Advance tax under Income Declaration Scheme 2016 entitled to same credit as TDS; issue Form 4 under Rule 4(5)

HC held that advance tax paid by a declarant under the Income Declaration Scheme, 2016 is entitled to the same credit treatment as TDS; no sustainable distinction exists for credit purposes. The court found Sections 199 and 219 place TDS and advance tax on equal footing and that the Scheme's non obstante clauses do not extinguish the character of advance payments as tax. Petition allowed: respondent must issue Form 4 under Rule 4(5) once scheme requirements are met and must grant credit for advance tax relatable to the declared income.

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Issues Involved:
1. Entitlement to a certificate in Form 4 under the Income Declaration Scheme, 2016.
2. Adjustment of advance tax paid against the liability under the Scheme, 2016.
3. Interpretation of relevant provisions and judicial precedents.

Detailed Analysis:

1. Entitlement to a Certificate in Form 4:
The petitioner sought a direction to the Principal Commissioner of Income Tax to issue the certificate in Form 4 as required by Rule 4(5) of the Income Declaration Scheme Rules, 2016. The petitioner had declared undisclosed income under the Scheme, 2016, and complied with all requirements, including payment of tax, surcharge, and penalty amounting to Rs. 1,07,58,986/-. Despite this, the certificate was not issued due to certain mistakes and the respondent's refusal to adjust advance tax paid by the petitioner.

2. Adjustment of Advance Tax Paid:
The core issue was whether the advance tax paid by the petitioner could be adjusted against the liability under the Scheme, 2016. The respondent argued that there was no provision under the Scheme, 2016, to give credit for advance tax or self-assessment tax. This stance was supported by a previous judgment of the Bombay High Court in the case of Umesh D. Ganore Vs. Principal Commissioner of Income Tax, which held that advance tax and self-assessed tax could not be adjusted against liabilities under the Scheme, 2016.

3. Interpretation of Relevant Provisions and Judicial Precedents:
The petitioner contended that the advance tax should be given the same treatment as TDS, which was allowed as per Circular No.25 of 2016 by the CBDT. The petitioner also cited the case of Kumudam Publications Private Limited Vs. Central Board of Direct Taxes, where the Delhi High Court held that advance tax could be adjusted against liabilities under the Scheme, 2016, a decision upheld by the Supreme Court.

The court examined the nature of advance tax, referring to the Constitution Bench judgment in Brij Lal Vs. Commissioner of Income Tax, which explained that advance tax is a pre-assessment collection of taxes adjustable towards income tax levied on total income. The court noted that both TDS and advance tax are methods of advance tax collection and should be treated similarly for credit purposes.

Conclusion:
The court concluded that there was no justifiable reason to treat advance tax differently from TDS for the purpose of credit under the Scheme, 2016. The advance tax paid by the petitioner, being relatable to the income for the relevant assessment years, should be credited against the liability under the Scheme, 2016. The court allowed the petition, setting aside the communication dated 14th January 2020, and directed the respondent to issue the certificate in Form 4, giving credit for the advance tax already paid by the petitioner.

Order:
(i) The petition is allowed.
(ii) Respondent No.1 shall issue the certificate in Form 4, giving credit for the advance tax paid by the petitioner.
(iii) Rule made absolute in the aforesaid terms.
(iv) No costs.

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