2024 (12) TMI 712 - HC - Income Tax

Eligibility of scheme of Direct Tax Vivad se Vishwas Act, 2020 on Short remittance - as submitted that though the petitioner had remitted substantial amounts, there is an admitted short remittance of a sum of Rs.12,565/-, making the petitioner ineligible for settling the matter in terms of the provisions contained in the Scheme. HELD THAT - While the learned Senior Standing Counsel may be right in contending that strict compliance with the provisions of the Scheme is mandatory, it is seen from the facts of the case that the petitioner had substantially complied with the terms of the Scheme and had remitted a sum of Rs.19,57,182/- before the last date specified. The doctrine of substantial compliance was considered in CCE v. Hari Chand Shri Gopal 2010 (11) TMI 13 - SUPREME COURT Thus, the petitioner should not be denied the benefit of the Scheme for the short remittance of a sum of Rs.12,565/-. It is also not disputed that the shortfall was made up and later remitted by the petitioner. Writ petition is allowed by directing that if the petitioner has, by now, remitted the full amount required to be remitted by the petitioner in terms of the provisions of the Direct Tax Vivad se Vishwas Act, 2020, the liability of the petitioner for tax, penalty and interest for the assessment year 2009-2010 will be treated as settled and the petitioner will be eligible for all benefits under the Direct Tax Vivad se Vishwas Act, 2020 (including any immunity from prosecution).

Summary

Issues:
1. Short remittance under the Direct Tax Vivad se Vishwas Act, 2020.

Analysis:
The petitioner, an individual assessee under the Income Tax Act, 1961, faced a demand for tax and penalty for the assessment year 2009-2010. While appeals were pending, the petitioner opted to settle the liability under the Direct Tax Vivad se Vishwas Act, 2020. An inadvertent error led to a short remittance of Rs.12,565, causing the competent authority not to consider the issue settled. The petitioner argued that subsequent full payment rectified the error, urging for substantial compliance recognition.

The Income Tax Department contended that strict compliance with the Scheme is mandatory, emphasizing that any shortfall renders the petitioner ineligible for settlement benefits. Despite acknowledging substantial prior payments, the Department maintained that the short remittance disqualifies the petitioner from availing the Scheme's benefits.

After evaluating the facts and submissions, the Court found in favor of the petitioner. While acknowledging the mandatory nature of compliance, the Court referenced the doctrine of substantial compliance, emphasizing the importance of meeting statutory prerequisites to achieve the statute's intent. Citing relevant case law, the Court highlighted that substantial compliance entails fulfilling essential substance rather than mere procedural formalities. Considering the circumstances, the Court concluded that the petitioner's subsequent full payment rectified the error, warranting the petitioner's eligibility for Scheme benefits.

Consequently, the Court allowed the writ petition, directing that if the petitioner has now remitted the full required amount, the liability for tax, penalty, and interest for the assessment year 2009-2010 will be deemed settled. The petitioner will then be entitled to all benefits under the Direct Tax Vivad se Vishwas Act, 2020, including potential immunity from prosecution.