Navjeevan Dharmi Associates Vs PCIT (Supreme Court of India)
Factual Background and Proceedings before the High Court
For A.Ys. 2014-15 and 2015-16, the Petitioner had not filed its Return of Income. After the introduction of the Income Declaration Scheme, 2016 (IDS, 2016), the Petitioner filed Form No. 1 on 4th August 2016 declaring undisclosed income for those assessment years. The total tax liability under the IDS, 2016 was Rs. 1,87,55,741/-. The Petitioner paid Rs. 25 Lakhs on 30th December 2017 and another Rs. 25 Lakhs on 15th February 2018, but made no further payment, although the entire payment could have been made latest by 31st January 2020. Consequently, the Petitioner was not entitled to any benefit under the IDS, 2016. TaxGuru has published material concerning the Income Declaration Scheme, 2016 and its Explanatory Notes.
Read HC Judgment in this case: IDS Declaration Failed but Tax Already Paid Must Be Credited: Bombay HC
For A.Y. 2017-18, the Petitioner filed its Return of Income on 15th February 2018. A notice under Section 148 was issued on 31st March 2021 on the basis that income chargeable to tax had escaped assessment within the meaning of Section 147. The reasons furnished referred to undisclosed income of Rs. 4,16,79,423/- declared under the IDS, 2016 for A.Ys. 2014-15 and 2015-16 and the failure to pay the total tax liability of Rs. 1,87,55,741/- by 31st January 2020. The undisclosed income was therefore proposed to be brought to tax in A.Y. 2017-18.
After a hearing, the Assessing Officer passed an Assessment Order dated 27th March 2022. The Petitioner thereafter filed a Revision Application under Section 264 on 24th March 2023. It contended that the income should have been assessed at 30% as “income from business” instead of 60% by invoking Section 69A; that credit should be given for taxes paid under the IDS, 2016; and that credit should also be given for advance tax, TDS and self-assessment tax.
By order dated 29th March 2024, the Principal Commissioner rejected the contention concerning characterization of income and refused credit for taxes paid under the IDS, 2016. The application was allowed to the extent of prepaid taxes, with the Assessing Officer directed to carry out further verification after considering the latest judicial precedents.
High Court Reasoning and Ruling
The High Court found that the Principal Commissioner had duly considered the facts and contentions. On characterization of income, the Principal Commissioner had considered Section 69A, the absence of Returns of Income for A.Ys. 2014-15 and 2015-16, the absence of an explanation regarding the sources of the undeclared income, minimal compliance with notices under Section 142(1), and the filing of an ITR only at the fag end of the proceedings on 8th March 2022. In that ITR, total income of Rs. 4,16,85,136/- was declared without supporting evidence regarding its sources. The High Court found “absolutely nothing wrong” with the Commissioner’s order on this aspect and held that the view taken was a plausible and possible view requiring no interference under Article 226 of the Constitution of India.
On credit for amounts paid under the IDS, 2016, however, the High Court held that the issue was squarely covered by Pinnacle Vastunirman Put. Ltd. Vs. Union of India and Ors [(2021) 438 ITR 27 (Born) ; (2021) SCC Online Born 2347]. Following that decision, it held that where part installments were paid under the IDS, 2016, the Revenue had no authority to retain those amounts where the declaration was deemed never to have been made, having regard to Article 265 of the Constitution of India. The High Court therefore held that the Petitioner was entitled to credit for the tax paid under the IDS, 2016 and set aside the Commissioner’s order to that extent.
In reaching that conclusion, the High Court referred to the reasoning in Hemlatha Gargya v. CIT [2003] 259 ITR 1 (S.C.); (2003) 9 SCC 510 and decisions concerning payments made under the Voluntary Disclosure of Income Scheme. It also noted that sub-section (3) of Section 187 of the Income Declaration Scheme provides that where the declarant fails to pay the tax, surcharge and penalty within the specified dates, the declaration shall be deemed never to have been made under the Scheme. The High Court concluded that the Revenue could not retain tax paid under such a declaration in the absence of authority of law.
As regards advance tax, TDS and self-assessment tax, the High Court found that the direction for verification and grant of credit, if any, was in line with Kamla Chandra Singh Kabali Vs. Principal Commissioner of Income Tax [(2022) 137 taxmann.com, 346 (Born)]. It accordingly directed the Assessing Officer to verify the IDS, 2016 payments and give credit for them while computing tax payable for A.Y. 2017-18, and similarly to verify advance tax, TDS and self-assessment tax and give credit for the same, if any. The Writ Petition was disposed of with no order as to costs.
Challenge before the Supreme Court and Final Ruling
The matter reached the Supreme Court by way of a Special Leave Petition. The Supreme Court condoned the delay and stated that it found no grounds to interfere with the impugned judgment and order of the High Court. The Special Leave Petition was accordingly dismissed. Pending applications, if any, were directed to stand disposed of.
Thus, the Supreme Court did not interfere with the High Court judgment. The High Court’s rejection of the challenge to the characterization of income, its direction to verify and grant credit for tax paid under the IDS, 2016, and its directions concerning advance tax, TDS and self-assessment tax therefore remained undisturbed.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay condoned.
2. We find no grounds to interfere with the impugned judgment and order of the High Court. Hence, the Special Leave Petition is dismissed.
3. Pending application(s), if any, shall stand disposed of.
