2021 (5) TMI 368 - HC - Income Tax

Direct Tax Vivad Se Vishwas Act, 2020 - Rectification u/s 254 - Challenge to the orders whereby, Forms 1 and 2 filed under the Direct Tax Vivad Se Vishwas Act, 2020 were rejected by the designated authority - Whether, in the given facts and circumstances, it could be said that the revenue's appeal was pending on the specified date (i.e., 31.01.2020) as noticed under the 2020 Act? - Revenue says that there is no mention of an MA, in the 2020 Act - HELD THAT - A careful perusal of the order dated 22.06.2018 would show that the revenue's appeal was dismissed, at the threshold, based on a mistaken impression, perhaps, given by the departmental representative, that the Tribunal had taken a view against the revenue. As noticed hereinabove by us, on 22.06.2018, on the date, the revenue's appeal was dismissed. the petitioner-assessee was not represented. This obvious error, which was apparent from the record, was corrected by the Tribunal, on 11.05.2020. Therefore, if we were to apply the response given to FAQ no. 61, as contained in the revenue's Circular No. 21 of 2020, dated 04.12.2020, in our opinion, the petitioner-assessee should succeed. A plain reading of the response to FAQ no. 61 would show that it requires fulfilment of two prerequisites for an appeal to be construed as pending on the specified date i.e., 31.01.2020 as per the provisions of the 2020 Act. i. First, the MA should be pending on the specified date, i.e., 31.01.2020. ii. Second, the said MA should relate to an appeal, which had been dismissed in limine before 31.01.2020. Insofar as the first aspect is concerned, there is no dispute that the MA was filed, and was pending on the specified date, i.e., 31.01.2020. As regards the second aspect, in our view, the order of the Tribunal dated 22.06.2020 can only be construed as an order that dismissed the revenue s appeal in limine. In our opinion, the decision taken to dismiss the revenue s appeal was based on a preliminary assessment of the facts, i.e., the outcome of the revenue s appeal preferred with the Tribunal qua the same issues in earlier AYs. There was no discussion on the merits of the case. Therefore, in our view, the petitioner-assessee should succeed on this ground alone. In the given facts and circumstances, the order dated 11.05.2020 would have to be construed, metaphorically, as one breathing life into a dead appeal, in the light of the doctrine of relation back . See Commissioner of Income-Tax vs. Haryana Sheet Glass Ltd. 2009 (9) TMI 70 - DELHI HIGH COURT The order dated 11.05.2020 rectified the Tribunal s earlier order dated 22.06.2018, as according to the Tribunal, a mistake, apparent on the face of the record, had occurred. The Tribunal, in its operative directions, while recalling the order dated 22.06.2018, not only restored the revenue's appeal but also posted it for a fresh hearing. Therefore, if the doctrine of relation back were to be applied, and given its logical application, it would have to be said that the revenue's appeal was pending on the specified date, i.e., 31.01.2020. Conclusion - We are inclined to allow the prayer made in the writ petition. The impugned orders are set aside.

Summary

Issues Involved:
1. Validity of rejection of Forms 1 and 2 under the Direct Tax Vivad Se Vishwas Act, 2020.
2. Whether the revenue's appeal was pending on the specified date (31.01.2020) under the 2020 Act.

Issue-wise Detailed Analysis:

1. Validity of Rejection of Forms 1 and 2:
The petitioner-assessee challenged the orders dated 27.01.2021 and 11.02.2021, which rejected Forms 1 and 2 filed under the Direct Tax Vivad Se Vishwas Act, 2020. The Assessing Officer (AO) had increased the petitioner-assessee’s taxable income from ?21,21,160 to ?2,19,50,020 for AY 2011-2012, disallowing deductions under Section 80IC of the Income Tax Act, 1961. The petitioner-assessee's appeal to the Commissioner of Income Tax (Appeals) [CIT(A)] was allowed, but the revenue's subsequent appeal to the Income Tax Appellate Tribunal (Tribunal) was dismissed based on a mistaken belief about previous years' decisions.

The Tribunal later rectified this mistake via a Miscellaneous Application (MA) under Section 254(2) of the Act, restoring the revenue’s appeal for fresh hearing. The petitioner-assessee filed Forms 1 and 2 under the 2020 Act, which were rejected by the designated authority. The court had to determine if the revenue's appeal was pending on the specified date (31.01.2020) as per the 2020 Act.

2. Whether the Revenue's Appeal was Pending on the Specified Date:
The petitioner-assessee argued that the revenue’s appeal was pending because the MA filed by the revenue on 13.11.2018 was allowed on 11.05.2020, restoring the appeal dismissed on 22.06.2018. The revenue contended that the 2020 Act did not mention MAs and that the dismissal of the appeal was on merits.

The court concluded that the Tribunal’s order dated 22.06.2018 was based on a mistake of fact and was dismissed "in limine" (preliminarily). The Tribunal corrected this mistake on 11.05.2020, restoring the revenue’s appeal, which was pending for a fresh hearing. The court referred to FAQ 61 in the revenue’s Circular No. 21 of 2020, which stated that an MA pending on 31.01.2020 in respect of an appeal dismissed in limine would be covered by the scheme. The court determined that the revenue’s appeal was indeed pending on the specified date, applying the doctrine of relation back, which treats an act done at a later time as though it occurred earlier.

Conclusion:
The court allowed the petitioner-assessee's writ petition, setting aside the impugned orders. The revenue was directed to consider Forms 1 and 2 filed by the petitioner-assessee and proceed as per the 2020 Act's provisions, considering the specified timelines. The court emphasized that the Tribunal's rectification of its earlier order breathed life into the appeal, making it pending on the specified date.