Case Digest: Direct Tax Vivad se Vishwas Scheme

The Finance Ministry of the Indian government introduced a bill highlighting details about Direct Tax dispute settlement scheme which is known as The Direct Tax ‘Vivad se Vishwas Bill, 2020’ for dispute resolution to direct taxes, it proposes the idea of levying less or discounted payment from a taxpayer, if he/she settles all disputes before the end of this particular financial year, i.e. FY 2019-20, under this scheme.

The Direct Tax Vivad Se Vishwas Act, 2020 is enacted to provide for resolution of disputed tax and for matters connected therewith or incidental thereto. It covers Income-tax Act, 1961 and does not cover Wealth-tax Act, 1957, Gift-tax Act, 1958, Equalization levy under the Finance Act, 2016

The Scheme provides for resolution of disputes wherein an appellant would be required to pay only the amount of the disputed taxes and will get complete waiver of interest & penalty and immunity from proceedings for prosecution for an offence provided he pays the required amount by 30 June 2020 (extended from 31 March 2020 considering the Covid19 crisis). Those who avail this scheme after 30 June 2020 will have to pay some additional amount. The last date of scheme is yet not notified.

Vivad se Vishwas: Declarations for Direct Tax dispute resolution made from Gujarat stand at dismal 12%

The Income Tax officials said that Just two weeks before “Vivad se Vishwas” direct tax resolution scheme ends, the declarations for dispute resolution made from Gujarat stand at a dismal 12 per cent.

“In Gujarat, there are 51,686 tax disputes in various appellate forums. A total of Rs 78,785 crore is locked up in litigation,” Jain said. The scheme was introduced in the finance Bill 2020 to reduce litigation with regard to direct taxes. It allows waiver of interest, penalty and prosecution for settling tax disputes due up to January 31, 2020. The appellate forums that deal with direct tax litigations include Commissioner of Income Tax (Appeals) or CIT Appeals, Income Tax Appellate Tribunal (ITAT), High Court and Supreme Court. Despite the high number of pending litigations, only 6,196 declarations involving Rs 962.27 crore have been filed so far, which is 12 per cent of the total pending litigations pertaining to direct taxes. The last date for filing declarations is December 31, 2020.

Delhi HC directs Income Tax Commissioner to process application filed under Vivad Se Vishwas Act, 2020 SHYAM SUNDER SETHI vs PR. COMMISSIONER OF INCOME TAX-10 & ORS 2021 TAXSCAN (HC) 427

The Delhi High Court directed the Income Tax Commissioner to process the application filed under Vivad Se Vishwas Act, 2020. The petitioner, Shyam Sunder Sethi had filed his income-tax return concerning the assessment year 2011-2012. In the return, the petitioner had declared his income as Rs.49,32,900. The petitioner avers that in the said income-tax return, exemption had been claimed under Section 54 of the Income Tax Act, 1961 and accordingly against “capital gains”, the amount shown was Nil.

Vivad Se Vishwas Act is a Beneficial Legislation, Dept cannot deny Benefit If Assessee is eligible for the Scheme: Bombay HC Bhupendra Harilal Mehta vs Principal Commissioner of Income Tax 2021 TAXSCAN (HC) 366

The Bombay High Court ruled that Direct Tax Vivad Se Vishwas (DTVSV) Act, 2020 is a Beneficial Legislation, Dept cannot deny the Benefit If Assesee is eligible for the Scheme.The Petitioner, Bhupendra Harilal Mehta filed a declaration in Form No.1 under Section 4(1) of the DTVSV Act read with Rule 3(1) of the DTVSV Rules on 16th December 2020. The disputed income was declared to be Rs.5,98,90,960/- and the disputed tax thereon as Rs.2,02,69,581/-. Petitioner submitted that the gross amount payable by it was 100% of the disputed tax i.e. Rs.2,02,69,581/- out of which a sum of Rs.69,31,892/- was declared to have been paid and the balance of Rs.1,33,37,689/- was declared to be payable by Petitioner.

Delayed Self-Assessment Tax Payment can’t be Tax Arrear for Vivad se Vishwas Scheme: Bombay High Court Macrotech Developers Limited vs Principal Commissioner of Income Tax and others 2021 TAXSCAN (HC) 643

The Bombay High Court ruled that the Delayed self-assessment tax payment cannot be tax arrear for Vivad se Vishwas Scheme. The petitioner, Macrotech Developers Limited is a public limited company incorporated under the Companies Act, 1956 having its registered office at Mahalaxmi, Mumbai. It is engaged in the business of land development and construction of real estate properties.

