2017 (7) TMI 732 - HC - Income Tax

Benefit of Amnesty scheme in respect of penalty only - Penalty imposed on the petitioners u/s 271D, 271E and 272A(2)(C) - Revenue denied the benefit as there is a reference to a payment of tax and interest payable on the total income finally determined, along with 25% of the minimum penalty leviable, the Scheme must be intended to cover only such penalties as have been imposed on an assessee along with the assessment order. Held that - Firstly, the definition of tax arrears does not exclude a situation where the dispute of an assessee is only in respect of a penalty that has been determined against him under the Income Tax Act. Secondly, while the procedure envisaged includes the filing of a declaration solely in respect of penalty, the Scheme suggests that when a declaration is only with regard to penalty, the obligation of the declarant is to pay 25% of the minimum penalty levied, and also to pay the tax and interest payable on the total income finally determined for the assessment year in question. The object of the Scheme appears to be to ensure that, while a person seeking an Amnesty Scheme only in respect of the penalty that is imposed on him, avails the benefit of the Scheme to that extent, it should also be ensured that the said declarant discharges the tax and interest liability under the Income Tax Act for the assessment year in question. A person, who defaults on the tax and interest liability under the Income Tax Act for the assessment year, cannot claim the benefit of amnesty in respect of the penalty alone. It is also significant to note that the exclusions from the Scheme, that are enumerated in Section 208 of the Finance Act, 2016, also do not expressly provide for the exclusion of a declaration, such as those filed in the instant writ petition, where the amnesty is sought only in respect of a penalty that is imposed under the Income tax Act. Thus, find that, the reasons stated in Exts.P8, P9 and P10 intimations served on the petitioners cannot be legally sustained to deny the petitioners the benefit of Ext.P4 Amnesty Scheme. Resultantly, quash Exts.P8, P9 and P10 intimations in both the writ petitions and direct the 2nd respondent to process Exts.P5, P6 and P7 declarations submitted by the petitioners in both the writ petitions expeditiously and in terms of Exts.P4 Scheme, as clarified in this judgment. - Decided in favor of assessee.

Summary

Issues Involved:
Refusal to process application under Direct Tax Dispute Resolution Scheme, 2016 for penalties imposed under Income Tax Act.

Detailed Analysis:

Issue 1: Refusal to process application under Amnesty Scheme
The petitioners, engaged in film production, sought benefits under the Direct Tax Dispute Resolution Scheme, 2016 for penalties imposed under Sections 271D, 271E, and 272A(2)(C) of the Income Tax Act. The penalties were related to violations of tax provisions noticed by the Joint Commissioner of Income Tax. The petitioners filed declarations under the Amnesty Scheme but were informed that their declarations could not be processed as the penalties were not linked to any assessment proceedings determining total income. The respondents justified this based on Circulars issued by the Central Board of Direct Taxes (CBDT) clarifying the scope of the Amnesty Scheme.

Issue 2: Interpretation of Amnesty Scheme
The court analyzed the provisions of the Amnesty Scheme, which required a declaration of tax arrears pending appeal before the appellate authority. The Scheme allowed for settlement of disputed penalties by paying 25% of the minimum penalty levied along with tax and interest on total income finally determined. The CBDT's clarification suggested penalties not linked to assessment proceedings would not be covered. However, the court disagreed with this restrictive interpretation, emphasizing that the Scheme did not exclude penalties determined under the Income Tax Act without assessment proceedings. It concluded that the petitioners should be granted the benefit of the Amnesty Scheme as they had offered to pay the mandatory penalties imposed on them.

Judgment:
The court quashed the intimations refusing to process the petitioners' declarations and directed the designated authority to process the declarations in accordance with the Amnesty Scheme. The court clarified that the declarants must also pay the tax and interest liability under the Income Tax Act for the relevant assessment year. The authority was instructed to process the declarations within six weeks from the date of the judgment, disregarding any circulars issued by the CBDT.