Facts of the Case

The petitioner, Prayas Buildwell Private Limited, filed a writ petition challenging a communication dated 18.12.2020 whereby its declaration filed in Form 1 under the Direct Tax Vivad Se Vishwas Act, 2020 for Assessment Year 2009-10 was rejected. The declaration was rejected on the ground that there was no disputed income, penalty or interest for the relevant assessment year.

The petitioner had originally filed its return for AY 2009-10 declaring nil income, claiming exemption on sale of rural agricultural land. Subsequently, realizing that such income was required to be considered for the purposes of Minimum Alternate Tax under Section 115JB, the petitioner filed a revised return declaring book profits and paid MAT. The assessment order dated 26.12.2011 accepted the revised return.

Penalty proceedings under Section 221(1) were initiated and demand was raised. The petitioner filed an appeal before the Commissioner of Income Tax (Appeals), which was dismissed on the ground of delay. The petitioner then filed an appeal before the ITAT, which was pending as on the date when the declaration under the Vivad Se Vishwas Act was filed.

While the appeal before the ITAT was pending, the petitioner opted for settlement under the Vivad Se Vishwas Scheme by filing Forms 1 and 2 on 18.12.2020. The declaration was rejected by the designated authority on the same date on the premise that there was no “disputed tax”.

Issues Involved

Whether the petitioner’s declaration under the Direct Tax Vivad Se Vishwas Act could be rejected on the ground that there was no disputed tax, merely because the Revenue considered the underlying appeal to be non-maintainable, despite the fact that an appeal was pending before the appellate forum on the specified date.

Petitioner’s Arguments

The petitioner contended that the rejection of the declaration was contrary to the express provisions of the Vivad Se Vishwas Act. It was argued that the Act does not require the designated authority to examine the maintainability or merits of the pending appeal. The existence of a pending appeal itself constituted a dispute under the Act, entitling the petitioner to opt for settlement.

Respondent’s Arguments

The Revenue argued that since the assessment had accepted the petitioner’s return, the petitioner could not be considered an aggrieved person and therefore the appeal filed by the petitioner was not maintainable. On this basis, it was contended that there was no disputed tax and the declaration under the Vivad Se Vishwas Act was rightly rejected.

Court Order / Findings

The Delhi High Court examined the scheme of the Direct Tax Vivad Se Vishwas Act, including the definitions of “disputed tax”, “disputed income” and “tax arrear” under Section 2, and the mechanism provided under Sections 3 and 4. The Court held that the Act does not draw any distinction based on the perceived maintainability of an appeal.

The Court observed that as on the date when the petitioner filed the declaration, an appeal was admittedly pending before the ITAT. The pendency of such appeal was sufficient to constitute a “dispute” under the Act. The Court held that eligibility under the Vivad Se Vishwas Scheme is not contingent upon adjudication of the merits or maintainability of the appeal.

The Court further noted that the issue whether an assessee whose return was accepted could maintain an appeal was itself a contentious legal issue, which could not be a ground to deny the benefit of the settlement scheme. The Court relied on the object and purpose of the Vivad Se Vishwas Act, which is to reduce litigation and unlock stuck revenue.

Important Clarification

The High Court clarified that while examining a declaration under the Vivad Se Vishwas Act, the designated authority is not required to go into the merits or maintainability of the pending appeal. If an appeal is pending on the specified date and the case does not fall under the exclusions in Section 9 of the Act, the declaration cannot be rejected on the ground that there is no dispute.

Final Outcome

The writ petition was allowed. The Delhi High Court set aside the communication dated 18.12.2020 rejecting the petitioner’s declaration under the Direct Tax Vivad Se Vishwas Act and directed the designated authority to process the petitioner’s declaration and undertaking in accordance with law as applicable on the date of filing.

Link to download order - https://www.mytaxexpert.co.in/uploads/1769856993_PRAYASBUILDWELLPRIVATELIMITEDVsPR.COMMISSIONEROFINCOMETAX7ANR.pdf

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