TMI Blog2021 (3) TMI 1089X X X X Extracts X X X X X X X X Extracts X X X X ..... )(o) of the Vivad 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. 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. Considering the above, the clarification given by respondent No.2 by way of answer to questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e name of the cotton mills since migration of the permanent account number of the cotton mills to the permanent account number of the petitioner has not taken place. Therefore, it is pleaded that the tax demand of the cotton mills should be construed to be that of the petitioner and reference to the petitioner would mean and include the petitioner as well as the cotton mills. 5. For the assessment year 2015-16, petitioner had filed return of income under section 139(1) of the Act disclosing total income of ₹ 2,05,71,01,650.00. The self-assessment income tax payable on the returned income as per section 115JB of the Act was ₹ 69,92,08,851.00. At the time of filing of the return, an amount of ₹ 27,34,77,755.00 was shown to have been paid by way of tax deducted at source. Balance of self-assessment tax of ₹ 42,57,31,096.00 (₹ 69,92,08,851.00 less ₹ 27,34,77,755.00) with interest thereon under sections 234A, 234B and 234C of the Act aggregating to ₹ 12,36,74,855.00, totalling ₹ 54,94,05,951.00 were paid by the petitioner after the due date for filing of the return in the following manner:- Sr. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate authority i.e., Commissioner of Income Tax (Appeals) dismissed the appeal and upheld the assessment order vide order dated 27.12.2018. 11. Aggrieved by the order of Commissioner of Income Tax (Appeals) dated 27.12.2018, petitioner preferred further appeal before the Income Tax Appellate Tribunal (briefly 'the Tribunal' hereinafter) which was registered as ITA No.1538/Mum/2019. It is stated that the aforesaid appeal is pending before the Tribunal for final hearing. 12. While the appeal of the petitioner was pending before the Tribunal, central government enacted the Direct Tax Vivad se Vishwas Act, 2020 which came into force on and from 17.03.2020. Primary objective of the Direct Tax Vivad se Vishwas Act, 2020 (briefly 'the Vivad se Vishwas Act' hereinafter) is to reduce pending tax litigations pertaining to direct taxes and in the process, grant considerable relief to the eligible declarants while at the same time generating substantial revenue for the government. 13. Circular No.9 of 2020 dated 22.04.2020 was issued by respondent No.2 whereby certain clarifications were given in the form of question and answer. Be it stated that the central governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax for the assessment year 2015-16. 18. It is in this context that the present writ petition has been filed seeking the reliefs as indicated above. 19. Respondents have filed a common affidavit through Mr. Abhay Damle, Principal Commissioner of Income Tax, Central-4, Mumbai. Referring to section 9(a)(ii) of the Vivad se Vishwas Act, it is submitted that the same is an exclusionary clause. While clause (a) of section 9 excludes certain class of cases on the basis of tax arrears, clauses (b), (c) and (d) exclude certain class of persons on the basis of grave violation of certain enactments from the ambit of the Vivad se Vishwas Act. On that basis, it is contended that as per section 9(a)(ii), tax arrears relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of declaration are excluded from the ambit of the Vivad se Vishwas Act. As per the said provision, once prosecution is instituted in respect of an assessment year to which the tax arrears relate then the appeal pertaining to such assessment year is not eligible for settlement under the Vivad se Vishwas Act. This is what has been clarified by answer to question No.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... almost one year of direct tax collections; besides, tax disputes consume enormous amount of time, energy and resources of both the tax payers and of the government. Therefore, resolution of pending tax disputes is the need of the hour. This will not only benefit the government by generating timely revenue but also the tax payers who will be able to deploy the time, energy and resources saved by opting for such dispute resolution towards their business activities. Therefore, while examining or considering a declaration filed under the Vivad se Vishwas Act, the above aspects need to be borne in mind. 20.1. Mr. Sridharan has meticulously referred to various provisions of the Vivad se Vishwas Act particularly the definition of 'tax arrear' as appearing in section 2(1)(o) and submits that the entire scheme of settlement centers around tax arrear. Referring to section 9(a) of the Vivad se Vishwas Act, he submits that language of this section is very clear in as much as this section provides that provisions of the Vivad se Vishwas Act would not apply