2021 (7) TMI 1056 - HC - Income Tax

Direct Tax Vivad Se Vishwas Scheme 2020 - whether the amount which was forfeited at the time of auction, is to be credited into the account of the petitioner or is to be credited to the account of the Government, after defraying the expenses of the same, as provided in Rule 58 of Schedule II of the Income Tax Act, 1961? - HELD THAT - As rightly observed in the impugned order that the amount which was the forfeited amount could not be credited into the account of the petitioner and was forfeited to the Government as the auction purchaser failed to deposit the balance amount. Moreover, there is no challenge to the said Rules by the petitioner. The Rules being very clear, thus, the amount in question had to be forfeited to the Government and not credited to the petitioner. Even otherwise once the auction was not successful then as per the above-said Rules and also as per the stand of the respondent in the written statement, the property is required to be re-auctioned. In case, the re-auction is successful then the petitioner will have the benefit of the sale proceeds. Thus, considering from any aspect, the impugned action of the respondents is in accordance with law and deserves to be upheld and the first submission of the petitioner deserves to be rejected. With respect to the aspect that the said amount had been credited in the account of the petitioner/assessee and the same was so reflecting in Form-26AS (Annexure P-2 with the writ petition), suffice it to say that any entry inadvertently made and being in violation of the Rules governing the case is required to be ignored. Moreover, even as per the case of the petitioner, the respondent-authority as per order dated 26.04.2018 had carried out the said correction after passing a detailed order and after considering the rule in question. The said order has not been challenged by the petitioner in the present writ petition. The entry of ₹ 8,02,500/-, which is there in Form-26AS, is contrary to the orders passed by the authorities as well as contrary to the Rule in question i.e., Rule 58 of the Schedule II of the Income Tax Act, 1961 and is therefore required to be ignored. The respondent-authorities had thus correctly not given the credit of ₹ 8,02,500/- to the petitioner vide impugned order dated 01.02.2021 (Annexure P-9) and even Form-3 dated 05.02.2021 (Annexure P-10) has been correctly issued and thus, the impugned order does not call for any interference and hence, the writ petition stands dismissed.

Summary

Issues:
1. Whether the forfeited amount from an auction should be credited to the petitioner or to the Government as per Rule 58 of the Income Tax Act, 1961.

Analysis:
The petitioner filed a writ petition seeking a writ of certiorari to quash an order that did not credit ?8,02,500 forfeited from an auction to the petitioner, who had availed the Direct Tax Vivad Se Vishwas Scheme. The petitioner also sought a mandamus to rectify the Form-3 to include the forfeited amount. The key issue was whether the forfeited amount should be credited to the petitioner or to the Government as per Rule 58 of the Income Tax Act, 1961.

The facts revealed that the petitioner owned shops, and an amount of ?8,02,500 was forfeited when a bidder failed to pay the balance after an auction. The petitioner had a history of tax disputes, including penalty proceedings and appeals. The petitioner availed the Vivad Se Vishwas Scheme during the appeal process. The Tax Recovery Officer had earlier credited the forfeited amount to the petitioner but later corrected it as per Rule 58.

The respondent argued that the forfeited amount was correctly credited to the Government, not the petitioner, as per Rule 58. The respondent highlighted that the property would be re-auctioned, and the petitioner would benefit from the sale proceeds. The petitioner's counsel argued that the amount should be credited to the petitioner since it was received during the auction. The petitioner also claimed that the amount was reflected in Form-26AS.

The Court analyzed Rules 57 and 58 of the Income Tax Act, 1961, which govern forfeitures in property auctions. Rule 58 specifies that the forfeited amount shall be credited to the Government after deducting auction expenses. The Court upheld the respondent's action, stating that the forfeited amount rightfully belonged to the Government as the auction purchaser failed to pay the balance. The Court disregarded the entry in Form-26AS, as it contradicted the rules and the respondent's corrected order.

Ultimately, the Court dismissed the writ petition, affirming that the forfeited amount was correctly credited to the Government as per Rule 58. The Court emphasized that the petitioner would benefit from the re-auction proceeds if successful. The petitioner's challenge was rejected, and the impugned orders were upheld, leading to the dismissal of the writ petition and related applications.