No provision in DTVSV Act authorizing recovery of interest paid earlier by the Department u/s 244A of the IT Act
Shivani Bhati | Nov 14, 2021 |
No provision in DTVSV Act authorizing recovery of interest paid earlier by the Department u/s 244A of the IT Act
Writ Petition is filed under Article 226 of Constitution of India before the Bombay HC challenging the validity of Form-3, dated 30th January, 2021 and 26th March, 2021 issued under Section 5 of the Direct Tax Vivad Se Vishwas Act, 2020 (the “DTVSV Act”) by the Designated Authority for Assessment Year 2003-2004.
This Petition raises two issues for our consideration:
Assessing Officer had made addition with respect to a permanent establishment in the case of Petitioner and consequently denied it benefit of the double taxation avoidance agreement.
The entire income was taxed at 40% instead of 10% as declared by Petitioner. Then the matter was appealed to CIT(A). The additions were deleted. Against the said deletions, the Department filed an Appeal before the ITAT being ITA No. 3633/Mum/2007 against the order of CIT(A). The Tribunal restored the matter back to the Assessing Officer for fresh examination. It is stated that the Department had accepted this order of the ITAT.
There is no provision in the DTVSV Act that authorizes recovery of interest paid earlier by the Department under Section 244A of the IT Act by adding the same to the amount of disputed tax in the manner sought to be done. In this view of the matter, the addition of Rs.7,75,272/- to the disputed tax in the impugned Form-3 is bad in law.
Bombay HC ordered to quash and set aside Form-3 dated 26th March 2021 issued by Respondent No. 1 for Assessment Year 2003- 04. We direct Respondent No.1 to issue fresh Form-3 to Petitioner determining the amount of disputed tax. Petitioner to make payment of the disputed tax so determined within a period of two weeks of the issuance of revised Form -3.
Section 6 of the DTVSV Act prohibits the Department from recovering any interest. Section 6 of the DTVSV Act does not permit Designated Authority to charge interest on tax arrears defined under the DTVSV Act, however, to say that there is a complete prohibition from recovery, may not be correct as the restraint to institute proceedings is only in respect of an offense but not for recovery of interest on refund concerned in the present matter. It is also not necessary for us to dwell into whether the Revenue can take recourse to Section 244A (3) of the IT Act as suggested by Learned Senior Counsel Mr. Pardiwala or take recourse to Section 234D of the IT Act as suggested on behalf of the Revenue, as it is always open for the Revenue to take steps as per law.
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