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2019 (3) TMI 1268 - HC - Income TaxIncome declaration scheme 2016 - Declaration of undisclosed income - benefit of advance tax or self assessed tax for the purpose of the said scheme - segregation of the declaration still survives - granting benefit of the self assessed tax or advance tax under the Act, for the purpose of discharging the assessee's liability under the said scheme - HELD THAT - Section 184 provides that the declaration under the said scheme shall not be entitled in respect of undisclosed income declared or any amount of tax and surcharge paid to reopen the assessment or reassessment under the Income Tax Act or the Wealth Tax Act. Section 191 provides that any amount of tax and surcharge and penalty paid pursuant to the declaration shall not be refundable. Thus, the scheme makes clear demarcation between an undisclosed income declared under the said scheme and the assessment of the assessee's declared income under the Income Tax Act, 1961. Therefore, in absence of any specific provision in the scheme, granting benefit of the self assessed tax or advance tax under the Act, for the purpose of discharging the assessee's liability under the said scheme, the same cannot be readily presumed. To reiterate these provisions provided for two separate compartments between the assessment proceedings under the said Act and declaration of undisclosed income under the said scheme. The self assessed tax and advance tax would be adjusted against an assessee's liabilities arising in the assessment under the said Act and cannot be transposed for the purpose of discharging the liability to pay tax, surcharge or penalty by a declarant of undisclosed income under the said scheme. The reference to the Rules or the formant for making declaration or payment would not change this provision. Nothing contained in the Rules or the formats prescribed therein would indicate any intention on the part of the legislature to grant the benefit of advance tax or self assessed tax for the purpose of the said scheme. In any case, such right had to be recognized under the Act and cannot be interpreted on the strength of prescribed formants for making declaration. CBDT Circular dated 30.6.2016 has clarified the provision in relation to the tax deducted at source, providing that adjustment under the scheme would be permissible in cases where relation between the income declared under the scheme and the advance tax can be established and such tax has not been claimed in the return of income filed for any assessment year. This clarification made by the CBDT would neither indicate that the legislature while framing the scheme envisaged the adjustment of other taxes namely the advance tax or self assessed tax, nor would state different treatments given to the two kinds of taxes rendered the provisions of the said scheme ultra virus, the constitution being in violation of Article 14 of the Constitution. The CBDT exercises its power vested under Section 119 of the Act. As is well settled, it is within the power of CBDT to issue clarifications for reducing the rigors of the statutory provisions. Even otherwise the very nature of tax deducted at source is different from the other two categories namely advance tax and self assessment tax, since tax deducted at source is always relatable to certain income which the assessee would disclose under the said scheme. Segregation of the declaration still survives - The provisions contained in the scheme enable the assessee to disclose undisclosed income. There is no provision in the scheme which requires the declarant to make a composite declaration in relation to several assessment years for which he desirous to make a declaration of undisclosed income. The scheme does not prohibit multiple declarations by the assessee, making separate declarations for different assessment years. Under these circumstances, we do not find any provision under the said scheme requiring competent authority to either accept or reject the declaration in respect of several assessment years in entirety. In other words, if the declaration of the assessee of undisclosed income for the particular assessment year fulfills all requirement of the scheme, there is no reason why such a declarant should not get benefit of such declaration simply because in relation to other assessment years, the declaration may fail for any reason. Sum total of this discussion would be that in relation to those assessment years where the petitioner relied on the adjustment of self assessed tax or advance tax for making good, the requirement of depositing tax, surcharge and penalty under the scheme, the declaration must fail and the action of the Revenue Authorities must be confirmed. In relation to those assessment years where without any adjustment of advance tax or self assessed tax, deposits made by the petitioner were sufficient to cover the tax, surcharge and penalty under the scheme by the due dates, such declaration must be accepted.
