By TIOL News Service
MUMBAI, MAR 28, 2019: THE ISSUE BEFORE THE BENCH IS - Whether any advance tax or self-assessed tax paid by an assessee will provide any benefit when making declaration under Income Tax Declaration Scheme, 2016, when there is no specific provision to such effect in the Scheme. NO IS THE VERDICT.
Hence it also clarified that the nature of TDS is different from that of advance tax and self-assessed tax, considering that TDS is always relatable to some income which the assessee would disclose under the Income Tax Declaration Scheme, 2016. Further, the Bench of the High Court also observed that the Income Tax Declaration Scheme, 2016 does not empower the Revenue to accept or reject declarations for several AYs in entirety. Hence, the High Court notably observed that benefit under the Scheme can be denied to any declaration made in a certain AY which fulfils all requirements of the Scheme, merely on grounds that such declaration would be ineligible for benefit in another AY.
Facts of the case
The assessee, an individual, made a declaration under the Income Tax Declaration Scheme, 2016, reflecting undisclosed income of about Rs 1.81 crores. On such income, the assessee was required to pay tax, surcharge and penalty. The assessee claimed to have paid about Rs 8.19 lakhs as advance tax, self assessed tax and TDS and claimed that the balance of Rs 73.34 lakhs was payable. However, the assessee's declaration was not accepted by the Revenue. Moreover, the AO issued notices proposing to re-open assessments for the relevant AYs. Moreover, notice for prosecution u/s 276CC was also received. Hence the present writ petitions were filed, contesting such notices. Moreover, the assessee claimed there to be a short-fall of Rs 4 between the tax paid and payable under the Scheme and that such difference was on account of calculation errors & could not be grounds enough to reject the declaration.
In writ, the High Court held that,
++ analysis of the scheme would show that in absence of such a scheme, an assessee who has intentionally not disclosed an income, would be subject to the normal provisions under the Act for assessment, levy of tax, interest and penalty. Without there being any specific provision in the scheme granting benefit of tax voluntarily paid, or deposited as self-assessed tax or by way of advance tax, a declarant under the scheme cannot claim set off such tax against his liability to pay tax in terms of the provisions contained in the scheme. When as in the present case, the assessee was either depositing or paying such tax, the scheme was nowhere in horizon. The scheme makes special provisions for declaration of undisclosed income u/s 187 which provides for the time frame for deposit of tax, surcharge and penalty. The scheme makes clear demarcation between an undisclosed income declared under the scheme and the assessment of the assessee's declared income under the Income Tax Act, 1961. Therefore, in absence of any specific provision in the scheme, granting benefit of the self assessed tax or advance tax under the Act, for the purpose of discharging the assessee's liability under the said scheme, the same cannot be readily presumed;
++ the reference to the Rules or the formant for making declaration or payment would not change this provision. Nothing contained in the Rules or the formats prescribed therein would indicate any intention on the part of the legislature to grant the benefit of advance tax or self assessed tax for the purpose of the scheme. In any case, such right had to be recognized under the Act and cannot be interpreted on the strength of prescribed formants for making declaration. The CBDT Circular dated 30.6.2016 has clarified the provision in relation to the tax deducted at source, providing that adjustment under the scheme would be permissible in cases where relation between the income declared under the scheme and the advance tax can be established and such tax has not been claimed in the return of income filed for any assessment year. This clarification made by the CBDT would neither indicate that the legislature while framing the scheme envisaged the adjustment of other taxes namely the advance tax or self assessed tax, nor would state different treatments given to the two kinds of taxes rendered the provisions of the said scheme ultra vires , the constitution being in violation of Article 14 of the Constitution. The CBDT exercises its power vested under Section 119 of the Act. As is well settled, it is within the power of CBDT to issue clarifications for reducing the rigors of the statutory provisions. Even otherwise the very nature of tax deducted at source is different from the other two categories namely advance tax and self assessment tax, since tax deducted at source is always relatable to certain income which the assessee would disclose under the said scheme;
++ the subsidiary issue of the segregation of the declaration still survives. The provisions contained in the scheme enable the assessee to disclose undisclosed income. There is no provision in the scheme which requires the declarant to make a composite declaration in relation to several assessment years for which he desirous to make a declaration of undisclosed income. The scheme does not prohibit multiple declarations by the assessee, making separate declarations for different assessment years. Under these circumstances, there is no provision under the scheme requiring competent authority to either accept or reject the declaration in respect of several assessment years in entirety. In other words, if the declaration of the assessee of undisclosed income for the particular assessment year fulfills all requirement of the scheme, there is no reason why such a declarant should not get benefit of such declaration simply because in relation to other assessment years, the declaration may fail for any reason.
(See 2019-TIOL-684-HC-MUM-IT)
