A division bench of the Delhi High Court, on Monday held that penalty under section 271AAC of the Income Tax Act, 1961 would not attract when an application filed under the Pradhan Mantri Garib kalian ( PMGK ) was rejected by the tax department for gullible mistake arising out of confusion about options to make declaration under the said scheme.
The bench of Justices Sanjiv Khanna and Prathiba M Singh was hearing a petition filed by an advocate, who is an income tax practitioner whose application for PMGK scheme was rejected by the authorities.
In the instant case, the assessee had admitted the cash deposits in demonetized notes in his bank accounts and also stated that he had already paid approx. subsequent to a search operation by the department. Thereafter, he paid Rs.1,00,00,000 as the advance tax with an intent to declare the unaccounted money as income in his return. As per the direction of the Tax Officers, the Assessee had also issued cheques towards 49.90% payable as tax, surcharge and penalty and 25% to be deposited in the Bond Ledger Account.
When the assessee requested the credit of the advance tax already paid by treating the same as tax under the scheme, the Revenue refused to it. Subsequently, the declaration made by the Assessee was rejected by the Revenue Officials by stating that the credit of advance tax paid, TDS or TCS was not to be allowed under the PMGK Scheme and also imposed 10 percent penalty.
Aggrieved by the action of the authorities, the assessee approached the High Court.
Counsel for the Revenue, on the other hand, had submitted that the PMGK Scheme was a complete and self-contained code that had required payment of full tax, surcharge and penalty and deposit under the Deposit Scheme. PMGK Scheme did not envisage benefit of prior payment of taxes, advance tax or the TDS.
“Legislations do not and cannot deal with all circumstances with abstract symmetry. When interpretation and understanding of legal provisions and applicability in a peculiar factual matrix were ambiguous and nebulous at the given point of time and confusion had prevailed, the Courts should provide succour to the party who would suffer an infelicitous and odious harm, subject to the purpose of the legislation not being defeated and subdued.”
Analyzing the provisions of the Scheme in the light of the CBDT circular dated 18th January 2018, the bench held that in case of seized cash/money deposit adjustment for payment of tax, surcharge and penalty was permitted.
The bench further said that “Despite the circular, facts narrated in some detail to show that the Amendment Act had equally puzzled and flummoxed the tax law enforcers with whom the petitioner was in constant interaction and had sought guidance and assistance. Tax officers certainly had failed to appreciate and understand the difference between the two options and the procedure, and have substantially contributed to the muddle. The petitioner we would accept was prompted, if not clearly directed to file the declaration and make deposits as made under the PMGK Scheme as the right course an option. Role of an assessing officer or the Income-tax authorities has been described as that of solicitude to the public exchequer with the inbuilt fairness to the assessee. Respondents, as tax authorities being law enforcers and having acted as facilitators, should have explicated doubts, when they had counselled the petitioner to make taxes etc. under the PMGK Scheme.”
“No provision prohibits or bars an assessee, who had made the true and correct disclosure, to partly take benefit of the option under Section 115BBE and partly exercise the second option in the form of the declaration under PMGK Scheme. The sections do not prohibit part declarations under both options, provided entire undisclosed income has been accounted for in the declaration made under PMGK Scheme and Section 115BBE. Such recourse to both or any option was available to the petitioner on or after the Amendment Act was notified on 15th December 2016. Of course, if the petitioner does not make payment as stipulated under Section 115BBE and applicable surcharge in respect of the aforesaid undisclosed income of Rs.1,71,34,268.54/-, it will be open to the respondents to treat the declaration under PMGK Scheme as invalid or void on the ground of misrepresentation or suppression of facts. Similarly if subsequently the declaration is found to be bad on account of suppression of facts or misrepresentation. In case of tax, interest etc. are paid we believe a fair-minded assessing officer would not initiate penalty proceedings under Section 271AAC of the Act,” the bench added.
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