2024 (12) TMI 715 - HC - Income Tax

Denial of benefit of Direct Tax Vivad Se Vishwas Act, 2020 - there was no disputed income/penalty/interest relevant to assessment year (AY) 2009-10 - whether the petitioner was entitled to apply under the VSV Scheme on the ground that a dispute was pending on the date when it filed its application? - Scope of expression disputed penalty and disputed tax - HELD THAT - A plain reading of the provisions of the VSV Act indicate that no distinction is drawn as to the nature of the dispute that is pending. The eligibility to apply under the VSV Act, is not contingent on the merits of the maintainability of the appeal. Thus, if an appeal in respect of any disputed tax is pending before the learned ITAT or the learned CIT(A), the assessee would be entitled to file a declaration under Section 4 (1) of the VSV Act. It is material to note that the petitioner had succeeded before the learned ITAT in its appeal and the order of the learned CIT(A) rejecting the petitioner s appeal on the ground of limitation was set aside. ITAT has issued specific directions for the learned CIT(A) to decide the dispute on merits. It is also material to note that the Revenue has not challenged the order dated 09.02.2023 passed by the learned ITAT. However, sensu stricto this may not be relevant at this stage. All that was necessary to be considered is whether on the date when the petitioner had made declaration under Section 4 of the VSV Act, an appeal before the learned CIT(A) or the learned ITAT was pending. Undisputedly, the petitioner s appeal before the learned ITAT was pending on the said date. As not the Revenue s contention that the petitioner s case falls in any of the exclusions mentioned in clauses of Section 9 of the VSV Act. As noted above, the only reason why the petitioner s declaration under Section 4 of the VSV Act has been rejected is that there was no dispute regarding tax. This, as we noticed above, is unsustainable. Thus, the impugned communication is set aside. The designated authority is directed to consider the petitioner s declaration and undertaking in accordance with law as applicable on the date on which the declaration and undertaking was filed.

Issues Involved:

1. Rejection of the petitioner's application under the Direct Tax Vivad Se Vishwas Act, 2020 (VSV Act) on the grounds of no disputed income/penalty/interest for the assessment year 2009-10.
2. Determination of whether the petitioner was entitled to apply under the VSV Scheme due to a pending dispute.
3. Examination of the definitions of "disputed penalty" and "disputed tax" under the VSV Act.
4. Consideration of the maintainability of the petitioner's appeal before the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT).
5. Analysis of the applicability of the VSV Act in the context of pending appeals.

Detailed Analysis:

1. Rejection of Application under VSV Act:

The petitioner challenged a communication dated 18.12.2020, which rejected their application under the VSV Act for the assessment year 2009-10, asserting that there was no disputed income, penalty, or interest. The petitioner had filed a declaration and undertaking in Forms 1 and 2 of the VSV Act, which was denied acceptance by the concerned authority. The petitioner argued that the rejection was contrary to the language of the Scheme, seeking a direction for settlement of the disputed income and tax under the VSV Act.

2. Entitlement to Apply under VSV Scheme:

The core question was whether the petitioner was entitled to apply under the VSV Scheme based on a pending dispute at the time of application. The court examined the definitions of "disputed penalty" and "disputed tax" under Section 2(1)(i) & (j) of the VSV Act, which include scenarios where an appeal is pending before an appellate forum. The court concluded that since the petitioner's appeal was pending before the ITAT on the date of the declaration, there was indeed a "disputed tax."

3. Definitions under VSV Act:

The court analyzed the definitions of "disputed penalty" and "disputed tax" under the VSV Act. "Disputed tax" includes the income-tax payable if an appeal or writ petition is pending as of the specified date. The court noted that the VSV Act did not require the merits of the appeal to be considered when determining eligibility to apply under the Act.

4. Maintainability of Appeal:

The court addressed the Revenue's contention that the petitioner's appeal was not maintainable, arguing that the petitioner's return was accepted, and therefore, they could not be considered aggrieved. The court cited precedents, including the decision in Commissioner of Income Tax vs. Bharat General Reinsurance Co. Ltd., which supports the view that an assessee can challenge the validity of taxing an income even if it was initially included in the return. The court found that the question of the appeal's maintainability was a contentious issue that should be adjudicated by the CIT(A).

5. Applicability of VSV Act:

The court referred to the decision of the Bombay High Court in Govindrajulu Naidu v. Principal Commissioner of Income Tax, which emphasized that the VSV Act aims to expedite the realization of locked-up revenue and provides relief to taxpayers with pending disputes. The court noted that the petitioner's appeal was pending, and the ITAT had set aside the CIT(A)'s order, directing a decision on merits. The Revenue did not challenge the ITAT's order, further supporting the existence of a dispute.

Conclusion:

The court set aside the impugned communication rejecting the petitioner's application under the VSV Act. It directed the designated authority to consider the petitioner's declaration and undertaking in accordance with the law applicable at the time of filing. The petition was disposed of with these directions, affirming the petitioner's entitlement to apply under the VSV Scheme due to the pending dispute.

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