2021 (9) TMI 92 - HC - Income Tax

Applicability of the DTVSV Act - Eligibility or otherwise of the petitioner to avail benefit under the scheme - N on acceptance of declaration in Form No.1 filed by the petitioner - applicability of the DTVSV Act denied solely on the basis of the filing of objections - extending the benefit only to an assessee who has filed objections to the draft assessment order and denying it to one who chooses not to file objections to the draft assessment order for various reasons - HELD THAT - The declaration form is one which is designed under the rules framed under the DTVSV Act.Secondly, based on the clauses contained in the declaration form, the eligibility/applicability of the DTVSV Act cannot be put to test. Thirdly, the interpretation sought to be placed by reading the said sentence in isolation runs contrary to the earlier part of the clarification, wherein it is mentioned that assessee decides not to file objections with the DRP and is waiting for final order to be passed by AO, against which, he can file appeal with the Commissioner (Appeals) . Once, an assessee decides not to file an appeal, it is irrelevant whether time for filing objection has expired or not. If the time for filing objections has expired, the consequences would be that the proposals made in the draft assessment order would be confirmed. Therefore, the proposals made in the draft assessment order would only get converted into Final order, which can be appealed against. If time to file objections has not yet expired, the assessee can decide for settling the dispute under the scheme. Either ways, the benefit of the applicability of the DTVSV Act cannot be denied solely on the basis of the filing of objections or not. Thus, the acceptance of the said contention advanced by the respondent would make the clarification issued by the 3rd respondent vide answer to question No.16 of FAQs, otiose and redundant. As noted in the opening remarks, the DTVSV Act being a beneficial piece of legislation, resort should be made to liberal interpretation rather than literal interpretation, which would render the entire scheme inoperable. In view of the conclusions arrived at as above, the petitioner is entitled to succeed in this Writ Petition. Writ petition is allowed; the impugned proceeding of the 1st respondent dt.30.04.2021 is hereby set aside; the 1st respondent is directed to accept the declaration in Form No.1 filed by the petitioner on 30.03.2021, process the same in accordance with the DTVSV Act of 2020; issue Form No. 3; and permit the petitioner to make the payment of disputed tax as declared in the declaration Form No.1, before the due date as notified.

Summary

Issues Involved:
1. Eligibility of the petitioner to avail benefits under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act).
2. Interpretation of the term "appellant" under Section 2(1)(a) of the DTVSV Act.
3. Validity of the rejection of the petitioner's application based on Circular No. 9/2020.

Detailed Analysis:

1. Eligibility of the Petitioner to Avail Benefits under the DTVSV Act:
The petitioner, a foreign company engaged in power equipment manufacturing, challenged the rejection of their application under the DTVSV Act. The petitioner argued that they were eligible to settle their tax dispute under the scheme, as clarified by Circular No. 9/2020. The petitioner did not file objections to the draft assessment order within the 30-day period, leading to the final order being passed on 10.02.2020. The petitioner contended that the scheme aimed to settle long-pending tax disputes and that the rejection of their declaration was contrary to the law.

2. Interpretation of the Term "Appellant" under Section 2(1)(a) of the DTVSV Act:
The respondents argued that the petitioner could not be considered an "appellant" under Section 2(1)(a) of the DTVSV Act because they did not file objections to the draft assessment order. The respondents contended that the petitioner’s failure to file objections implied acceptance of the draft assessment order, and thus, no dispute existed as of the specified date. However, the court noted that the DTVSV Act is a beneficial piece of legislation intended to resolve vexatious litigation. The court emphasized that the Act should be interpreted liberally to achieve its objective. The court referred to Circular No. 9/2020, which expanded the definition of "appellant" to include those who did not file objections to the draft assessment order but were waiting for the final order to file an appeal.

3. Validity of the Rejection of the Petitioner's Application Based on Circular No. 9/2020:
The respondents contended that the petitioner was ineligible to avail the benefits of the scheme because the time to file objections to the draft assessment order had expired before the specified date. However, the court rejected this contention, stating that the right to file an appeal under Section 246A of the Income Tax Act is not dependent on filing objections to the draft assessment order. The court highlighted that the DTVSV Act does not mandate the filing of an appeal to be eligible for the scheme. The court noted that the language used in the Act and the circulars issued by the CBDT indicated that the possibility of filing an appeal against the final order suffices for eligibility.

The court further observed that the petitioner’s decision not to file objections to the draft assessment order did not preclude them from filing an appeal against the final order. The court stated that creating separate classes of assessees based on whether they filed objections to the draft assessment order would result in discrimination. The court concluded that the rejection of the petitioner’s declaration was contrary to the provisions of the DTVSV Act and the clarifications issued by the CBDT.

Conclusion:
The court allowed the writ petition, set aside the impugned order, and directed the respondent to accept the petitioner’s declaration, process it in accordance with the DTVSV Act, and permit the petitioner to make the payment of disputed tax as declared. The court emphasized the need for a liberal interpretation of the DTVSV Act to achieve its objective of resolving tax disputes.