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2022 (5) TMI 1388 - HC - Income TaxRevision u/s 263 - petitioners had opted to settle the dispute under the Direct Tax Vivad Se Vishwas Act, 2020 - HELD THAT - Section 6 of the Direct Tax Vivad Se Vishwas Act, 2020, makes it very clear that once there is a compliance with the timeliness specified under Section (5), the designated authority shall not institute any proceedings in respect of an offence or aims or levy any penalty or charge any interest under the Income Tax in respect of the tax arrears. Section 5 of the Direct Tax Vivad Se Vishwas Act, 2020, also makes it clear that save as otherwise expressly provided in sub-section(3) of Section 5 or Section 6, noting contained in this Act shall be construed as conferring any benefit, concession or immunity on the declarant in any proceedings other than those in relation to which the declaration has been made. The intention of the parliament enacting the of the Direct Tax Vivad Se Vishwas Act, 2020, is to bring a closure of disputes in respect of tax arrears. Whether the petitioner had correctly or wrongly availed the benefit of Section 57(F) of the Income Tax Act or not cannot be re-opened once again under Section 263 of the Income Tax Act, 1961. Once the petitioners had opted to settle the dispute under the Direct Tax Vivad Se Vishwas Act, 2020, the proceedings initiated under Section 263 have to go. If on the other hand the respective petitioners had not filed Form 1 and 2 or not accepted with the issue of Form 3, the Impugned Notice seeking to re-open the assessment under Section 263 of the Income Tax Act, 1961 could be justified. The Finance Minister in her speech on 01.02.2020 announced the the Direct Tax Vivad Se Vishwas Scheme to bring down the litigation. The Government intended to reduce the litigation, so that the taxpayers can buy peace with the department. The aforesaid scheme was to be implemented on 30.06.2020. The taxpayers whose appeals were pending at any level were entitled to avail benefit of the scheme. Therefore, there is no justification in proceeding further with the impugned proceedings initiated by the first respondent under Section 263 of the Income Tax Act, 1961.
Issues Involved:
1. Jurisdiction of notices issued under Section 263 of the Income Tax Act, 1961. 2. Validity of reopening assessments under Section 148 of the Income Tax Act. 3. Applicability of the Direct Tax Vivad Se Vishwas Scheme, 2020. 4. Classification of income from the sale of property. 5. Application of promissory estoppel and principles of fair administration. Issue-wise Detailed Analysis: 1. Jurisdiction of Notices Issued under Section 263 of the Income Tax Act, 1961: The petitioners challenged the impugned notices dated 22.02.2021 under Section 263 of the Income Tax Act, 1961, arguing that these notices were without jurisdiction. They contended that they had opted to settle their cases under the Direct Tax Vivad Se Vishwas Scheme, 2020. The respondents argued that the assessment orders dated 27.12.2018 were erroneous and prejudicial to the interest of the Revenue, justifying the invocation of Section 263. The court found that once the petitioners had opted to settle the dispute under the Vivad Se Vishwas Act, 2020, the proceedings initiated under Section 263 had to be dropped. 2. Validity of Reopening Assessments under Section 148 of the Income Tax Act: The facts indicated that the petitioners, along with their siblings, sold a property in the financial year 2010-2011. The assessments were reopened under Section 148, leading to separate assessment orders dated 27.12.2018. The petitioners had filed appeals before the CIT Appeals under Section 246A. The court noted that the reopening of assessments was based on the non-admission of capital gains in the returns filed by the petitioners. 3. Applicability of the Direct Tax Vivad Se Vishwas Scheme, 2020: During the pendency of the appeals, the petitioners opted for the Vivad Se Vishwas Scheme and filed Form 1 and Form 2. The Designated Authority issued Form 3, quantifying the refund amounts. The court emphasized that the scheme aimed to bring closure to disputes regarding tax arrears. It held that the intention of the Act was to prevent reopening settled matters under Section 263 once the scheme was opted for. 4. Classification of Income from the Sale of Property: The respondents argued that the income from the sale should be treated as "income from other sources" rather than "long-term capital gain," and that the petitioners incorrectly claimed benefits under Section 54F. The court observed that the assessment orders were based on the petitioners' claims of 54(F) exemption and subsequent investments in residential properties. However, it concluded that these issues could not be reopened under Section 263 once the Vivad Se Vishwas Scheme was opted for. 5. Application of Promissory Estoppel and Principles of Fair Administration: The petitioners relied on various decisions, including Radha Krishnan Industries Vs. State of Himachal Pradesh, to argue that the rule of law requires fairness in the application of tax statutes. The court agreed, noting that the principles of promissory estoppel and fair administration applied, and that the Revenue should not act in a manner that undermines the credibility of the tax settlement schemes. Conclusion: The court allowed the writ petitions, quashing the impugned notices issued under Section 263 of the Income Tax Act, 1961, and emphasized that the proceedings under Section 263 could not continue once the petitioners had opted for the Direct Tax Vivad Se Vishwas Scheme, 2020. The court reiterated the intention of the scheme to reduce litigation and provide a peaceful resolution for taxpayers.
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