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2022 (3) TMI 1356 - HC - Income TaxRevision u/s 264 - Refund of tax paid as advance tax after opting for VDIS scheme - Availing the benefit of VDIS while claimed the benefit by filing belated ITR u/s 139(4) - petitioner took advantage of the VDIS by voluntary disclosing his income in respect of assessment years 1993-94 to 1997-98 - HELD THAT - In the present case, the petitioner has first availed the benefit of VDIS by submitting the return 01.07.1997 and 31.12.1997 for the assessment year 1993-94 to 1997-98 and paid the income-tax @ 30%. Thereafter, he filed the belated IT returns u/s 139 on 23.01.1998 and deducted income so disclosed in VDIS i.e. voluntary disclose income. The voluntarily disclosed income is not liable to be included with regular income declared in the return u/s 139 as tax paid under VDIS is not liable to be refunded at any cost. The income tax return submitted under Section 139 is not liable to be reopened after availing of the VDIS. The source of income shown for voluntary disclose income and income source shown in the return under Section 139 is altogether different. Under Section 64 of the Finance Act only those persons are entitled to give declaration in respect of income chargeable under the tax under the Income Tax Act for any assessment year, firstly for which he has failed to furnish return u/s 139, secondly, which he has failed to disclose in a return of income furnished by him under the Income Tax Act before the date of commencement of the scheme, thirdly, which has escaped assessment by reason of the omission or failure. As per clause sub-clause (a), in this case, the petitioner did not furnish any return under Section 139 before 31.12.1997, therefore, in voluntarily disclosed income, he ought to have disclosed his all income from all the sources because till 31.12.1997, he did not disclose his any of the income by submitting the return under Section 139. He submitted the return under section 139, after 31.12.1997 i.e. 23.01.1998 to bring his case within clause 64 (1) (b). As submitted belated IT returns under section 139 but as per the requirement of section 64 (1)(b) that ought to have been filed before the date of commencement of the scheme. Since he did not submit any return under section 139 before this scheme, therefore involuntarily disclosed income, he ought to have disclosed his entire income. He cannot be permitted to commit mischief with the Act or VDIS by disclosing part of his income in VDIS and thereafter part of his income by submitting belated return as the Bombay High Court in case of Earnest Business Services (P) Ltd 2017 (3) TMI 1185 - BOMBAY HIGH COURT has rightly held that both the tax altogether different and there cannot be any adjustment between them. Section 70 and 71 mandate that the income disclosed in VDIS shall not be included income under section 139 means income which had already been disclosed and that assessment is not liable to be reopened. The petitioner in order to avail the undue benefit of this scheme has filed the belated return by contending that the filing of such belated return is permissible and claimed the deduction of income as well as the refund of the tax. Thus we are not inclined to interfere with the order passed by the Commissioner, Income-tax. Hence, Writ Petition is hereby dismissed.
Issues Involved:
1. Delay in filing Income Tax Returns for the assessment years 1993-94 to 1997-98. 2. Application of the Voluntary Disclosure of Income Scheme (VDIS), 1997. 3. Rejection of income tax returns for assessment years 1996-97 and 1997-98. 4. Claim for refund of advance tax and TDS. 5. Eligibility for basic exemption and applicability of Query No. 25 of VDIS. 6. Distinction between tax paid under VDIS and regular income tax. Issue-wise Analysis: 1. Delay in Filing Income Tax Returns: The petitioner failed to file income tax returns for the assessment years 1993-94 to 1997-98 within the prescribed time under Section 139(1) of the Income Tax Act. The returns were eventually filed on January 23, 1998. The petitioner attributed the delay to the late issuance of Form 16 by the employer, United India Insurance Company, and claimed that advance tax had been paid by the employer for the relevant years. 2. Application of the Voluntary Disclosure of Income Scheme (VDIS), 1997: The Central Government introduced VDIS under the Finance Act, 1997, allowing individuals to disclose undisclosed income for any assessment year up to December 31, 1997. The petitioner disclosed income for the assessment years 1993-94 to 1997-98 under VDIS, paying the required tax at 30%. The petitioner claimed that the disclosed income should not be included in the total income for the assessment years 1996-97 and 1997-98. 3. Rejection of Income Tax Returns for Assessment Years 1996-97 and 1997-98: The Income Tax Officer rejected the returns for the assessment years 1996-97 and 1997-98 under Section 143(1)(4) of the Income Tax Act. The rejection was based on the discrepancy between the income disclosed under VDIS and the regular income shown in the returns. The petitioner had deducted the VDIS income from the total income, resulting in a 'Nil' tax liability. 4. Claim for Refund of Advance Tax and TDS: The petitioner sought a refund of ?45,000 and ?92,064 for the assessment years 1996-97 and 1997-98, respectively, arguing that the income disclosed under VDIS should not be included in the total income. The Commissioner of Income Tax dismissed the revisions, stating that the petitioner was not eligible for the basic exemption under Query No. 25 of VDIS and that the nature of assets disclosed under VDIS did not match the sources of income shown in the returns. 5. Eligibility for Basic Exemption and Applicability of Query No. 25 of VDIS: The Commissioner held that the petitioner, being an employee of United India Insurance Company, was not eligible for the basic exemption under Query No. 25 of VDIS. The petitioner had given incorrect reasons for the delay in filing returns and was attempting to benefit from both the Income Tax Act and VDIS, which was not permissible. 6. Distinction Between Tax Paid Under VDIS and Regular Income Tax: The court emphasized that tax paid under VDIS is distinct from regular income tax. Sections 68, 69, and 70 of the Finance Act, 1997, make it clear that the voluntarily disclosed income under VDIS shall not be included in the total income for any assessment year under the Income Tax Act. The tax paid under VDIS is non-refundable and does not affect the finality of completed assessments. The petitioner’s attempt to adjust the VDIS income with regular income and claim a refund was contrary to the scheme's intent. Conclusion: The court dismissed the writ petition, upholding the Commissioner’s order dated March 29, 2001. The petitioner’s actions were found to be inconsistent with the provisions of VDIS and the Income Tax Act. The petitioner was not entitled to claim a refund of the tax paid under VDIS or to deduct the VDIS income from the total income in the returns filed under Section 139. The petitioner’s belated returns and claims for refunds were deemed an attempt to misuse the VDIS provisions.
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