Gujarat HC grants penalty waiver under Vera Samadhan Yojana after tax authorities misinterpreted Clause 4.5 requirements

The Gujarat HC allowed a petition challenging rejection of benefits under Vera Samadhan Yojana, 2019. The petitioner sought penalty waiver after paying tax and interest before assessment order. Tax authorities misinterpreted Clause 4.5, requiring 20% penalty deposit despite prior payments. The HC held that since petitioner paid tax and interest before assessment and scheme announcement, penalty waiver was available without additional deposit. The court quashed assessment orders and notices, granting amnesty scheme benefits. The alternative prayer for tribunal appeal restoration became redundant.

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Issues Involved:
1. Entitlement to benefits under Vera Samadhan Yojana 2019.
2. Requirement for payment of penalty under the Amnesty Scheme.
3. Validity of bank account attachment by the respondent authorities.
4. Restoration of appeals withdrawn to avail Amnesty Scheme benefits.
5. Refund of amounts wrongly recovered under the Amnesty Scheme.

Detailed Analysis:

1. Entitlement to Benefits under Vera Samadhan Yojana 2019:
The petitioner, a proprietorship firm, applied for benefits under the Vera Samadhan Yojana 2019 after having paid the tax and interest prior to the assessment order. The scheme provides waiver of interest and penalty if the tax amount is paid. The petitioner received an intimation letter stating that no amount was payable, yet the respondent demanded payment of the unpaid penalty amount. The court held that the petitioner is entitled to the benefits of the Amnesty Scheme as they had already paid the tax and interest, and the scheme's object is to waive interest and penalty upon payment of tax.

2. Requirement for Payment of Penalty under the Amnesty Scheme:
The respondent authorities misinterpreted Clause 4.5 of the Amnesty Scheme, which pertains to cases where the assessment order pertains to interest or penalty or both, requiring payment of 20% of the outstanding demand. The court noted that the petitioner had already paid the tax and interest, and the demand was raised only for the penalty. The court ruled that the petitioner was not required to pay any further amount as the assessment order included tax, interest, and penalty, and the petitioner had already complied with the tax and interest payment requirements.

3. Validity of Bank Account Attachment by the Respondent Authorities:
The respondent authorities attached the petitioner’s bank accounts without prior intimation, causing business disruptions. The court found this action improper, especially since the petitioner had applied for the Amnesty Scheme and no final decision had been communicated. The court ordered the release of the bank attachments and deemed the respondent's actions contrary to the scheme's provisions.

4. Restoration of Appeals Withdrawn to Avail Amnesty Scheme Benefits:
The petitioner sought restoration of appeals withdrawn to avail the Amnesty Scheme benefits if the scheme's application was rejected. The court held that since the petitioner was entitled to the scheme's benefits, the alternative prayer for restoration of appeals did not survive. The court emphasized that the petitioner should not be penalized for following the scheme's procedures.

5. Refund of Amounts Wrongly Recovered under the Amnesty Scheme:
The court directed the respondents to refund the amounts recovered from the petitioner pursuant to the recovery proceedings, with statutory interest, within 12 weeks. This decision was based on the finding that the petitioner was entitled to the waiver of penalty under the scheme and had already paid the required tax and interest.

Conclusion:
The court allowed the petitions, quashed the impugned assessment orders and notices, and directed the respondent authorities to grant the benefits of the Amnesty Scheme to the petitioner. The respondents were also instructed to refund the amounts recovered with statutory interest, thereby upholding the petitioner’s entitlement to the scheme’s benefits and addressing the improper actions of the respondent authorities.

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