Madras HC directs Income Tax Dept. to process application under Direct Tax Vivad Se Vishwas Act, 2020 at the earliest communicate it to Assessee Fenner (India) Limited vs The Addl. Commissioner of Income Tax 2021 TAXSCAN (HC) 251

The Madras High Court directed the Income Tax Department to process the application under Direct Tax Vivad Se Vishwas Act, 2020 at the earliest communicate it to the assessee. The assessee, M/s.Fenner (India) Limited has filed the appeal under Section 260A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal, Madras for the assessment year 2002-03.“The assessee is given liberty to restore the appeal in the event the ultimate decision to be taken on the declaration filed by the assessee under Section 4 of the said Act is not in favour of the assessee. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any application to be filed for condonation of delay in restoration of the appeal and on such request made by the assessee by filing a Miscellaneous Petition for Restoration, the Registry shall place such petition before the Division Bench for orders,” the court ordered.

Vivad Se Vishwas Act: CBDT Clarifications cannot impose a Cut-Off Date for Its Applicability, says Rajasthan HC

The Rajasthan High Court has held that a clarification issued by the Central Board of Direct Taxes (CBDT), being declaratory in nature, cannot introduce a cut off date for its applicability. A two-judge bench of the High Court consisting of Chief Justice Akil Kureshi and Justice Sudesh Bansal further held that since the primary intention of the Vivad Se Vishwas Act, 2020 was the resolution of disputed taxes, the courts must adopt an interpretation that furthers this intention and not restrict its scope.Allowing the writ petition, the bench concluded that “A clarification by its very nature is declaratory. If for applicability of such clarification a cut off date is introduced it would run counter to the very concept of a clarification. If the CBDT circular is not read-down as to remove the rigors of the cut off date by holding that the same is not sacrosanct the same may suffer from vice of arbitrariness.”

Vivad Se Vishwas Scheme is Optional: Calcutta HC condones Delay in Appeals filed by Revenue in Rs. 38,000 Crores Penny Stock Scam PRINCIPAL COMMISSIONER OF INCOME TAX vs DINESH KUMAR BANSAL 2022 TAXSCAN (HC) 255

A division bench of the Calcutta High Court, while condoning the delay in a bunch of appeals filed by the Revenue, has held that the benefit provided under the Direct Tax Vivad Se Vishwas Scheme is optional based on the reasons assigned by the authorities.Considering the seriousness of the case, the Court held that “we are of the considered view that cause of justice would be served if the delay in filing the appeal is condoned and the appeals are heard on merits so that the Court can consider as to whether any substantial question of law arises for consideration.

Benefit under Vivad Se Vishwas Scheme is Optional: Calcutta HC condones Delay in Appeals filed by Revenue in Rs. 38,000 Cr Penny Stock Scam Gammon India Limited & Anr vs Sales Tax Officer 2022 TAXSCAN (HC) 285

A division bench of the Calcutta High Court, while condoning the delay in a bunch of appeals filed by the Revenue, has held that the benefit provided under the Direct Tax Vivad Se Vishwas Scheme is optional based on the reasons assigned by the authorities.Considering the seriousness of the case, the Court held that “we are of the considered view that cause of justice would be served if the delay in filing the appeal is condoned and the appeals are heard on merits so that the Court can consider as to whether any substantial question of law arises for consideration.

Application under Companies Act against an order rejecting Waiver of Interest would fall under Direct Tax Vivad Se Vishwas Act: Delhi High Court KAPRI INTERNATIONAL PVT. LTD vs COMMISSIONER OF INCOME TAX 2022 TAXSCAN (HC) 641

The Delhi High Court has ruled that an application under the Companies Act against the order rejecting the application for waiver of interest would fall within the scope of Direct Tax Vivad Se Vishwas Act, 2020 (VSV Act).The Bench while allowing the petition held that the attempt of the revenue department to exclude the case of the assessee from a possible settlement under the VSV Act was extremely hyper-technical, and set aside the order passed by the PCIT rejecting the declarations filed by the assessee under the VSV Act. The Court directed the PCIT to re-examine and reassess the declaration filed by the assessee and decide the matter on merits. Mr Rajesh Jain and Mr V. Tiwari appeared for the petitioner and Mr Kunal Sharma, Ms Zehra Khan, and Mr S. Bhattacharyya appeared for the Respondent.

