner's payments and declarations. The court concluded that there shall be no order as to costs.