Due to the non-voluntary nature of the tax payment, interest on instalments reimbursed under IDS 2016 is not payable

Fact and issue of the case

The brief facts of the case, as per the pleading made in the writ petition, which are required to be enumerated, reads hereunder as :-

The fact of the case is that the writ petitioner is regular assessee under the Income Tax Department having PAN No.AOJPS8551F. The Government of India has framed a regulation known as the Income Declaration Scheme, 2016, in exercise of power conferred under Section 199 of the Finance Act, 2016, which has been brought in force for declaration of undisclosed income on the basis of the mode and manner stipulated under Section 183 of the aforesaid Act. Another Section has been provided i.e., Section 187 which provides that the tax, surcharge and penalty payable under the Scheme in respect of undisclosed income was to be paid on or before the dates notified by the Central Government. Sub-Section 3 of Section 187 of the Finance Act, 2016 provides that if a declarant fails to pay the tax, surcharge and penalty in respect of the declaration made under Section 183, the declaration filed by the said applicant shall be deemed never to have been made under this Section.

The writ petitioner has made his declaration in statutory form-1 online before the respondent authority and made declaration of undisclosed income being a sum of 4.00 crores, being an amount of declaration of undisclosed income pertaining to the Assessment Years 2015-16 and 2016-17 of a sum of Rs.1.50 crores and Rs.2.50 crores respectively. On 29th September, 2016, the due acknowledgment of the declaration has been issued to the writ petitioner. The writ petitioner was required to deposit an amount not less than 25% of the total sum payable by the petitioner on or before 30th November, 2016 and, thereafter, an amount not less than 50%, as reduced by the amount paid by the petitioner, was to be deposited by 31st march, 2017 and the balance amount was to be deposited by 30th September, 2017.

The writ petitioner, therefore, was required to deposit an amount to the tune of Rs.45 lacs up to 25th November, 2016, Rs.45 lacs up to 25th March, 2017 and Rs.90 lacs up to 25th September, 2017. The writ petitioner has deposited a sum of Rs.45 lacs on or before 30th November, 2016 and, thereafter, deposited further sum of Rs.45 lacs on or before 31st March, 2017 and to that effect e-receipts were issued to the writ petitioner.

The writ petitioner although was further required to pay the balance amount of tax, surcharge and penalty of Rs.90 lacs on or before 30th September, 2017 but due to the reasons beyond control of the petitioner, the aforesaid amount could not be deposited on or before 30th September, 2017. The writ petitioner contended that in terms of the provision of Section 187(3) of the Finance Act, 2016, declaration made by the petitioner will be deemed to have never made as the petitioner failed to deposit the total amount of tax, surcharge and penalty within the time schedule under the Scheme.

The writ petitioner, therefore, has further contended that the natural corollary of non-deposit of the amount in entirety, in view of the provision of Sub-Section 3 of Section 187 of the Finance Act, 2016 will be that such declaration made under Section 183 became non est in the eye of law and, therefore, he is entitled for the refund of the aforesaid amount having been deposited up to two instalments on or before 30th November, 2016 and on or before 31st March, 2017, the total comes to Rs.90 lacs.

The writ petitioner has made such submission on the ground that once the declaration so furnished by the writ petitioner due to non-deposit of the amount in entirety as required under the Finance Act, 2016 will be said to be non est in the eye of law due to deeming provision as under Sub-Section 3 of Section 187 of the Finance Act, 2016 and hence the amount which has been retained by the respondent Income Tax Department is nothing but in violation of the provision of Article 265 of the Constitution of India.

The writ petitioner has repeatedly represented for refund of the said amount or its adjustment by filing representations, one of the representation filed on 11th September, 2018 has been appended as Annexure-6 to the writ petition but the grievance has not been redressed, therefore, the instant writ petition has been filed.

Observation of the court

We, on the basis of the aforesaid position, have considered the judgment rendered in the case of Union of India through Director of Income Tax v. Tata Chemicals Limited (Supra) wherein the issue involved pertains to refund becomes due when tax deducted at source, advance tax paid, self-assessment tax paid and tax paid on regular assessment exceeds tax chargeable for the year as a result of an order passed in appeal or other proceedings under the Income Tax Act. Therefore, the facts governing the said case is that if the tax has been deposited at source or advance tax has been paid or the tax has been paid by way of self-assessment or tax has been paid on regular assessment exceeds tax chargeable then there will be refund by the Income Tax Department and in that pretext the refund will be accompanied with the interest.

The aforesaid fact does suggest that in case of only bona fide approach of the assessee if the tax so deposited exceeds the tax chargeable for the year then only the question of payment of interest along with refund will arise.

The Hon’ble Apex Court in Union of India through Director of Income Tax v. Tata Chemicals Limited (Supra) where the issue arose as the quantum of tax deducted consequent to the order passed by the Assessing Officer directing it to deduct tax on amounts being remitted abroad, it was found in appeal that the payments made were in the nature of reimbursement and, therefore, not a part of income of the party to whom it is being remitted for the purpose of deduction of tax at source. Therefore, Tata Chemicals Limited sought refund of amount paid in excess along with interest thereof.

The Hon’ble Apex Court granted while making the following observations with regard to liability to pay tax; ―tax refund‖ is a refund of taxes when the tax liability is less than the tax paid. As per the old section an assessee was entitled for payment of interest on the amount of taxes refunded pursuant to an order passed under the Act, including the order passed in an appeal.

This Court, in view of the facts of the given case, is of the view that the conduct of the petitioner cannot be considered to be proper for issuance of a direction for payment of interest in favour of the writ petitioner even if this Court has directed for adjustment of the amount so deposited.

Accordingly, the prayer for interest is hereby rejected.

In the result, the instant writ petition stands disposed of with the aforesaid direction.

Pending Interlocutory Application(s), if any, also stand(s) disposed of.