Appeal filed with Delay shall be Treated as ‘Pending’, Eligible to be Settled under VSV Scheme: Delhi HC MEDEOR HOSPITAL LIMITED vs PRINCIPAL COMMISSIONER OF INCOME TAX 2022 TAXSCAN (HC) 829

A division bench of the Delhi High Court has held that an appeal filed with delay shall be treated as “pending” for the purpose of settlement under the Vivad Se Vishwas Scheme. The assessee, M/s Medeor Hospital Limited, has contended that there is no requirement under the Act that the appeal should be filed in time or that the appeal should have been ‘admitted’ before the specified date.Granting relief to the assessee, the bench held that “keeping in view the aforesaid, the Forms 3 dated 23rd January, 2021 and 12th February, 2021 attached as Annexures P-16 and P-21 as well as the FAQ No.59 of Circular No.21/2020 dated 4th December, 2020 issued by CBDT to the extent mentioned hereinabove are quashed and respondent No.1 is directed to treat the appeal filed against the assessment order under Section 143(3) for assessment year 2014-15 before CIT(A) on 24th May, 2019 as pending as on 31st January, 2020. The respondents are also directed to issue revised Forms 3 by settling both the appeals against the assessment order for assessment year 2014- 15 (i.e. quantum appeal pending before CIT(A) and the appeal against levy of penalty pending before ITAT) in accordance with the provisions of VSV Act within eight weeks.”

Mere Change of Opinion cannot form the basis for initiating Reassessment proceedings under Income Tax Act: Delhi HC AMBARNUJ FINANCE AND INVESTMENT PVT. LTD vs DEPUTY COMMISSIONER OF INCOME TAX & ANR 2022 TAXSCAN (HC) 870

The Delhi High Court( HC )has held that a mere change of opinion cannot form the basis for initiating reassessment proceedings under Income TaxAct,1961.The HC set aside the impugned rectification order dated 15th February 2021 and the consequential order of the Respondent rejecting the Petitioner’s application for settlement under the DTVSV Scheme, on the ground that the tax liability was not ascertained. It was directed by the HC to restore the application to the file of the AO to determine the amount payable by the assessee by the provisions of the Act of 2020 and grant a Certificate to the assessee containing particulars of tax arrears and the amount payable, by law.

Failure of Revenue to prefer appeal within time limit: Calcutta HC condones Delay in filing Vivad Se Vishwas Scheme Application PRINCIPAL COMMISSIONER OF INCOME TAX 5 vs ADITYA SARAF HUF 2023 TAXSCAN (HC) 116

The Calcutta High Court has recently condoned the delay of assessee-Aditya Saraf (HUF) in an appeal by the revenue against the decision of the Income Tax Appellate Tribunal (ITAT)The Court further noted that, “the assessee should not be non-suited for the default committed by the revenue in nor preferring the appeal within the period of limitation.” Consequently, the division bench disposed of the appeal with a direction to the assessee to file the required application and the revenue was subsequently directed to consider the application on merits. It was also clarified that the court has not delved into the merits of the matter.

Deposit under IDS neither refunded nor adjusted against any Outstanding Demand: Bombay HC directs Income Tax Authorities to Refund Sunil Wamanrao Sakore vs Union of India 2023 TAXSCAN (HC) 785

In a recent ruling, a Division Bench of Bombay High Court directed the Income Tax Authorities to issue a fresh Form-3 subsequent refund of the amount paid under the Income Declaration Scheme (IDS) and the balance amount, if any. The bench of Justice Kamala Khata and Justice Dhiraj Singh Thakur observed that the amount deposited by the petitioner under the IDS could not have been forfeited and have neither been refunded nor adjusted.The Bombay High Court opined that it would be strictly in accordance with the purpose, intent and the spirit of the Direct Tax Vivad se Vishwas Act aimed at eliminating and resolving the disputes between the assessee and revenue.

Deposit of Balance Amount Payable under Direct Tax Vivad Se Vishwas Act Delayed on Unforeseen Circumstances: Allahabad HC Condones Delay of 3 Days Digvendra Pratap Singh vs Union Of India 2023 TAXSCAN (HC) 1270

The Allahabad High Court condoned delay of 3 days on the ground that the deposit of balance amount payable under Direct Tax Vivad Se Vishwas Act (DTVSVA) delayed on unforeseen circumstances.“In view of the law mentioned above, as well as considering the pleadings and perusal of record, the Court is of the view that a delay of three days in depositing the arrears of tax of Rs. 8,67,137/- deserves to be condoned, and the amount balance tax deposited by the petitioner be accepted by the respondents treating the same well within time as per the scheme of the Direct Tax Vivad Se Vishwas Act, 2020 and also the impugned order /letter, passed by Central Board of Direct Tax, is hereby quashed” the Court concluded.

