Smita Rohit Gupta v. Principal Commissioner of Income Tax-1, Thane

1. Principal Commissioner of Income Tax-1, Thane, having office at B Wing, Ashar IT Park, 6th Floor, Road No.16Z, Wagle Industrial Estate, Thane (West), Thane - 400064.

2 Assistant Commissioner of Income-tax Circle 3, Thane, having office at B Wing, Ashar IT Park, 6th Floor, Road No.16Z, Wagle Industrial Estate, Thane (West), Thane-400064.

3 The Union of India, Through the Secretary, Ministry of Finance, Government of India, North Block, New Delhi - 110 001 … Respondents Mr. Dharan Gandhi with Ms Aanchal Vyas for Petitioner. Mr. Ajeet Manwani with Ms. Samiksha Kanani for Respondent CORAM K. R. SHRIRAM & DR. N. K. GOKHALE, JJ. DATED: 28th August 2023 (ORAL JUDGMENT PER K.R. SHRIRAM J.):

1. Petitioner is an individual who had filed a declaration under the Income Declaration Scheme, 2016 ("IDS"). Under the Scheme the entire payment of tax was to be made in three instalments: 25% taxes, surcharge and penalty in first instalment; for an amount not less than 50% of such tax, surcharge and penalty as reduced by the amount paid in the second instalment; and for the whole amount to be paid as reduced by the amounts earlier paid in the third instalment. Admittedly, Petitioner made payment of the first instalment but defaulted the remaining two instalments. In view of the default, as provided under Clause 3 of Section 187 of the IDS, the declaration filed by Petitioner was deemed to have never been made under the IDS and as provided under Section 197(b) of the Finance Act, 2016 the undisclosed income shall be chargeable to tax under the Income-tax Act, 1961 ("Act") in the previous year in which the declaration was made. In view thereof, Petitioner filed revised return of income.

2. Subsequently vide Finance (No.2) Act, 2019, a proviso was inserted in Section 187(1) of the Finance Act, 2016 which provided that where the amount of tax, surcharge and penalty, has not been paid within the due date notified under this sub-section, the Central Government may, by Notification in the Official Gazette, specify class of persons, who may, make the payment of such amounts on or before such date as may be notified by the Central Government, along with the interest on such amount @ 1% for every month or part of a month comprised in the period commencing on the date immediately following the due date and ending on the date of such payment. Using the said power, the Central Government issued Notification bearing number 103 of 2019 dated 13th December 2019 wherein the Central Government allowed every person who did not pay tax earlier under the Scheme, to pay the tax upto 31st January 2020 along with the interest. Petitioner was covered by the said Notification. Petitioner made use of the opportunity to revive the declaration under the Scheme. Accordingly, Petitioner made an application vide letter dated 13th January 2020 showing her intention to pay balance instalments along with interest under the Scheme and requested withdrawal of the order dated 24th May 2018 that been passed under Section 187(3) of the IDS. Petitioner was permitted to pay balance amount along with interest under the Scheme. Petitioner, on 18th January 2020, paid a sum of Rs.37,71,800/-. On payment of the amount, Respondent No.1 also issued Form No.4 on 22nd January 2020. Form No.4, copy whereof is at Exhibit 'O' to the Petition, also mentions that declaration made on 30th September 2016 has been accepted and that Petitioner has paid entire tax due under the Scheme. In the impugned order dated 20th March 2021, these facts are not disputed. In fact they have been accepted as reflecting the true facts.

3. As a result of the said acceptance of the declaration of Petitioner under the IDS, amount of undisclosed income of Rs.85,96,886/- could not have been taxed under the Act as per Section 188 of the IDS Finance Act, 2016. The time limit, however, to file revised return had expired. Left with no option, Petitioner, therefore, moved an application under Section 264 of the Act before Respondent No.1. Respondent No.1 provided an opportunity to Petitioner to explain her case and also asked Assessing Officer to submit a report after ascertaining correctness of the contentions of Petitioner. The Assessing Officer submitted detailed report dated 8th March 2021 wherein the Assessing Officer submitted that assessee should file revision petition within one year from the date of the order sought to be revised but the application has not been made in time. At the same time, the Assessing Officer also submitted that considering the circumstances of the case, delay may be condoned. Impugned order does not reflect anything contrary to what Petitioner submitted regarding the payment under the IDS.

4. Respondent No.1 condoned the delay but refused to grant relief to Petitioner on the merits of the case. Paragraph 5 of the impugned order dated 26th March 2021 reads as under:

8. Section 264 of the Act also came up for consideration before the Hon'ble Delhi High Court in Vijay Gupta v CIT Delhi-III 3 where paragraph 35 reads as under:

9. In the circumstances, it is well settled that powers conferred under Section 264 of the Act are very wide. Commissioner is bound to apply his mind to the question whether Petitioner's income was taxable and to what extent. Admittedly, amount payable under the IDS has been paid. Section 188 of the IDS provides that the amount of undisclosed income declared in accordance with 183 shall not be included in total income of the declarant for any assessment year for the Income-tax Act, if the declarant makes the payment of tax and surcharge referred to in Section 184 and the penalty referred to in Section 185, by the date 3 [2016] 68 taxmann.com 131 (Delhi) specified under Sub-section 1 of Section 187. Petitioner having paid the tax and surcharge and the penalty with interest, amount of undisclosed income cannot be included in the income of the declarant/petitioner. Therefore, in our view, Commissioner should have exercised his power under Section 264 of the Act and decide the matter on merits.