2022 (11) TMI 1308 - HC - Income Tax

Benefit of VSV Act - delay in payment - Timeline to pay under the VSV - Petitioner Companies were unable to pay the disputed amount as determined by Respondents in Form 3 prior to the last date provision permitting the Respondents to extend the time for payment - Petitioners stated that the delay in payment was not intentional and the Petitioners always intended to settle the dispute with the Income tax department and avail the benefit of VSV Act - Petitioners seek a direction to the Respondents to accept the declaration/application (Form 1 and Form 2) filed by the Petitioners as valid declarations though delayed - HELD THAT - Timeline to pay under the VSV was not mandatory as the last date stipulated under the VSV Act (3 of 2020) was extended by virtue of Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020. This Court is further of the opinion that the delay in payments of the amounts, in the present cases are attributable to unforeseen and extraneous circumstances that were beyond control of the Petitioners. In fact, the country was intermittently in lockdown on account of the COVID-19 pandemic from 25th March, 2020. In recognition of these difficulties as pointed out hereinabove, the Scheme was amended several times to extend the deadline for payment. Moreover, death of the Managing Director of the companies was an extraordinary and exceptional event which would render non-grant of relief on equitable consideration irrational. Though this Court is in agreement with the submission of learned counsel for the respondents that the power to condone the delay with regard to delay in payment is not vested with the Departmental Authorities, yet this Court under its inherent powers in extraordinary writ jurisdiction under Article 226 of the Constitution of India can pass any order necessary to remedy the injustice. The Supreme Court in B.C.Chaturvedi v. Union of India 1995 (11) TMI 379 - SUPREME COURT has held It deserves to be pointed out that the mere fact that there is no provision parallel to Article 142 relating to the High Courts, can be no ground to think that they have not to do complete justice . Consequently, the power of the High Court under Article 226 of the Constitution of India to grant relief in extraordinary and exceptional circumstances cannot be taken away or curtailed by any legislation. No prejudice caused to the respondents by accepting the prayer of petitioner - This is also a fit case where no prejudice will be caused to the Respondents by accepting the prayer of the Petitioners. Rather, the Respondents benefit and achieve the purpose of the Scheme, namely, to reduce pendency of cases, generate timely revenue for the government and provide certainty and savings of resources that would be spent on the long-drawn litigation process. Consequently as the delay in payment in the present cases were unintentional and supported by justifiable reasons, this Court is of the opinion that the cause of substantial justice deserves to be preferred, and this unintentional delay deserves to be condoned. This approach will only further the object and purpose of the VSV Act. Relief - The present writ petitions are allowed and the respondents are directed to accept the declarations/applications (Forms-1 and 2) dated 04th March, 2021 filed by the petitioners as valid declarations/applications within two weeks and accept the balance disputed amounts as stipulated by respondents in Forms-3 dated 07th May, 2021 and 22nd June, 2021 issued under VSV Act along with simple interest @ 9% per annum till the date the amounts are paid within four weeks.

Issues Involved:
1. Validity of the declaration/application (Form 1 and Form 2) under the Direct Tax Vivad Se Vishwas Act, 2020 (VSV Act).
2. Delay in payment of the disputed amount due to extraordinary circumstances.
3. Interpretation of the VSV Act provisions and their mandatory nature.
4. Equitable relief in extraordinary circumstances.
5. Jurisdiction of the High Court under Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Validity of the Declaration/Application:
The petitioners sought a direction for the respondents to accept their declaration/application (Form 1 and Form 2) dated 04th March, 2021 as valid under the VSV Act and to accept the balance disputed amount as stipulated by the respondents in Forms 3 dated 07th May, 2021 and 22nd June, 2021. The petitioners argued that they had filed the necessary forms within the stipulated time, but were unable to pay the disputed amount by the last date due to the death of a company director.

2. Delay in Payment:
The petitioners contended that the delay in payment was not intentional and was due to the death of a director who was responsible for taxation matters. They emphasized that the delay should be condoned as it was against the object and purpose of the VSV Act, which aims to reduce litigation and collect revenue.

3. Interpretation of VSV Act Provisions:
The respondents argued that the VSV Act mandates payment within fifteen days of the determination of the demand and does not permit any extension. They relied on Sections 4(6)(b) and 5(1)&(2) of the VSV Act, which state that non-compliance with the payment timeline results in the declaration being presumed never to have been made. They also cited the Supreme Court's decision in Hemalatha Gargya Vs. Commissioner of Income Tax, which interpreted similar provisions in the Voluntary Disclosure of Income Scheme (VDI Scheme) as mandatory.

4. Equitable Relief in Extraordinary Circumstances:
The petitioners argued that the Supreme Court's orders in Suo Moto Writ Petition (Civil) No.3/2020 extended the limitation period due to COVID-19, and that the death of the director was an extraordinary circumstance warranting equitable relief. They emphasized that the VSV Act is a beneficial legislation aimed at reducing litigation and should be interpreted liberally to advance its purpose.

5. Jurisdiction of the High Court under Article 226:
The court acknowledged that while the respondents do not have the power to condone the delay in payment, the High Court under its extraordinary writ jurisdiction under Article 226 of the Constitution of India can pass orders necessary to remedy injustice. The court cited previous judgments to support its broad jurisdiction to grant relief in extraordinary and exceptional circumstances.

Court's Reasoning:
The court recognized the intermittent lockdowns due to the COVID-19 pandemic and the death of the managing director as extraordinary and exceptional events. The court held that the timeline for payment under the VSV Act was not mandatory, as the deadlines had been extended multiple times due to the pandemic. The court found the reliance on Hemalatha Gargya by the respondents to be misconceived, as the VDI Scheme was an amnesty scheme, unlike the VSV Act, which is a beneficial legislation aimed at reducing litigation.

The court emphasized that the VSV Act's provisions should be interpreted liberally to advance its purpose. It noted that no prejudice would be caused to the respondents by accepting the petitioners' prayer, and that such action would help achieve the objectives of the VSV Act. The court concluded that the delay in payment was unintentional and supported by justifiable reasons, and that substantial justice warranted condoning the delay.

Relief:
The court allowed the writ petitions and directed the respondents to accept the petitioners' declarations/applications (Forms 1 and 2) dated 04th March, 2021 as valid within two weeks. The court also directed the respondents to accept the balance disputed amounts as stipulated in Forms 3 dated 07th May, 2021 and 22nd June, 2021, along with simple interest at 9% per annum until the amounts are paid within four weeks.

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