Bombay High Court: Money Lying in Corpus of Revenue Must be adjusted in Accordance with Direct Tax Vivad Se Vishwas Act, 2020

Bombay High Court: Money Lying in Corpus of Revenue Must be adjusted in Accordance with Direct Tax Vivad Se Vishwas Act, 2020

The Bombay High Court while hearing a petition filed against the Commissioner of Income-Tax to revise the impugned Form-3 dated 27th September 2021 issued under the provisions of Direct Tax Vivad Se Vishwas Act, 2020 (‘DTVSV Act’) by giving credit of the amount paid under the Income Declaration Scheme, 2016, observed that the money lying in the corpus of the revenue had simply to be adjusted by way of a mathematical exercise and benefit accorded to the petitioner under the DTVSV Act.

The division judges bench comprising of Justices Dhiraj Singh Thakur and Kamal Khata directed the department to issue a fresh Form-3 after giving the petitioner credit for the amount paid under the Income Declaration Scheme, 2016 (IDS) and the balance amount.

The brief background of the case was that an Income Declaration Scheme, 2016 (‘IDS’) was introduced by Chapter IX of the Finance Act, 2016 which envisaged granting an opportunity to persons to come forward and declare their undisclosed income and pay the applicable tax, surcharge and penalty on the income so disclosed. The Scheme also provided to such a declarant, among others, immunity from prosecution.

The petitioner, with a view to seek benefit under the IDS filed Form1, dated 30th September 2016 for the relevant year and disclosed an undisclosed income of Rs.15,50,000.

The revenue then issued an acknowledgment in Form-2 dated 4th October 2016 requiring the petitioner to pay an amount of Rs.6,97,500. The petitioner, however, deposited an amount of Rs.3,48,752 by way of two challans but could not deposit the rest on account of an alleged personal difficulty.

The case of the petitioner was then opened for reassessment under section 147 of the Income Tax Act, 1961 (‘the Act’). A notice dated 30th March 2018 under section 148 of the Act for the assessment year 2016-17 was issued pursuant to which the petitioner fled his return declaring an income of Rs.22,72,910.

An order of assessment came to be passed on 30th November 2018, whereby the total income of the petitioner was assessed at Rs.38,22,910. Penalty proceedings against the petitioner also resulted in levying a penalty of Rs.6,97,500 upon the petitioner. Both these orders came to be challenged before the Appellate Forum.

On 17th March 2020, Direct Tax Vivad se Vishwas Act, 2020 was enacted by the Parliament with a view to provide for resolution of disputed tax and for matters connected therewith or incidental thereto as is clear from the preamble of the said Act.

The petitioner, considering himself eligible, applied under the said DTVSV Act and submitted Forms 1 and 2 on 22 March, 2020, declaring a disputed income of Rs. 15,50,500.

The petitioner stated that while the liability of the petitioner was correctly worked out at Rs. 6,97,500, credit was not given for the taxes paid, which were addressed to the Principal Commissioner of Income Tax, Pune, with a request for rectification in Form-3.

The petitioner stated that his request failed to elicit any response from the respondents.

The department contended that the DTVSV Act nowhere envisages that an amount that was lying with the department be taken into consideration while determining tax payable under the DTVSV Act.

The issue that arose for consideration before the bench was whether the said amount of Rs.3,48,752 could be adjusted against the amount which was otherwise payable by the petitioner under the DTVSV Act or not.

The Court appositely referred to the provisions of the IDS and observed that that failure on the part of the petitioner to pay the tax in its entirety in respect of the declaration made under Section 183 would be deemed to have never been made under the IDS.

The Court noted that as on the last date specified, i.e., 30th October 2021, the petitioner had admittedly not paid the entire amount in terms of revised Form-3, dated 27th September 2021.

However, the entire case of the petitioner was that if an amount of Rs.3,48,752 which was deposited and was lying with the respondents in terms of the IDS, were to be adjusted against the revised Form-3 under the Scheme of the DTVSV Act, then the petitioner’s claim under the said Scheme could not be rejected.

In this regard, the bench observed that, “The amount deposited by the petitioner under the IDS could not have been forfeited and have neither been refunded nor adjusted. This is not a case where one would say that the petitioner had failed to make the payment within the time prescribed under the DTVSV Act which would result in denying the benefit of the said Scheme to the petitioner but in our opinion, this is a simple case where the money which was lying in the corpus of the revenue had simply to be adjusted by way of a mathematical exercise and benefit accorded to the petitioner under the DTVSV Act.”

In view of the observations, the Court allowed the petition and directed the respondents to issue a fresh Form-3, after giving the credit of the amount paid under the IDS and the balance amount if any, be refunded to the petitioner.