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

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 tax paid could not be retained, and the revenue was directed to rectify Form No. 3 under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act) to credit the amount paid under the IDS. The petitioner was to pay the disputed tax per the revised form within two weeks. The petitioner agreed to withdraw the pending appeal under the Income Tax Act. The petition was disposed of with no costs.

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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.

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