Re: Returned income being considered as part of “undisputed additions” for apportionment of prepaid taxes citing FAQ 79
In form 3 filed by the department, we had observed a very high levy of 234 (B) and 220(2) interest. Upon questioning as to why such heavy interest was charged despite interest supposed to be waived on tax demand under VSV scheme, the AO highlighted the answer to FAQ 79 in the CBDT circular of December 2020. As per his interpretation, our returned income would also be treated as “undisputed tax liability” arising out of undisputed additions, within the meaning of that FAQ.
Therefore he has apportioned our advance and self assessment tax paid years ago against returned income, between the undisputed and disputed tax liability. By so doing, heavy interest is being charged on a portion of our returned income, even though we had paid taxes on that even before filing our return for the relevant AY.
Is this interpretation valid? How can returned income be assumed as an addition accepted in an order (under the meaning of the FAQ #79)? Doesn’t this go against the very purpose of waiving interest on the tax demand under VSV scheme? Our request for rectification to the PCIT (Designated Authority) has also been replied turning down request and reiterating the same interpretation.
The querist may have to file writ before the High Court . In Co Operative Rabo Bank v CIT (WPNo. 1025 of 2021 dt .25 -8-2021 ( Bom) (HC) has allowed the writ petition where the revenue sought to withdraw the interest paid earlier under section 244A of the Act. The Court also discussed the issue of waiver of interest u/ s 234B of the Act. The assessee can read the judgement , the ratio may help to file the writ petition .
Thank you for your response, Sir.