2024 (11) TMI 1107 - HC - Income Tax

Benefit of Direct Tax Vivad Se Vishwas Act, 2020 - Review petition as a pending appeal under DTVSV Act - scheme was intended to give quietus to the tax legislation and collect the disputed taxes by granting waiver of penalty and interest - Applicability of CBDT circulars and clarifications - whether the case of the petitioner would fall within the four corners of Section 2(1)(j). HELD THAT - Admittedly, as on the cutoff date, no Appeal, Writ Petition or Special Leave Petition was pending before the Appellate Forum. Petitioner has drawn our attention to Clarification dated 22.04.2020, issued by the Central Board of Direct Taxes. As per response to Question-1, the proceedings initiated by the declarant by giving any notice for arbitration, conciliation or mediation are covered under the Act. Response to Question-2 clarifies that the assessee whose case is pending in arbitration, is eligible to apply for settlement under Vivad Se Vishwas , even if no appeal is pending. Reply to Question No. 61 provides that even if the Miscellaneous Application MA in respect of an appeal which was dismissed in limine was pending on before 31st January 2020, such MA is eligible. As apparent from the CBDT Circulars that pendency of arbitration proceedings and miscellaneous applications in certain cases, as on cutoff date would meet the requirement of Section 2(1)(j), even though no Appeal, Writ Petition or Special Leave Petition may be pending in any Appellate Forum in terms of Section 2(1)(j). It is well settled law that Department is bound by the circulars/instructions and has to comply with the same. The Hon ble Supreme Court has held in the case of Paper Products Ltd. 1999 (8) TMI 70 - SUPREME COURT that circulars/instructions issued by CBE C are binding on the departmental authorities. They cannot take contrary stand and department cannot repudiate a circular on the basis that it was inconsistent with the statutory provision. Thus, the respondent is bound by the circular of CBDT issuing clarification. Even though, the scope of review is limited and statutorily different from an appeal, the jurisdiction of the Court extends to the power to modify, review or recall its own order and that being so, the SLP cannot be said to have attained finality since the review petition was still pending on the cutoff date. Department itself has mellowed down the strict interpretation of Section 2(j) by including the pending arbitration proceedings and miscellaneous applications under the Vivad Se Vishwas Scheme . There is no reason why the pendency of the review petition after the dismissal of the Special Leave Petition should not get covered under Vivad Se Vishwas Scheme . The review petition will also partake the character of pending proceedings and therefore the petitioner should not have been non-suited or treated as ineligible for claiming benefit under DTVSV Act. DTVSV Act, in a sense, provides for a deviation from the strict application of tax laws towards achieving this purpose. If the provision in Section 2(j) and the Board Circular is to be construed in a restrictive manner as is contended by learned counsel for the respondent, the same will run contrary to the scheme of the Act of 2020. We are conscious that review petition has since been dismissed by the Supreme Court but we have to consider the right of the petitioner as on the cutoff date, when admittedly, the review petition was still pending. As on the cutoff date, the possibility of reaching a different conclusion could not have been ruled out. We are therefore unable to persuade ourselves to confine the benefit of the scheme to only such cases where an Appeal, Writ Petition or Special Leave Petition were pending. In our view, petition for review against the orders passed in the SLP would also be covered in the definition of Disputed Tax under Section 2(1)(j), thereby, making them eligible to take benefit of Vivad Se Vishwas Scheme . The remarks/reasons given by the first respondent in the impugned order thereby rejecting the declaration in Form-1 2 filed by the petitioner on 28.01.2021, cannot be sustained, for the said reasons are not in consonance with the scheme of the Act and also do not conform to the intent and purpose of the legislation. Writ petition is allowed and the impugned orderis hereby set aside. The first respondent is directed to accept the revised declaration form filed by the petitioner on 28.01.2021 and process the same in accordance with DTVSV Act, 2020 and pass requisite orders.

Summary

Issues Involved:

1. Eligibility of the review petition as a pending appeal under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act).
2. Interpretation of "pending appeal" under the DTVSV Act.
3. Applicability of CBDT circulars and clarifications.
4. Legislative intent and purpose of the DTVSV Act.

Detailed Analysis:

1. Eligibility of the Review Petition:
The primary issue was whether the review petition filed by the petitioner qualifies as a "pending appeal" under the DTVSV Act. The petitioner argued that the review petition should be considered an extension of the appeal process, and thus, should be eligible under the DTVSV Act. The court noted that although the scope of review is distinct from that of an appeal, the jurisdiction of the court includes the power to modify, review, or recall its own orders. Therefore, the Special Leave Petition (SLP) could not be considered final as the review petition was pending on the cutoff date.

2. Interpretation of "Pending Appeal":
The court examined the interpretation of "pending appeal" as defined in Section 2(1)(j) of the DTVSV Act. The respondent contended that no appeal, writ petition, or SLP was pending as of the specified date, making the petitioner ineligible. However, the court emphasized a broader interpretation, highlighting that the DTVSV Act aims to resolve disputes pending at various appellate and review stages. The court concluded that the review petition should be included within the definition of a pending appeal, thereby allowing the petitioner to avail the benefits of the DTVSV Act.

3. Applicability of CBDT Circulars and Clarifications:
The court referred to the Central Board of Direct Taxes (CBDT) circulars, which clarified that proceedings such as arbitration and miscellaneous applications pending on the cutoff date could meet the requirements of Section 2(1)(j). The court held that the department is bound by these circulars and cannot take a contrary position. The inclusion of arbitration proceedings and miscellaneous applications under the Vivad Se Vishwas Scheme indicated a relaxation of the strict interpretation of Section 2(1)(j), supporting the inclusion of the review petition as a pending proceeding.

4. Legislative Intent and Purpose:
The court underscored the legislative intent behind the DTVSV Act, which is to reduce tax disputes and generate timely revenue. The Act is characterized as a beneficial and remedial statute, designed to provide a mechanism for resolving pending income tax litigation. The court emphasized that a restrictive interpretation of the Act, as suggested by the respondent, would contradict the scheme's purpose. The court concluded that the Act intended to provide a resolution for disputes pending at various stages, including review petitions.

Conclusion:
The court allowed the writ petition, setting aside the impugned order that rejected the petitioner's declaration under the DTVSV Act. It directed the respondent to accept the revised declaration form filed by the petitioner and process it in accordance with the DTVSV Act, thereby recognizing the review petition as a pending appeal eligible for the scheme's benefits. The decision aligns with the Act's objective to settle disputes and facilitate timely revenue collection.