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TMI Blog2023 (9) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of tax arrear relating to an assessment year on or before the date of filing of declaration. The prosecution has to be in respect of tax arrear which naturally is relatable to an assessment year. In Macrotech (Supra) also the facts were that the prosecution had been initiated against petitioner therein under Section 276C(2)of the Act because of the delayed payment of the balance amount of the self assessment tax. The Court held that such delayed payment cannot be construed to be a tax arrear within the meaning of Section 2(1)(o) of the Act. Therefore, such a prosecution cannot be said to be in respect of tax arrear and hence, petitioner in that case was declared to be entitled to file a declaration under the DTVSV Act. As permissible under Office Memorandum [F. No.404/72/93-ITCC] dated 31st July 2017, petitioner had even deposited 20% of the demand and hence, is not an assessee in default. Later, Mr. Sridharan stated that the entire amount has been paid. We must also note that under Section 9(a)(ii) of DTVSV Act, the only exclusion visualised is a pendency of prosecution in respect of tax arrear relatable to an assessment year as on the date of filing the declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her or not the prosecution relates to tax arrear (say for delay in filing of return, delay in deduction of TDS, etc.), the taxpayer is dis-entitled to apply for settlement of pending appeal in relation to the tax arrear under the DTVSV Act. It is alleged in the petition that the purported clarification is ultra vires and contrary to the provisions of DTVSV Act and the Direct Tax Vivad Se Vishwas Rules 2020, is beyond the powers and authority conferred upon respondent no. 2 under Section 11 of the DTVSV Act, is arbitrary, and violative of Article 14 of the Constitution of India. 4. The question that arises in the petition is whether the rejection of the declarations filed by petitioner under the DTVSV Act is invalid? 5. Petitioner had filed its return of income for Assessment Year 2010-2011 on 23rd October 2010 declaring a total income of Rs. 26,06,385/- and for Assessment Year 2011-2012 on 23rd September 2011 declaring a total income of Rs. 13,37,173/-. 6. The tax due on the income returned for Assessment Year 2010- 2011 was duly paid by petitioner by way of TDS and self assessment tax and for Assessment Year 2011-2012 by way of TDS, advance tax and self assessment tax. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently commenced by the Revenue which filed complaint before the Additional Chief Metropolitan Magistrate, 38th Court at Ballard Pier. 10. In the meantime, DTVSV Act was notified and petitioner decided to take advantage of the provisions of DTVSV Act and, therefore, on 21st March 2020 filed declarations for Assessment Years 2010-2011 and 2011-2012. Petitioner s declaration was rejected for the reason noted earlier. 11. Petitioner, therefore, approached this Court and has sought the following reliefs : (a) that this Hon'ble Court may be pleased to issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India calling for the record of the purported clarification in reply to Question No. 73 of Circular No. 21 of 2020 dated 04.12.2020 (Ex. 'B'), and after going through the same and examining the question of legality thereof to quash the same. (b) that this Hon'ble Court may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India ordering and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act shall not apply in respect of tax arrear relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of declaration. This makes it apparent that the bar under the provision is applicable only to those cases where prosecution has been initiated in respect of tax arrear as defined under the DTVSV Act; (d) Section 2(1)(o) of the DTVSV Act defines tax arrear . Tax arrear means the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax, and penalty leviable or levied on such disputed tax; or disputed interest; or disputed penalty; or disputed fee, as determined under the provisions of the Act. On a combined reading of Section 9(a)(ii) and Section 2(1)(o) of the DTVSV Act, it is abundantly clear that the bar on filing of declaration under the DTVSV Act is only when prosecution initiated by the Income Tax Department realtes to tax arrears and not for any prosecution in relation to an assessment year per se; (e) respondent no. 1 has rejected the declaration filed by petitioner on the erroneous presumption that petitioner was an ineligible declarant in view of pending prosecution pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued by the parties before the appropriate forum and that Court will decide the matter in accordance with law. Of course we also do not express any view or opinion on this point. 15. The moot question before us, therefore, is whether the provisions of DTVSV Act shall apply to petitioner. Macrotech (Supra) answers and relying on the said judgment, we would say the DTVSV Act shall apply to petitioner. 