Court allows writ petition for Scheme 2016 adjustment, denies interest request, cites non-compliance with Income Tax Act.

The court allowed the writ petition, directing the adjustment of the amount deposited by the petitioner under the Scheme, 2016, in future assessments. The court rejected the petitioner's prayer for interest on the retained amount, citing the petitioner's conduct and non-compliance with statutory obligations under Section 139 of the Income Tax Act, 1961. The court concluded that retaining the amount without authority would be arbitrary and unconstitutional. Both judges, S.N. Prasad and S. Chand, concurred with the judgment and the directions issued.

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Issues Involved:
1. Entitlement for refund/adjustment of the amount deposited under Section 183 of the Finance Act, 2016.
2. Retention of the amount by the Income Tax Department after assessment and acceptance of returns for the years 2015-16 and 2016-17.
3. Legality of retaining the amount exceeding the assessed liability of the petitioner.

Issue-wise Detailed Analysis:

1. Entitlement for refund/adjustment of the amount deposited under Section 183 of the Finance Act, 2016:
The petitioner, a regular assessee under the Income Tax Department, declared undisclosed income under the Income Declaration Scheme, 2016, and deposited two instalments of Rs.45 lacs each but failed to deposit the third instalment of Rs.90 lacs. As per Section 187(3) of the Finance Act, 2016, failure to pay the total tax, surcharge, and penalty within the stipulated time renders the declaration non est. The petitioner argued that the amount deposited should be refunded or adjusted since the declaration is deemed non-existent. The petitioner cited judgments from the Hon'ble Supreme Court and High Courts that supported refund or adjustment of amounts deposited under similar schemes.

2. Retention of the amount by the Income Tax Department after assessment and acceptance of returns for the years 2015-16 and 2016-17:
The petitioner's premises were subjected to a search and seizure operation under Section 132 of the Income Tax Act, 1961, leading to revised returns for the assessment years 2015-16 and 2016-17, which were accepted by the Assessing Authority. The petitioner argued that since the returns were accepted and tax liabilities assessed, the Income Tax Department should not retain the amount deposited under the declaration scheme. The petitioner relied on the principle that retaining the amount without legal authority violates Article 265 of the Constitution of India.

3. Legality of retaining the amount exceeding the assessed liability of the petitioner:
The Income Tax Department argued that under Section 191 of the Finance Act, 2016, any amount paid under the declaration scheme is non-refundable. However, the court noted that the Hon'ble Supreme Court, in similar cases, directed refunds despite statutory provisions barring refunds. The court emphasized that retaining the amount after accepting the revised returns for the assessment years 2015-16 and 2016-17 would be arbitrary and in violation of Article 265 of the Constitution of India.

Conclusion:
The court allowed the writ petition, directing the adjustment of the amount deposited by the petitioner under the Scheme, 2016, in future assessments. The court rejected the petitioner's prayer for interest on the retained amount, citing the petitioner's conduct and non-compliance with statutory obligations under Section 139 of the Income Tax Act, 1961. The court concluded that retaining the amount without authority would be arbitrary and unconstitutional.

Separate Judgments:
Both judges, Sujit Narayan Prasad and Subhash Chand, concurred with the judgment and the directions issued.

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