2018 (8) TMI 1479 - HC - Income Tax

Income Tax Disclosure Scheme, 2016 (IDS 2016) - Error in the declaration - As soon as the petitioner realised the error, remaining sum was paid. Such payment was also accepted. Further two installments were also deposited well within the time permitted. - Does CBDT have the power to regularise the payments in appropriate cases? - Held that - Effect of section 191 perhaps would be that tax already paid would become nonrefundable. In other words, the petitioner s entire deposit of tax, surcharge and penalty were nonrefundable and on the other hand, declaration would be treated as nonest that too on account of a genuine bona fide error for a small portion of the installment not been paid for a short time. Under the circumstances, impugned communication dated 18. 9. 2017 is set aside. The respondent shall not reject the petitioner s declaration only on the ground of non payment of installments within time limit. All other conditions of the Scheme would be open for the respondents to verify with respect to which no controversy has been raised before us and we have therefore, not commented upon. The petitioner shall however deposit interest at the rate of 10% per annum for the period of delay in depositing such sum. Decided in favor of assessee.

Summary

Issues:
Challenge of non-acceptance of declaration under the Income Tax Declaration Scheme, 2016 due to failure to deposit full amount of first installment before the due date.

Analysis:
The petitioner challenged the respondents' action of not accepting the declaration under the Income Tax Declaration Scheme, 2016, citing failure to deposit the full amount of the first installment before the due date. The Scheme allowed for a declaration of undisclosed income subject to specific conditions, with provisions for tax, surcharge, and penalty. The petitioner initially declared undisclosed income of ?12.62 crores, later revised to ?13 crores, which was accepted. The petitioner deposited the second and third installments on time based on the revised declaration. However, a technical defect arose as the first installment was not paid in full before the due date due to a miscalculation by the petitioner's Chartered Accountant. The petitioner sought condonation from the Commissioner, but the request was rejected by the CBDT. The petitioner then filed a petition challenging this decision.

The Court noted that while the petitioner had paid a significant amount in total, a shortfall of ?5,62,500 occurred in the first installment. The petitioner had paid a total of ?5,85,00,000, matching the tax, surcharge, and penalty on the revised undisclosed income. The Court examined whether the CBDT had the power to regularize payments in appropriate cases. Section 119 of the Income Tax Act grants special powers to the CBDT, allowing for the admission of applications or claims for relief after the specified period in cases of genuine hardship. The CBDT's circular acknowledged these powers but outlined exclusions for granting extensions, including confusion about due dates. The Court determined that while the circular aimed to prevent misuse, exceptional cases requiring the exercise of powers could not be entirely excluded. In this case, the petitioner's error was genuine, and the majority of the amount was paid on time. The Court set aside the CBDT's decision and directed the petitioner to pay interest for the delay in the first installment by a specified date.

In conclusion, the Court ruled in favor of the petitioner, directing the respondents not to reject the declaration solely based on late installment payments. The petitioner was instructed to pay interest for the delayed amount, and the petition was disposed of accordingly.