Case Note & Summary
The Petitioner, Cooperative Rabobank U.A., a bank established in the Netherlands and part of the Rabobank Group, is a regular assessee under the Income Tax Act, 1961. For Assessment Year 2003-2004, the Petitioner filed a return declaring Nil income. The Assessing Officer passed an assessment order on 7th March 2006, assessing business profits attributable to a permanent establishment at Rs.1,50,75,790/-. Aggrieved, the Petitioner appealed to the Commissioner of Income Tax (Appeals), who on 31st January 2007 held that the Petitioner did not have a PE in India and deleted the addition. The Revenue filed an appeal before the Tribunal on 8th May 2007. Meanwhile, the order giving effect to the CIT(A) order was passed on 16th April 2007, and a refund of Rs.7,75,272/- along with interest under Section 244A was paid to the Petitioner. On 1st April 2015, the Tribunal partly allowed the Revenue's appeal, restoring the matter to the Assessing Officer for fresh adjudication. The Petitioner filed an appeal before the High Court under Section 260A of the IT Act, which was admitted on 22nd December 2015. During the pendency of the appeal, the Direct Tax Vivad Se Vishwas Act, 2020 came into force, offering a scheme for resolution of tax disputes. The Petitioner applied under the DTVSV Act, and the Designated Authority issued Form-3 on 30th January 2021 and 26th March 2021, demanding payment of a certain amount without considering the refund already paid. The Petitioner challenged these Form-3 notices by way of a writ petition under Article 226 of the Constitution of India. The main legal issue was whether the Designated Authority should have reduced the amount payable under the DTVSV Act by the refund already paid to the assessee. The Petitioner argued that the refund had been paid and retained by the Revenue, and therefore the amount payable should be reduced accordingly. The Respondents contended that the refund was not relevant to the computation under the DTVSV Act. The Court analyzed the provisions of the DTVSV Act, particularly Section 5, and the scheme of the Act, which aims to provide a simple and efficient resolution of tax disputes. The Court held that the Designated Authority ought to have considered the refund paid and applied the principle of set off under Section 245 of the IT Act. The Court quashed the impugned Form-3 and directed the Designated Authority to recompute the amount payable after taking into account the refund already paid to the Petitioner. The writ petition was allowed with no order as to costs.
Headnote
A) Direct Tax Vivad Se Vishwas Act, 2020 - Section 5 - Computation of Amount Payable - Refund Adjustment - The issue was whether the Designated Authority should have reduced the amount payable under the DTVSV Act by the refund already paid to the assessee under Section 244A of the Income Tax Act, 1961. The Court held that the refund paid must be taken into account while computing the amount payable under the DTVSV Act, as the scheme aims to provide a simple and efficient resolution of tax disputes. (Paras 1-58) B) Income Tax Act, 1961 - Section 245 - Set Off of Refunds Against Tax Arrears - The Court considered the applicability of Section 245 of the IT Act, which allows set off of refunds against tax arrears. The Court held that the Designated Authority ought to have applied this provision to adjust the refund against the disputed tax, thereby reducing the amount payable under the DTVSV Act. (Paras 30-45) C) Constitution of India, 1950 - Article 226 - Writ Jurisdiction - The Court exercised its writ jurisdiction to quash the impugned Form-3 and direct the Designated Authority to recompute the amount payable, as the Authority had failed to consider relevant facts and acted arbitrarily. (Paras 50-58)
Issue of Consideration
Whether the Designated Authority under the Direct Tax Vivad Se Vishwas Act, 2020 was correct in issuing Form-3 without considering the refund already paid to the assessee, and whether the amount payable under the DTVSV Act should be reduced by the refund amount.
Final Decision
The Court allowed the writ petition, quashed the impugned Form-3 dated 30th January 2021 and 26th March 2021, and directed the Designated Authority to recompute the amount payable under the DTVSV Act after taking into account the refund already paid to the Petitioner. No order as to costs.
Law Points
- Interpretation of Section 5 of Direct Tax Vivad Se Vishwas Act
- 2020
- Refund adjustment under Section 245 of Income Tax Act
- 1961
- Scope of Article 226 of Constitution of India
- 1950
