2022 (2) TMI 344 - HC - Income Tax

Claim for credit in respect of advance tax paid by a declarant under the Scheme, 2016 - character of the advance tax - Income Declaration Scheme, 2016 - Is advance tax entitled to the same dispensation as is given to the TDS? - Can a legally sustainable distinction be made between TDS and Advance Tax in the matter of credit to be given against the liability under the Scheme, 2016? - certificate in Form 4 as required by Rule 4(5) of the Income Declaration Scheme Rules, 2016 in respect of the income declared by the petitioner under the said scheme in Form 1 under Section 183 of the Finance Act, 2016 - HELD THAT - Section 219 provides in clear and explicit terms that an assessee who pays advance tax shall be entitled to credit therefor in the regular assessment. From a conjoint reading of Sections 199 and 219, it becomes clear that in the matter of credit, the TDS and advance tax stand on the same footing. As there is no sustainable ground to make a distinction between TDS and Advance Tax for the purpose of credit, we do not find any reason not to equate an advance tax with TDS for the purpose of the Scheme, 2016. If a TDS is entitled to credit, a fortiori advance tax must get the same dispensation. It is true that the provisions of Chapter XVII primarily deal with regular assessment in respect of the liability to pay income tax founded in Sections 4 and 5 of the Act, 1961, which are the charging sections. It is also true that the provisions of Sections 184 and 185 of the Act, 2016 incorporating the Scheme, 2016, begin with a non obstante clause. However, the overriding effect of Sections 184 and 185 is confined to the rate at which the tax is to be imposed on the undisclosed income, surcharge to be paid thereon and the penalty. The substance of the matter, especially the fact that the advance payment made by the declarant retains the character of tax, however, cannot be lost sight of. In the case at hand, it is not the case of respondent No.1 that the advance tax paid by the petitioner was not relatable to the income for the relevant assessment years, which petitioner disclosed. If the said payment is not apportionable towards any other liability, there is no justifiable reason to deprive the declarant from getting the credit for the same against the liability under the Scheme, 2016 Petition stands allowed - Respondent No.1 shall issue certificate in Form 4 as required by Rule 4(5) of Income Declaration Scheme Rules, 2016, upon the petitioner complying with all the requirements under the said Scheme, 2016. However, the petitioner shall be entitled to and given credit for the advance tax already paid by the petitioner and the respondent No.1 shall not refuse to issue Form No.4 on the said count.

Summary

Issues Involved:
1. Entitlement to a certificate in Form 4 under the Income Declaration Scheme, 2016.
2. Adjustment of advance tax paid against the liability under the Scheme, 2016.
3. Interpretation of relevant provisions and judicial precedents.

Detailed Analysis:

1. Entitlement to a Certificate in Form 4:
The petitioner sought a direction to the Principal Commissioner of Income Tax to issue the certificate in Form 4 as required by Rule 4(5) of the Income Declaration Scheme Rules, 2016. The petitioner had declared undisclosed income under the Scheme, 2016, and complied with all requirements, including payment of tax, surcharge, and penalty amounting to ?1,07,58,986/-. Despite this, the certificate was not issued due to certain mistakes and the respondent's refusal to adjust advance tax paid by the petitioner.

2. Adjustment of Advance Tax Paid:
The core issue was whether the advance tax paid by the petitioner could be adjusted against the liability under the Scheme, 2016. The respondent argued that there was no provision under the Scheme, 2016, to give credit for advance tax or self-assessment tax. This stance was supported by a previous judgment of the Bombay High Court in the case of Umesh D. Ganore Vs. Principal Commissioner of Income Tax, which held that advance tax and self-assessed tax could not be adjusted against liabilities under the Scheme, 2016.

3. Interpretation of Relevant Provisions and Judicial Precedents:
The petitioner contended that the advance tax should be given the same treatment as TDS, which was allowed as per Circular No.25 of 2016 by the CBDT. The petitioner also cited the case of Kumudam Publications Private Limited Vs. Central Board of Direct Taxes, where the Delhi High Court held that advance tax could be adjusted against liabilities under the Scheme, 2016, a decision upheld by the Supreme Court.

The court examined the nature of advance tax, referring to the Constitution Bench judgment in Brij Lal Vs. Commissioner of Income Tax, which explained that advance tax is a pre-assessment collection of taxes adjustable towards income tax levied on total income. The court noted that both TDS and advance tax are methods of advance tax collection and should be treated similarly for credit purposes.

Conclusion:
The court concluded that there was no justifiable reason to treat advance tax differently from TDS for the purpose of credit under the Scheme, 2016. The advance tax paid by the petitioner, being relatable to the income for the relevant assessment years, should be credited against the liability under the Scheme, 2016. The court allowed the petition, setting aside the communication dated 14th January 2020, and directed the respondent to issue the certificate in Form 4, giving credit for the advance tax already paid by the petitioner.

Order:
(i) The petition is allowed.
(ii) Respondent No.1 shall issue the certificate in Form 4, giving credit for the advance tax paid by the petitioner.
(iii) Rule made absolute in the aforesaid terms.
(iv) No costs.