Advance tax and self-assessment payments before IDS commencement not automatically allowable under Income Declaration Scheme 2016; misrepresented declarations void

HC held that payments made before IDS commencement (1 June 2016) in the form of advance tax and self-assessment tax are not automatically allowable under the Income Declaration Scheme 2016 except TDS; a declaration obtained by misrepresentation is void. Noting unexplained reduction of declared tax for AY 2012-13, the court set aside the impugned order for a limited purpose and remitted the matter to the respondent and Assessing Officer to examine the assessee's AY 2012-13 accounts, verify the correctness of the declaration, correct arithmetical errors and, if the declaration is proper, accept and close it under the Scheme.

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Issues Involved:
1. Adjustment of Advance Tax and Self-Assessment Tax under the Income Declaration Scheme, 2016.
2. Consideration of rectification petition under Section 154 of the Income Tax Act, 1961.

Summary:

Issue 1: Adjustment of Advance Tax and Self-Assessment Tax under the Income Declaration Scheme, 2016

The petitioner sought a Writ of Certiorarified Mandamus to quash the order dated 25.04.2019, which rejected the adjustment of Rs. 1.25 crores paid as Advance Tax and Self-Assessment Tax towards the tax liability under the Income Declaration Scheme, 2016 (IDS). The respondent argued that taxes paid prior to the IDS commencement date (1st June 2016) could not be claimed under the IDS, except for TDS payments. The court noted that the petitioner had declared an undisclosed income of Rs. 4,78,68,595/- for the Assessment Years 2012-13 to 2015-16 and agreed to pay Rs. 2,10,35,871/- as tax, surcharge, and penalty. The court found that the petitioner had paid Rs. 1.25 crores without filing a return under Section 139 of the Income Tax Act, 1961, and sought to adjust this amount under the IDS, which was denied.

The court observed that the IDS, 2016 is a beneficial legislation intended to encourage defaulters to settle their income tax disputes. The court found no impediment in allowing the petitioner to adjust the amount paid as Advance Tax and Self-Assessment Tax towards the tax liability under the IDS, 2016, provided the petitioner had made a correct declaration of income for the Assessment Year 2012-13. The impugned order was set aside for the limited purpose of re-examining the petitioner's accounts for the Assessment Year 2012-13. If the declaration was found correct, it would be accepted and closed under the IDS, 2016. Any discrepancies would result in denying the benefit of the IDS, 2016 to the petitioner. W.P. No. 10735 of 2022 was disposed of with these observations.

Issue 2: Consideration of rectification petition under Section 154 of the Income Tax Act, 1961

The petitioner sought a Writ of Mandamus directing the respondent to consider the rectification petition dated 09.03.2022 under Section 154 of the Income Tax Act, 1961. The respondent argued that the IDS, 2016 is a complete code in itself, and the provisions of the Income Tax Act, 1961 are not applicable to the IDS, 2016, except for specific sections mentioned in Section 195 of the Finance Act, 2016. The court agreed with the respondent that Section 154 of the Income Tax Act, 1961 was not applicable to the IDS, 2016, and therefore, no direction could be given to the respondent to pass orders under Section 154 in respect of a dispute under the IDS, 2016.

In view of the order in W.P. No. 10735 of 2022, no further order was required in W.P. No. 10741 of 2022, which was closed along with the connected miscellaneous petitions. No costs were imposed.

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