2025 (4) TMI 332 - HC - Income Tax

Petitioner entitled to refund of excess amount under Section 7 of Direct Tax Vivad Se Vishwas Act 2020

Madras HC allowed the writ petition challenging rejection of application to rectify mistake in Form-3 under Direct Tax Vivad Se Vishwas Act, 2020. Court ... Direct Tax Vivad Se Vishwas Act - rejecting the application filed by the petitioner to rectify the mistake in Form-3 - scope of expression “disputed tax” and “tax arrear” have been defined in Section 2(j) and Section 2(o) of the Direct Tax Vivad Se Vishwas Act, 2020 HELD THAT:- The amount payable by the petitioner is only one-half of the amount calculated in Sl.No.(3) to Table No.1, in such issue, and in such manner as may be prescribed as per the 1st Proviso to Section 3 of the Direct Tax Vivad Se Vishwas Act, 2020. The case of the petitioner ought to have been reconciled in terms of Serial No.(a) to Table to Section 3 of the Direct Tax Vivad Se Vishwas Act, 2020 read with 1st Proviso to the said Act and the definition of “disputed tax” in Section 2(j)(F) and definition of “tax arrears” in Section 2(o) of the Direct Tax Vivad Se Vishwas Act, 2020. As per Section 7 of the Direct Tax Vivad Se Vishwas Act, 2020, only amounts paid in pursuance of a declaration made u/s 4 shall not be refundable under any circumstances. Here, no amount has been paid by the petitioner pursuant to the declaration filed under Section 4 of the Direct Tax Vivad Se Vishwas Act, 2020. As per Explanation to Section 7 of the Direct Tax Vivad Se Vishwas Act, 2020, where the declarant had paid any amount under the Income Tax Act, 1961 in respect of his “tax arrear” which exceeds the amount payable under Section 3 of the Direct Tax Vivad Se Vishwas Act, 2020, he / she shall be entitled to a refund of such excess amount. However, the said person will not be entitled to interest on such excess amount. Therefore, this Writ Petition is allowed by setting aside the Impugned Communication/Order rejecting the application filed by the petitioner to rectify the mistake in Form-3 dated 20.04.2021 issued by the respondent under the provisions of the Direct Tax Vivad Se Vishwas Act, 2020. ISSUES PRESENTED and CONSIDEREDThe primary issue considered in this judgment is whether the petitioner is entitled to a rectification of Form-3 issued under the Direct Tax Vivad Se Vishwas Act, 2020, and consequently, a refund of the excess amount paid as tax arrears. The court also examined whether the interest levied under Sections 234A, 234B, and 234C of the Income Tax Act, 1961, should be waived under the provisions of the Direct Tax Vivad Se Vishwas Act, 2020.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe Direct Tax Vivad Se Vishwas Act, 2020, provides a mechanism for resolving tax disputes by allowing taxpayers to pay only the disputed tax amount, waiving interest and penalties. The Act defines 'disputed tax' and 'tax arrear' under Sections 2(j) and 2(o), respectively. Section 3 outlines the amounts payable under the Act, with the first proviso allowing for a reduced payment if the appeal is filed by the income-tax authority.Court's Interpretation and ReasoningThe court interpreted the provisions of the Direct Tax Vivad Se Vishwas Act, 2020, to determine the correct amount payable by the petitioner. It noted that the petitioner had already paid a significant portion of the tax arrears and that the interest levied should be waived under the Act. The court also considered the relevant precedents cited by the petitioner, although it found them largely irrelevant to the specific facts of the case.Key Evidence and FindingsThe court found that the petitioner had paid Rs. 33,53,781/- towards tax arrears, which exceeded the amount payable under the Direct Tax Vivad Se Vishwas Act, 2020. The court noted that the interest amount of Rs. 31,38,157/- should be waived, and only the disputed tax amount of Rs. 28,47,653/- should be considered for payment.Application of Law to FactsThe court applied the provisions of the Direct Tax Vivad Se Vishwas Act, 2020, to the facts of the case, concluding that the petitioner was entitled to a refund of the excess amount paid. The court determined that the petitioner should pay only 50% of the disputed tax amount as per the first proviso to Section 3, which was not paid before the specified date, resulting in an excess payment of Rs. 19,29,955/-.Treatment of Competing ArgumentsThe court considered the arguments of both parties, including the petitioner's reliance on various legal precedents and the respondent's contention that the writ petition should be dismissed. The court found the petitioner's arguments more persuasive, particularly regarding the application of the Direct Tax Vivad Se Vishwas Act, 2020.ConclusionsThe court concluded that the petitioner was entitled to a rectification of Form-3 and a refund of the excess amount paid. The court set aside the impugned order rejecting the petitioner's application for rectification and directed the respondent to refund the excess amount or allow its adjustment against any future tax liability.SIGNIFICANT HOLDINGSThe court established that under the Direct Tax Vivad Se Vishwas Act, 2020, taxpayers are entitled to pay only the disputed tax amount, with interest and penalties being waived. The court emphasized that any excess amount paid should be refunded, although without interest, as per the Act's provisions. The court's final determination was to allow the writ petition, set aside the impugned order, and direct the respondent to refund the excess amount within six weeks.