2017 (9) TMI 835 - HC - Income Tax

Benefit of Amnesty scheme - Penalty u/s 271D and 271E - The Direct Tax Dispute Resolution Scheme, 2016 - petitioners had offered to pay 25% of the mandatory penalties - Held that - The issue is no longer resintegra, as the same has been decided in case Ms. Grihalakshmi Films 2017 (7) TMI 732 - HIGH COURT OF KERALA wherein held 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. Going by the authoritative pronouncement, this Court is of the opinion that, there is no scope for restricting the interpretation given to the scheme and that the penalty as levied under Sections 271D and 271E of the Act also could be settled under the Scheme. Hence, Exts.P9 and P10 are set aside.

Summary

Issues:
Challenge to orders withdrawing penalty imposition under Sections 271D and 271E of the Income Tax Act under 'The Direct Tax Dispute Resolution Scheme, 2016'.

Analysis:
The petitioner's father faced a penalty under Sections 271D and 271E of the Income Tax Act. The petitioner sought resolution under 'The Direct Tax Dispute Resolution Scheme, 2016' by offering to pay 25% of the penalty. However, subsequent orders withdrew the penalty imposition, stating it was not linked to assessment proceedings. The petitioner contested these orders. The department referred to a clarification by the Central Board of Direct Taxes. The issue had been previously addressed by the court in a similar case, where it was debated if penalties not directly linked to assessment proceedings could be covered under the Scheme.

The court examined the Amnesty Scheme and found that it did not exclude penalties determined under the Income Tax Act. The Scheme required declarants to pay 25% of the minimum penalty along with tax and interest. The court rejected the restrictive interpretation proposed by the department and held that the Scheme aimed to ensure declarants settled tax and interest liabilities along with penalties. Exclusions from the Scheme did not explicitly cover cases seeking amnesty only for penalties imposed under the Income Tax Act. Consequently, the court ruled that the reasons provided in the withdrawal orders were not legally valid to deny the petitioner the benefits of the Amnesty Scheme.

Based on the court's analysis, it was concluded that penalties under Sections 271D and 271E of the Act could indeed be settled under the Scheme. Therefore, the orders withdrawing the penalty imposition were set aside, and the first respondent was directed to reevaluate the application based on the court's interpretation and issue fresh orders accordingly.