2021 (12) TMI 461 - HC - Income Tax

Rejection of declaration filed by the petitioner under section 4 of the DTVSV Act, 2020 - HELD THAT - Assessment orders for respective years were served on the petitioner on 12th January 2019. The petitioner on 7th April 2019, filed appeal along-with application for condonation of delay challenging said orders. The delay has been condoned vide order dated 24th February, 2021, meaning thereby that the appeals challenging assessment orders were pending on the specified date i.e.; 31st January 2020 in terms of the judgment of this Court in the case of Karan Ventakeshwara Associates 2021 (6) TMI 1008 - BOMBAY HIGH COURT The respondent No.3, therefore, could not have rejected the declaration filed by the petitioner. The petitioner has also challenged the Circular No.21/2020 on the ground that the right conferred under Section 2(1)(a)(i) cannot be limited by a clarificatory order in the manner it has been done. The clarification cannot add new qualifications beyond the provisions of the DTVSV Act, 2020 and that clarification can only operate within contours specified in the DTVSV Act, 2020. Question No.59 in the said circular deals with the situation where time limit for filing appeal has expired during the period from 1st April, 2019 to 31st January, 2020 and appeal having been admitted prior to 31st January, 2020. The petitioner has challenged said clarification on the ground that filing appeal with application for condonation of delay is within the control of petitioner but, its decision is not. In the present case, the assessment orders were served on petitioner on 12th January 2019. The period of limitation for filing appeal is 30 days, therefore appeal ought to have been filed prior to 11th February, 2019. The said date 11th February, 2019 is prior to the period prescribed under Ques. No.59, being period from 1st April, 2019 to 31st January, 2020. These facts would raise a doubt about applicability of the circular dated 4th December, 2020 to the case of the petitioner. In any case, having found action of rejection of declarations by respondent No.3 being bad-in-law, we do not propose to examine this challenge now. The challenge therefore is kept open for decision in appropriate proceeding. It will have to be held that the rejection of declaration filed by the petitioner under section 4 of the DTVSV Act, 2020 is bad-in-law. Similarly, the impugned communication dated 29th January, 2020 is liable to be quashed and set aside.The petition is thus partly allowed. The action of rejection of the declarations filed by the petitioner under Section 4 of DTVSV Act, 2020 is held to be bad-in-law.

Summary

Issues:
1. Interpretation of the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act, 2020) and the Vivad Se Vishwas Scheme (VSVS, 2020).
2. Validity of Circular No. 21/2020 issued by the Central Board of Direct Taxes (CBDT).
3. Rejection of declarations filed under Section 4 of the DTVSV Act, 2020 by the Designated Authority.
4. Compliance with scheme requirements for availing benefits.
5. Applicability of judgments in similar cases to the present scenario.

Issue 1: Interpretation of the DTVSV Act, 2020 and the VSVS, 2020:
The High Court analyzed the provisions of the DTVSV Act, 2020 and the VSVS, 2020, which aim to reduce pending Income Tax litigation and provide benefits to taxpayers. The court highlighted the definition of an appellant under the Act and emphasized that the appeals must be pending as of the specified date, i.e., 31st January 2020, to be eligible for the scheme's benefits.

Issue 2: Validity of Circular No. 21/2020 by CBDT:
The court examined Circular No. 21/2020 issued by the CBDT, which provided clarifications regarding the DTVSV Act, 2020. The court specifically focused on Question No. 59 of the circular, which addressed the eligibility of taxpayers whose appeal filing deadlines had expired but had filed for condonation of delay. The court scrutinized the circular's impact on the petitioner's case and its alignment with the Act's provisions.

Issue 3: Rejection of declarations by the Designated Authority:
The petitioner had filed declarations under Section 4 of the DTVSV Act, 2020, which were rejected by the Designated Authority based on the CBDT circular. The court analyzed the timeline of events, including the filing of belated appeals and subsequent condonation of delay by the Appellate Tribunal, to determine the validity of the rejection of the declarations.

Issue 4: Compliance with scheme requirements for availing benefits:
The court discussed the importance of full compliance with the scheme's provisions to avail benefits, citing judgments emphasizing the need for strict adherence to scheme requirements. It compared cases where benefits were denied due to non-compliance within prescribed periods to the petitioner's case, where the declarations were filed within the stipulated time.

Issue 5: Applicability of judgments in similar cases:
The court referred to a previous judgment involving a similar issue and highlighted the significance of condonation of delay in filing appeals for determining eligibility under the DTVSV Act, 2020. It distinguished cases where benefits were denied due to non-compliance within prescribed periods from the petitioner's case, where the delay in filing appeals was condoned.

In conclusion, the court partially allowed the petition, holding the rejection of declarations as bad-in-law and quashing the communication informing the petitioner of the rejection. The Designated Authority was directed to process the declarations in accordance with the law expeditiously.