Refund Of Excess Amount Already Deposited Against Demand – An Important Issue Regarding Dispute Resolution Scheme, 2016
INTRODUCTION : The Dispute Resolution Scheme, 2016 has been introduced through Union Budget, 2016. The scheme has been brought with the object to collect tax arrears, clear pendency of appeals, achieve reduction in administrative costs etc. In most of the cases apart from filing appeal, the demand amount, either partly or fully, is generally deposited by the assesses. There is an important issue regarding this aspect which requires clarification from the tax administrators.
ISSUE OF REFUND OF EXCESS AMOUNT ALREADY DEPOSITED : In many cases the amount already deposited by the assesses against the demand may be more than the amount required to be paid under the scheme. For example – In a case where the dispute is related only to the penalty, the same can be settled by paying only 25% of the minimum penalty leviable. There may be various cases where the assessees might have already deposited more than above 25%, under departmental pressure for demand recovery etc. or otherwise.
Similarly, in cases where the dispute is related to the assessment, the amount already deposited under demand recovery pressures etc. (or otherwise) may be more than amount required to be paid under the scheme (i.e., tax + interest up to date of assessment etc.).
In such cases, it is general expectation that the excess amount should be refunded to the assessee. However at present, no clear assurance / mentioning of grant of refund of such amount is there in any rule, circular, press release etc. Further in the various forms related to the scheme, there is only mention of “amount payable”. There is no column etc. for “amount refundable”.
In such a situation, the assessees whose already deposited amount is in excess of amount required to be paid under the scheme, may find it difficult to opt for the scheme. The reason may be the fear that while going for resolving one dispute they may get in to another dispute / legal complications etc. for getting refund of above excess amount.
The above expectation of refund is logical and justified. It is under belief that when the assessee has filed appeal it means he has not accepted the penalty / tax demand etc. but the amount has been deposited only as a temporary measure to avoid demand recovery pressures etc., with expectation of refund on relief in appeal. Therefore, the nature of amount deposited with the department is only of handing over of an amount to the department as a trustee of the same and not of an acceptance of penalty / taxes levied and final unconditional payment thereof.
Further, it is necessary for the tax administrators to look the issue from the point of view of the assessees also, who are important party to the scheme. Without acceptance of the terms of the scheme from the side of the assesses, the scheme can not be implemented with expected success. The view point of the assessees can be considered in the manner that suppose, if the assessee has deposited full amount towards demand with appeal, he will have no reason to opt for the scheme if excess is not refunded to him. Because in absence of the refund if he will adopt the scheme then on one hand he will gain nothing and on other hand he will loose the right to pursue appeal also. In such a situation, if instead of opting for the scheme, the assessee will pursue the appeal then there may always be hope / chances for full / substantial / partial relief.
It is considerable that the expectation for refund of excess amount is not unreasonable. The same is expected in consideration of surrendering the valuable right for fighting for relief before various forums from CIT(A) to higher authorities, courts etc.
An another aspect is also there that due to grant of the refund in some cases, the department may not loose because there will be other apparent benefits to the department i.e., reduction in pendency of cases, reduction of administration cost etc., which are also objectives behind bringing the scheme.
AN ANOTHER ISSUE : Apart from the above one more issue is there. There are various cases in which fee under section 234 E has been levied and they are in appeal. The above fee is neither tax nor penalty and the scheme mentions only about tax and penalty. Therefore, clarification is also required that whether the above cases will be covered under the scheme or not.
CONCLUSION : The issue of refund of amount already deposited and which is in excess of amount required to be paid is very important issue. The clarification on the same is very much needed. The clarification will help large no. of assesses to decide regarding opting for the scheme.