Issues Involved:
1. Validity of the Revenue Authority's rejection of the Petitioner's declaration under the Income Tax Declaration Scheme, 2016. 2. Legality of reassessment notices and orders issued by the Assessing Officer for the assessment years covered under the declaration. 3. Validity of prosecution notices issued under Section 276CC of the Income Tax Act, 1961. 4. Adjustment of advance tax, self-assessed tax, and TDS towards the Petitioner's liability under the Scheme. 5. Segregation of declaration for different assessment years under the Scheme. Issue-Wise Detailed Analysis: 1. Validity of the Revenue Authority's Rejection of the Petitioner's Declaration: The Petitioner challenged the Revenue Authority's decision to not accept his declaration under the Income Tax Declaration Scheme, 2016. The Scheme, framed under Section 183 of the Finance Act, 2006, allowed assessees to declare undisclosed income and avoid penalties and prosecution, provided they fulfilled the conditions of the Scheme. The Petitioner declared undisclosed income for the assessment years 2011-12 to 2014-15 and paid the required tax, surcharge, and penalty, albeit with a minor shortfall of ?4 due to an oversight. The Court noted that this shortfall was not the central controversy. The main issue was whether advance tax, self-assessed tax, and TDS paid prior to the declaration could be adjusted towards the Petitioner's liability under the Scheme. The Court held that the Scheme did not provide for such adjustments and emphasized that the Scheme is a complete code with specific provisions for declaration, tax, surcharge, and penalty payments. 2. Legality of Reassessment Notices and Orders: The Petitioner also challenged the reassessment notices and orders issued by the Assessing Officer for the assessment years covered under the declaration. The Court examined the provisions of the Scheme and concluded that the Scheme did not allow for the adjustment of advance tax or self-assessed tax towards the liability under the Scheme. Consequently, the declarations for the assessment years where such adjustments were claimed failed, and the reassessment notices and orders for those years were upheld. 3. Validity of Prosecution Notices Issued Under Section 276CC: The Petitioner challenged the prosecution notices issued under Section 276CC of the Income Tax Act, 1961. The Court held that for the assessment years where the Petitioner's declaration under the Scheme was accepted, the prosecution notices would be set aside. However, for the assessment years where the declaration failed, the prosecution notices were upheld. 4. Adjustment of Advance Tax, Self-Assessed Tax, and TDS: The Petitioner argued that the advance tax, self-assessed tax, and TDS paid prior to the declaration should be adjusted towards his liability under the Scheme. The Court analyzed the provisions of the Scheme and relevant case law, including the decision in Earnest Business Services Pvt. Ltd. v/s. Commissioner of Income Tax and Others, which held that the Scheme is distinct from the Income Tax Act, 1961, and does not allow for such adjustments. The Court also considered the CBDT Circular No. 25 of 2016, which allowed for the adjustment of TDS under specific conditions but did not extend this benefit to advance tax or self-assessed tax. The Court concluded that the Scheme did not provide for the adjustment of advance tax or self-assessed tax and rejected the Petitioner's contention. 5. Segregation of Declaration for Different Assessment Years: The Petitioner contended that the declarations for different assessment years should be considered separately. The Court held that the Scheme did not require a composite declaration for multiple assessment years and allowed for separate declarations. Therefore, the declarations for the assessment years where the Petitioner did not claim adjustments of advance tax or self-assessed tax and made sufficient payments were accepted. Judgment Summary: The Court disposed of the petitions with the following directions: 1. In Writ Petition No. 14709 of 2018, the Petitioner's declaration for assessment years 2013-14 and 2014-15 failed, and the Revenue Authority's action was confirmed. 2. In Writ Petition No. 14710 of 2018, the Petitioner's declaration for assessment years 2011-12 and 2012-13 was accepted, and the reassessment orders and prosecution notices for those years were set aside. 3. In Writ Petition No. 14710 of 2018, the Petitioner's declaration for assessment years 2011-12 and 2014-15 failed, and the Revenue Authority's action was confirmed. 4. In Writ Petition No. 14710 of 2018, the Petitioner's declaration for assessment years 2012-13 and 2013-14 was accepted, and the reassessment orders and prosecution notices for those years were set aside. 5. The Petitioner was allowed to file appeals before the Appellate Commissioner for the assessment years where the declaration failed, without objection on limitation, if filed by April 30, 2019. 6. The Court did not entertain the Petitioner's request for the return of deposited amounts for the failed declarations, leaving it open for the Petitioner to pursue remedies under the law. Both petitions were disposed of accordingly.
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