Bombay High Court Mandates Advance Tax Credit Under Income Declaration Scheme 2016: Analysis of Kamla Chandrasingh Kabali Case

The intersection of voluntary disclosure schemes and standard tax collection mechanisms often creates complex legal disputes, particularly regarding the adjustment of previously paid taxes. A prominent example of this friction is found in the judicial pronouncement by the Bombay High Court in the matter of Kamla Chandrasingh Kabali Vs PCIT (Bombay High Court). Delivered on 02/02/2022 under Writ Petition No. 3622 of 2019, this judgment provides critical clarity on whether an assessee can claim credit for advance tax against liabilities arising under the Income Declaration Scheme, 2016.

The core of the dispute revolved around the Revenue's refusal to issue a certification in Form 4, arguing that advance tax and self-assessment tax could not be adjusted against the specific liabilities of the disclosure scheme. The High Court's comprehensive analysis of statutory provisions and apex court precedents ultimately reshaped the understanding of pre-assessment tax collections within the framework of special declaration schemes.

Factual Matrix of the Dispute

The assessee, an individual, found herself unable to file her regular income tax returns for the assessment years ranging from 2011-12 to 2014-15 due to adverse family circumstances. To rectify her tax compliance status, she opted to utilize the Income Declaration Scheme, 2016, which was introduced under Section 183 of the Finance Act, 2016. This scheme was designed by the Parliament to offer a window for non-compliant individuals to declare their undisclosed income and regularize their tax affairs by paying a specified rate of tax, surcharge, and penalty.

The Declaration and Financial Computations

On 30th December 2016, the assessee submitted her initial declaration using Form 1, disclosing a cumulative undisclosed income of Rs. 2,39,08,854/-. This total was distributed across four assessment years as follows:

  • Rs. 52,74,620/- for the assessment year 2011-12
  • Rs. 69,14,678/- for the assessment year 2012-13
  • Rs. 62,87,925/- for the assessment year 2013-14
  • Rs. 54,31,631/- for the assessment year 2014-15

Based on the statutory framework of the Finance Act, 2016, the corresponding liability for tax, surcharge, and penalty was calculated at Rs. 1,07,58,986/-. Due to certain technical errors in the initial submission and following the issuance of a reassessment notice under Section 147 of the Income Tax Act 1961, the assessee filed a revised declaration form on 18th January 2019.

The Revenue's Rejection

Despite the assessee's efforts to comply with the scheme's prerequisites, the Principal Commissioner of Income Tax (Respondent No. 1) withheld the issuance of the final certificate in Form 4. The Revenue communicated its rejection via a letter dated 14th January 2020.