Three Days Delay in Depositing Tax Arrears Due to Sickness: Allahabad HC Condones Delay Digvendra Pratap Singh vs Union Of India 2023 TAXSCAN (HC) 1302

The Allahabad High Court condoned the three days delay in depositing tax arrears due to sickness. The petitioner, Digvendra Pratap Singh challenged the order passed by respondent No.3 by which the application of the petitioner for condoning the delay of three days in depositing the balance amount payable by him under the Direct Tax Vivad Se Vishwas Act, 2020 (Act, 2020), has been rejected.A coram comprising of Justice Siddhartha Varma and Justice Arun Kumar Singh Deshwal observed that “a delay of three days in depositing the arrears of tax of Rs. 8,67,137/- deserves to be condoned, and the amount balance tax deposited by the petitioner be accepted by the respondents treating the same well within time as per the scheme of Act, 2020 and also the impugned order /letter dated 25.8.2022, passed by Central Board of Direct Tax, is hereby quashed.” Ami Tandon, Abhinav Gaur, Advocate, Vibhu Rai appeared for the petitioner and Counsel for the respondent Naveen Chandra Gupta

Criminal charges for late self-Assessment tax payment to persist despite Vivad Se Vishwas Scheme approval: Supreme Court THE PRINCIPAL COMMISSIONER OF INCOME TAX vs MACROTECH DEVELOPERS LTD 2023 TAXSCAN (SC) 227

“We are not inclined to interfere with the impugned judgment as the criminal prosecution relates to delayed payment of self assessment tax and the application under the Direct Tax Vivad Se Vishwas Act, 20201 relates to the additions made in the assessment order”, the Supreme Court noted, disposing appeals against the assessee by the Revenue.The Bombay High Court had thus held that “the clarification given by respondent by way of answer to question No.73 vide circular No.21/2020 dated December 4, 2020 is not in consonance with section 9(a)(ii) of the Vivad se Vishwas Act and, therefore, the same would stand set aside and quashed. Declaration of the petitioner would have to be decided by respondent in conformity with the provisions of the Vivad se Vishwas Act dehors the answer given to question No.73 which is set aside and quashed.”

Delayed Payment on Balance Amount of Self Assessment Tax not amount to Tax Arrear under DTVSV Act: Bombay HC.Pragati Pre Fab India vs Principal Commissioner of Income Tax 2023 TAXSCAN (HC) 1407

The Bombay High Court (HC) has held that delayed payment on the balance amount of self-assessment tax does not amount to tax arrears under Direct Tax Vivad Se Vishwas Act 2020 ( DTVSV Act)The division bench comprising Justice K.R Shriram & Justice Dr. N.k. Gokhale observed that the prosecution against the petitioner 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. Further held that “the declaration of petitioner filed on 31st January 2021 for Assessment Years 2010-2011 and 2011-2012 would have to be decided by respondent no.1 in conformity with the provisions of DTVSV Act. The petition is accordingly allowed to the extent.”

Relief to Cooperative Rabobank: Bombay HC directs Income Tax Commissioner to issue fresh Form-3 under Direct Tax Vivad Se Vishwas Scheme Cooperative Rabobank U A vs Commissioner of Income Tax 2021 TAXSCAN (HC) 257

In a relief to the Cooperative Rabobank, the Bombay High Court directed the Income Tax Commissioner to issue a fresh Form-3 under the Direct Tax Vivad Se Vishwas Scheme (DTVSV Act). The Petitioner Cooperative Rabobank is a bank established in the Netherlands and it is a part of the Rabobank Group worldwide. It is submitted that Petitioner is a regular assessee under the Income Tax Act, 1961.The court quashed and set aside Form-3 dated 26th March, 2021 issued by Respondent for Assessment Year 2002- 2003. The court further directed Respondent to issue fresh Form-3 within two weeks from the date of pronouncement of the judgment.

Relief to Cooperative Rabobank: Bombay HC directs Income Tax Commissioner to issue fresh Form-3 under Direct Tax Vivad Se Vishwas Schem Cooperative Rabobank U A vs Commissioner of Income Tax 2021 TAXSCAN (HC) 257

In a relief to the Cooperative Rabobank, the Bombay High Court directed the Income Tax Commissioner to issue a fresh Form-3 under the Direct Tax Vivad Se Vishwas Scheme (DTVSV Act). The Petitioner Cooperative Rabobank is a bank established in the Netherlands and it is a part of the Rabobank Group worldwide. It is submitted that Petitioner is a regular assessee under the Income Tax Act, 1961.The court quashed and set aside Form-3 dated 26th March, 2021 issued by Respondent for Assessment Year 2002- 2003. The court further directed Respondent to issue fresh Form-3 within two weeks from the date of pronouncement of the judgment.

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