2021 (8) TMI 1227 - HC - Income Tax

Court voids incomplete Income Declaration Scheme declaration; directs payment under Direct Tax Vivad Se Vishwas Act

Pinnacle Vastunirman Private Limited Versus The Union of India, Through The Secretary, Department of Revenue Ministry of Finance Government of India, The Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Principal Commissioner of Income Tax-2 Pune

The court held that the declaration under the Income Declaration Scheme, 2016 (IDS) was void due to non-payment of the full amount, making it non-est. The ... Application under Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act). - Seeking Adjust/give credit to the amount paid by petitioner under the Income Declaration Scheme, 2016 (“the IDS”) - Tax in respect of voluntarily disclosed income is refundable or not - application made under the Direct Tax Vivad Se Vishwas Act, 2020 - HELD THAT:- Sub-Section (3) of Section 187 of IDS categorically provides if the declarant fails to pay the tax, surcharge and penalty in respect of the declaration made under Section 183 on or before the dates specified in sub-Section 1, the declaration filed by him shall be deemed never to have been made under the Scheme - declaration will be non-est. Revenue cannot retain any amounts paid under a declaration which contemplated under the Scheme is deemed never to have been made. The Scheme does not provide for Revenue to retain the tax so paid in respect of a declaration which is void and non-est. Article 265 of the Constitution of India provides that no tax shall be levied or collected except by authority of law. This would mean there must be a law, the law must authorise the tax and the tax must be levied and collected according to the law. In the absence of any such authority of law, a retention of tax contrary to the very Scheme cannot be permitted. Therefore, the provision of Section 191 cannot have any application to a situation where the tax is paid but the entire amount of tax is not paid and accordingly the retention of the tax by respondent no.1 is illegal. Petitioner is entitled to an adjustment by giving credit to the amount paid under IDS. Respondent no. 3 is directed to rectify Form No. 3 issued under the DTVSV Act read with DTVSV Rules, to give credit to this amount and issue fresh Form No. 3, within two weeks from the day, an authenticated copy of this order is served upon respondent No. 3 by petitioner. Petitioner to make payment of disputed tax in accordance with revised / rectified Form-3 within a period of two weeks from the issuance of revised Form-3. Issues Involved:1. Legality and validity of the refusal to adjust/give credit to the amount paid under the Income Declaration Scheme, 2016 (IDS) in the petitioner's application under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act).2. Interpretation and application of Section 191 of the IDS regarding non-refundability of tax, surcharge, or penalty paid.3. Comparison and relevance of similar provisions under the Voluntary Disclosure of Income Scheme, 1997 (VDIS) and judicial precedents.Detailed Analysis:1. Legality and Validity of Refusal to Adjust/Give Credit:The petitioner challenged the refusal by the respondent to adjust or give credit for the amount paid under the IDS in the petitioner's application under the DTVSV Act. The petitioner had disclosed undisclosed income under the IDS and paid the first installment but failed to pay the subsequent installments. Consequently, under Section 187(3) of the IDS, the declaration was deemed never to have been made, and the amount disclosed was chargeable to tax. The assessing officer did not credit the amount already paid, leading to the petitioner's appeal under Section 246A of the Income Tax Act, which was pending. The petitioner then sought relief under the DTVSV Act, but the designated authority did not credit the amount paid under the IDS, prompting the petitioner to seek rectification, which was denied based on Section 191 of the IDS.2. Interpretation and Application of Section 191 of the IDS:Section 191 of the IDS states that any amount of tax, surcharge, or penalty paid under Section 184 or 185 shall not be refundable. The respondent argued that since the petitioner failed to pay the remaining installments, the declaration was deemed never to have been made, and the amount paid was forfeited. The petitioner contended that this interpretation was unfair and sought either adjustment of the amount under the DTVSV Act or a refund with interest.3. Comparison and Relevance of Similar Provisions under VDIS and Judicial Precedents:The court examined similar provisions under the VDIS, specifically Sections 67(2) and 70, which are comparable to Sections 187(3) and 191 of the IDS. The Supreme Court in Hemlatha Gargya vs. Commissioner of Income Tax held that while the time limits for payment under VDIS were mandatory, the amounts paid beyond the prescribed time should be refunded or adjusted in accordance with the law. This principle was followed by various High Courts, including the Karnataka High Court in Smt. Atamjit Singh vs. Commissioner of Income-Tax and the Kerala High Court in R. Ranganatha Reddiar vs. Income Tax Officer.Conclusion:The court concluded that the declaration under the IDS was deemed never to have been made due to non-payment of the full amount, making the declaration void and non-est. Consequently, the tax paid could not be retained by the revenue. The court directed the respondent to rectify Form No. 3 under the DTVSV Act, giving credit to the amount paid under the IDS, and issue a fresh Form No. 3. The petitioner was to make the payment of the disputed tax as per the revised Form-3 within two weeks of its issuance. The petitioner's counsel agreed to withdraw the pending appeal under Section 248 of the Act.Disposition:The petition was disposed of with no order as to costs, and all parties were directed to act on an authenticated copy of the order.