16. At the outset, we should keep in mind that the object of the DTVSV Act was to reduce litigations in direct taxes. Under the said Act, a tax payer would be required to pay the amount of disputed taxes and would get complete waiver of interest and penalty subject to payment by the specified date. The objects and reasons of the DTVSV Bill when introduced in the Parliament which later on became the DTVSV Act reads as under : Over the years, the pendency of appeals filed by taxpayers as well as Government has increased due to the fact that the number of appeals that are filed is much higher than the number of appeals that are disposed. As a result, a huge amount of disputed tax arrears is locked-up in these appeals. As on the 30th November, 2019, the amount of disputed direct ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 30 per cent. of the disputed penalty, disputed interest or disputed fee, as the case may be. 4. The proposed Bill shall come into force on the date it receives the assent of the President and declaration may be made thereafter up to the date to be notified by the Government. Therefore, the purpose was to reduce tax disputes pertaining to direct taxes. 17. Tax arrear has been defined in Section 2(1)(o) as under : (o) 'tax arrear' means,- (i) the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax, and penalty leviable or levied on such disputed tax; or (ii) disputed interest; or (iii) disputed penalty; or (iv) disputed fee, as determined under the provisions of the Income Tax Act. Thus, tax arrear would mean the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax and penalty leviable or levied on such disputed tax or disputed interest or disputed penalty or disputed fee as determined under the provisions of the Act. Section 9 of the DTVSV Act provides for instances where DTVSV Act would not be applicable. Section 9(a) (relevant to this case) of the DTVSV Act re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uses comprised in section 9(a), we find that the thrust of the said provision is in respect of tax arrear which appears to be the common thread running through all the subclauses. Extricating clause (ii) from the above, we find that the exclusion referred to in section 9(a)(ii) is in respect of tax arrear relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of declaration. Thus, what section 9(a)(ii) postulates is that the provisions of the Vivad se Vishwas Act would not apply in respect of tax arrear relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of declaration. Therefore, the prosecution must be in respect of tax arrear relating to an assessment year. We are of the view that there is no ambiguity in so far the intent of this provision is concerned and as pointed out by the Supreme Court in Dilip Kumar and Company (supra), a statute must be construed according to the intention of the Legislature and that the courts should act upon the true intention of the Legislature while applying and interpreting the law. Therefore, what section 9(a) (ii) stipulates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1. From the above, what is discernible is that where only notice for initiation of prosecution has been issued, assessee would be eligible to file declaration. However, once prosecution is instituted with respect to an assessment year, the assessee would not be eligible to file declaration for that assessment year unless the prosecution is compounded before filing the declaration. 31. In the circular No. 20/2020 dated 04.12.2020, respondent No. 2 issued further clarifications in respect of Vivad se Vishwas Act. In the circular dated 22.04.2020, the clarifications were upto question No. 55. In the circular dated 04.12.2020 further clarifications have been given from question No. 56 onwards upto question No. 89. Question No. 73 and the answer given thereto has been impugned by the petitioner by contending that on the basis of such interpretation declaration of the petitioner is liable to be rejected. Question No. 73 and the answer given thereto are as under :- 73. In the case of a taxpayer, prosecution has been instituted for assessment year 2012-13 with respect of an issue which is not in appeal. Will he be eligible to file declaration for issues which are in appeal for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Vishwas Act. To hold that an assessee would not be eligible to file a declaration because there is a pending prosecution for the assessment year in question on an issue unrelated to tax arrear would defeat the very purport and object of the Vivad se Vishwas Act. Such an interpretation which abridges the scope of settlement as contemplated under the Vivad se Vishwas Act cannot therefore be accepted. 33. In so far the prosecution against the petitioner is concerned, the same has been initiated under section 276-C(2) of the Act because of the delayed payment of the balance amount of the self-assessment tax. Such delayed payment cannot be construed to be a tax arrear within the meaning of section 2(1)(o) of the Act. Therefore such a prosecution cannot be said to be in respect of tax arrear. Because such a prosecution is pending which is relatable to the assessment year 2015-16, it would be in complete defiance of logic to debar the petitioner from filing a declaration for settlement of tax arrear for the said assessment year which is pending in appeal before the Tribunal. 34. Considering the above, the clarification given by respondent No. 2 by way of answer to question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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