The Telangana High Court ruled that the authorities can not blame the assessee for its inability to pay the amount determined in Form No.SVLDRS-3.
The petitioner has engaged in the infrastructure development sector and is a registered assessee with the Service Tax Department, Hyderabad under the Finance Act, 1994 and also under the Income Tax Act, 1961.
The Petitioner filed an application under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019’ (SVLDRS), and the petitioner’s application for settlement of dues under the SVLDRS was accepted by the Designated Committee of the Tax Department. The Committee reviewed the petitioner’s application and issued its approval vide Form No.SVLDRS and the petitioner was asked to remit an amount of Rs.18,91,37,548/- as against the original liability of Rs.59,20,19,079/-.
As per the SVLDRS, payment of the amount mentioned in Form No.SVLDRS-3 should be made as per timelines prescribed (and extended from time to time), failing which the order of the Designated Committee would be deemed to be automatically canceled. The final date for making the above payment was June 30, 2020.
The Petitioner contended that because of the COVID-19 Pandemic situation and its own financial difficulties, the only way the petitioner could discharge its liability as per Form No.SVLDRS-3 was by utilizing the Income tax refund of Rs.34,65,92,300/- which it was held entitled to. But, on account of the Garnishee Notice issued by the GST authorities to C.I.T. (C.P.C.), Bengaluru and Principal C.I.T. (Central), Hyderabad to remit Rs.59,02,23,755/- towards Service tax liability of the petitioner, the Income Tax Department did not pay to the petitioner the refund due to it for the Assessment Year 2018-19.
A phone call was received by the petitioner from the office of respondent asking the petitioner if it could discharge the liability under the SVLDRS if the due date of payments determined under the Scheme is extended to September 30, 2020, and if so, the petitioner was asked to send a formal communication to that effect.
The Petitioner responded to the respondent by way of an e- mail that petitioner would be able to discharge its liability of Rs.18,91,37,548/- as per Form No.SVLDRS-3 and followed it up by a detailed representation to respondent with a copy marked to the Central Board of Indirect Taxes and Customs explaining the exceptional circumstances the petitioner is in and requesting them to consider petitioner’s plea positively.
But the efforts of petitioner to have the Garnishee Notice issued by the respondent to the Income Tax Department withdrawn or modified did not succeed and the petitioner was disabled from discharging its Service tax liabilities determined under Form No.SVLDRS-3 from out of the refund amount due to it from the Income Tax Department.
The petitioner challenged the action of respondents in taking Rs.30,92,60,666/- from the Income Tax Department and appropriating it towards liability determined under Form No.SVLDRS-3 of Rs.18,91,37,548.
The petitioner requested to direct the respondents to pay to the petitioner Rs.12,01,23,118 and not to declare the petitioner as a defaulter under the SVLDR Scheme 2019 or to take coercive action against itself, its directors, and officials.
The division bench of Justices Rama Chandra Rao ruled that the respondents cannot be allowed to take advantage of their own wrong and blame the petitioner for its inability to pay within the time the amount determined in Form No.SVLDRS-3 by the Designated Committee and label the petitioner as a “defaulter”.
The court held that The action of the Income Tax Department in soliciting from the Service Tax Department, a fresh Garnishee Notice in order to see that the petitioner does not get the income tax refund, (which was payable as per the intimation issued to the petitioner under Section 143(1) of the Act on 20.02.2020, and by continuing to retain the income tax refund amounts till November 2020 without any valid reason), is not bonafide and indicates a prejudice against the petitioner.
“The inaction on the part of the Income Tax Department in not paying to the petitioner interest at rate of 15% p.a on the refund from 20.5.2020 ( the date of expiry of the 3 month period as per Section 243 (1) (b) of the Income Tax Act,1961) which it is entitled to get on account of the delay in making payment of refund, is arbitrary, illegal and violates Art.14, 300A of the Constitution of India and also Section 243(1) (b) of the Income Tax Act,1961,” the court added.
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