Facts of the Case

The Petitioner, an advocate and income-tax practitioner, had deposited substantial cash amounting to Rs. 2,40,46,000/- in bank accounts after demonetisation. Prior to introduction of PMGKY, he had deposited Rs. 85,50,000/- as advance tax under the Income-tax Act with the intention of declaring such amount in his regular return.

Subsequently, upon interaction with Income Tax Authorities, the Petitioner opted to declare the undisclosed income under the PMGKY Scheme and sought adjustment of the advance tax already paid against the liability arising under PMGKY.

The authorities rejected the declaration on the ground that credit of advance tax, TDS or TCS is not allowable under PMGKY Scheme, resulting in forfeiture implications under the Scheme. The Petitioner challenged this rejection before the Delhi High Court.

Issues Involved

  1. Whether advance tax paid before introduction of PMGKY Scheme can be adjusted against tax liability under PMGKY?
  2. Whether PMGKY Scheme constitutes a complete code in itself?
  3. Whether denial of adjustment of advance tax amounts to double taxation?
  4. Whether principles laid down in Kumudam Publications Pvt. Ltd. v. CBDT apply to PMGKY Scheme?

Petitioner’s Arguments

1. Advance Tax Should Be Adjusted

The Petitioner argued that the amount already deposited as advance tax should be treated as tax paid for PMGKY compliance.

2. Double Taxation

It was argued that insisting upon fresh payment under PMGKY despite prior tax deposit would amount to taxation twice on the same income.

3. Reliance on Kumudam Publications Case

The Petitioner relied upon Kumudam Publications Pvt. Ltd. v. Central Board of Direct Taxes, wherein adjustment of advance tax under Income Disclosure Scheme, 2016 was permitted.

4. Bona Fide Conduct

The Petitioner contended that he acted under guidance of tax officials and complied with their directions.

Respondent’s Arguments

1. PMGKY Is a Self-Contained Code

Revenue contended that PMGKY is a complete and independent statutory scheme.

2. No Provision for Adjustment

The Scheme expressly requires payment of tax, surcharge, penalty and deposit separately before filing declaration.

3. Separate Taxing Mechanism

The tax under PMGKY is distinct from regular income-tax under the Income-tax Act.

4. No Statutory Right

There is no statutory provision permitting adjustment of advance tax under PMGKY.

Court Findings / Observations

1. PMGKY Is a Separate Taxation Code

The Court held that PMGKY creates a separate taxation mechanism independent of regular assessment proceedings.

2. Advance Tax Cannot Be Adjusted

The Court clearly held that advance tax deposited under the Income-tax Act cannot be treated as payment under PMGKY.

3. No Double Taxation

The Court rejected the plea of double taxation by holding that PMGKY operates independently.

4. Kumudam Publications Not Applicable

The Court distinguished the Income Disclosure Scheme from PMGKY and held that the ratio in Kumudam Publications could not be extended.

5. Legislative Intent

The Court observed that the Scheme was designed specifically after demonetisation to deal with undisclosed cash deposits.

Court Order / Final Decision

The Delhi High Court upheld the Revenue’s stand and held that:

  • No credit for advance tax paid can be allowed under PMGKY Scheme.
  • The declaration filed by the Petitioner was rightly rejected.
  • PMGKY provisions must be strictly complied with.

Accordingly, the writ petition was dismissed.

Important Clarification

PMGKY and Regular Income Tax Are Separate

Tax paid under the Income-tax Act cannot automatically be adjusted against PMGKY liability.

Strict Interpretation of Amnesty Schemes

Beneficial tax schemes must be interpreted strictly as per statutory wording.

No Equitable Relief in Tax Amnesty

Equity cannot override express statutory requirements.

Sections Involved

Income-tax Act, 1961

  • Section 115BBE
  • Section 271AAC
  • Section 68
  • Section 69
  • Section 69A
  • Section 69B
  • Section 69C
  • Section 69D
  • Section 131
  • Section 139
  • Section 140

Finance Act, 2016 (PMGKY Provisions)

  • Section 199A
  • Section 199B
  • Section 199C
  • Section 199D
  • Section 199E
  • Section 199F
  • Section 199H
  • Section 199I
  • Section 199K
  • Section 199M

 Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:1721-DB/SKN12032018CW63122017.pdf

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