Court Allows Amnesty Scheme for Income Tax Act Penalties

The court held that penalties under Sections 271D and 271E of the Income Tax Act could be settled under 'The Direct Tax Dispute Resolution Scheme, 2016'. The orders withdrawing penalty imposition were deemed invalid, and the petitioner was entitled to the benefits of the Amnesty Scheme. The court directed the tax department to reassess the application based on this interpretation and issue new orders.

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Issues:
Challenge to orders withdrawing penalty imposition under Sections 271D and 271E of the Income Tax Act under 'The Direct Tax Dispute Resolution Scheme, 2016'.

Analysis:
The petitioner's father faced a penalty under Sections 271D and 271E of the Income Tax Act. The petitioner sought resolution under 'The Direct Tax Dispute Resolution Scheme, 2016' by offering to pay 25% of the penalty. However, subsequent orders withdrew the penalty imposition, stating it was not linked to assessment proceedings. The petitioner contested these orders. The department referred to a clarification by the Central Board of Direct Taxes. The issue had been previously addressed by the court in a similar case, where it was debated if penalties not directly linked to assessment proceedings could be covered under the Scheme.

The court examined the Amnesty Scheme and found that it did not exclude penalties determined under the Income Tax Act. The Scheme required declarants to pay 25% of the minimum penalty along with tax and interest. The court rejected the restrictive interpretation proposed by the department and held that the Scheme aimed to ensure declarants settled tax and interest liabilities along with penalties. Exclusions from the Scheme did not explicitly cover cases seeking amnesty only for penalties imposed under the Income Tax Act. Consequently, the court ruled that the reasons provided in the withdrawal orders were not legally valid to deny the petitioner the benefits of the Amnesty Scheme.

Based on the court's analysis, it was concluded that penalties under Sections 271D and 271E of the Act could indeed be settled under the Scheme. Therefore, the orders withdrawing the penalty imposition were set aside, and the first respondent was directed to reevaluate the application based on the court's interpretation and issue fresh orders accordingly.

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