Settlement scheme deduction must include audit and pre-notice payments, including interest and penalty deposits, under Section 124.

Amounts paid by a declarant during audit and before issuance of the show cause notice had to be deducted while computing the amount payable under the settlement scheme in Section 124 of the Finance (No. 2) Act, 2019. Section 124(2) covers any amount paid as a pre-deposit or as a deposit during enquiry, investigation or audit, and its wording is not confined to payments booked only as tax. The legislative scheme therefore required credit for deposits made towards interest and penalty as well, if they were paid in the relevant proceedings. The Designated Committee's exclusion of such amounts was inconsistent with the statute and unsustainable.

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Issues: Whether amounts paid by the declarant towards interest and penalty before issuance of the show cause notice and during audit could be deducted while computing the amount payable under the settlement scheme under Section 124 of the Finance (No.2) Act, 2019.

Analysis: Section 124(2) provides that any amount paid as pre-deposit at any stage of appellate proceedings or as deposit during enquiry, investigation or audit shall be deducted while issuing the statement indicating the amount payable. The provision uses the expression "any amount paid" and does not restrict deduction to amounts paid only under the head of tax. The legislative scheme contemplates deduction of deposits made during the relevant proceedings irrespective of whether they were booked as tax, interest, or penalty. The computation adopted by the Designated Committee, which excluded amounts paid towards interest and penalty, was therefore inconsistent with the statutory mandate.

Conclusion: The exclusion of the amounts paid towards interest and penalty from the deductible deposit was unsustainable. The petitioner was entitled to have those amounts adjusted while computing the amount payable under the scheme.

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