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)
Pragati Pre Fab India Pvt. Ltd, the petitioner challenged the rejection by respondent no.1 of the declaration filed on 31st January 2021 under the DTVSV Act. Prosecution under section. 276C(2) of the Income Tax Act had been filed before Addl. Chief Metropolitan Magistrate, Mumbai. As per the assessee company is not eligible for the VSV scheme, as the prosecution has been launched on it and requested to reject the application of the assessee company and the application for the VSV scheme was rejected.
The tax due on the income returned for the Assessment Year was duly paid by the 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. The return filed by the petitioner for both assessment years was processed under Section 143(1) of the Income Tax Act, 1961 (the Act).
Subsequently, assessments were reopened under Section 147 of the Act by issuance of notice under Section 148 of the Act. Re-assessment proceedings were concluded and the Assessing Officer passed an assessment order dated 28th March 2016 under Section 144 read with Section 147 of the Act assessing the petitioner’s income for Assessment Year 2010-2011 at Rs.11,69,41,860/- and for Assessment Year 2011-2012 at Rs.34,88,000/-. In the meantime, the DTVSV Act was notified and the petitioner decided to take advantage of the provisions of the DTVSV Act.
Section 9 of the DTVSV Act lists the cases whereby the DTVSV Act will not be applicable. Section 9(a)(ii) of the DTVSV Act provides that the provisions of the 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 applies only to those cases where prosecution has been initiated in respect of “tax arrear” as defined under the DTVSV Act. In the circular No.20/2020 dated 04.12.2020, respondent No. 2 issued further clarifications in respect of the Vivad se Vishwas 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.”
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