in respect of tax arrear as covered by the four situations enumerated thereunder. As per sub-clause (i), provisions of the Vivad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne hand and sections 9(b), (c), (d) and (e) on the other hand. While in the case of the former the exclusion is in respect of tax arrear relating to an assessment year, in the case of the later the exclusion pertains to a person who has suffered disability or prosecution under the mentioned statutes. If this is the position then the answer given to question No.73 contained in the circular No.21/2020 would be contrary to the statutory mandate. The answer given is only an interpretation. As per the said interpretation, the ineligibility to file declaration relates to an assessment year in respect of which prosecution has been instituted on or before the date of declaration. Since in question No.73 prosecution was initiated against the tax payer for assessment year 2012-13, for the said assessment year, the tax payer would not be eligible to file declaration even on issues not relating to prosecution. Mr. Sridharan submits that this interpretation is not only erroneous but is ultra vires the mandate of section 9(a)(ii) of the Vivad se Vishwas Act. By way of a circular or interpretation, the statutory requirement or intention of the legislature cannot be curtailed or narrowed down. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought in to reduce litigation in indirect taxes. It resulted in settling over 1,89,000 cases. Currently, there are 4,83,000 direct tax cases pending in various appellate forums i.e. Commissioner (Appeals), ITAT, High Court and Supreme Court. This year, I propose to bring a scheme similar to the indirect tax Sabka Vishwas for reducing litigations even in the direct taxes. Under the proposed Vivad se Vishwas scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty provided he pays by 31st March, 2020. Those who avail this scheme after 31st March, 2020 will have to pay some additional amount. The scheme will remain open till 30th June, 2020. Taxpayers in whose cases appeals are pending at any level can benefit from this scheme. I hope that taxpayers will make use of this opportunity to get relief from vexatious litigation process. 23.1. Thus, what was intended by the Hon'ble Finance Minister was to bring a scheme similar to the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 which pertained to indirect taxes. The object of the Vivad se Vishwas scheme is to reduce litigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to an assessment or reassessment order or against disputed interest, disputed fees where there is no disputed tax. Further, the appeal may also be against the tax determined on defaults in respect of tax deducted at source or tax collected at source; (c) in appeals related to disputed tax, the declarant shall only pay the whole of the disputed tax if the payment is made before the 31st day of March, 2020 and for the payments made after the 31st day of March, 2020 but on or before the date notified by Central Government, the amount payable shall be increased by 10 per cent. of disputed tax; (d) in appeals related to disputed penalty, disputed interest or disputed fee, the amount payable by the declarant shall be 25 per cent. of the disputed penalty, disputed interest or disputed fee, as the case may be, if the payment is made on or before the 31st day of March, 2020. If payment is made after the 31st day of March, 2020 but on or before the date notified by Central Government, the amount payable shall be increased to 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been filed by the appellant in respect of such interest. Finally, 'tax arrear' has been defined in section 2(1)(o) in the following manner:- (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. 25.1. 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. 26. Section 3 deals with the amount payable by a declarant. A reading of section 3 makes it clear that where a declarant files a declaration under the Vivad se Vishwas Act, the same is in respect of tax arrear. A statement is provided thereunder determining the amount payable depending upon the nature of tax arrear. 26.1. Filing of declaration and particulars to be furnished are dealt with in section 4. Sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een instituted on or before the date of filing of declaration; (iii) relating to any undisclosed income from a source located outside India or undisclosed asset located outside India; (iv) relating to an assessment or reassessment made on the basis of information received under an agreement referred to in section 90 or section 90A of the Income-tax Act, if it relates to any tax arrear; 27.1. As per sub-clause (i), provisions of the Vivad se Vishwas Act would not apply in respect of tax arrear relating to an assessment year in respect of which an assessment has been made including on the basis of search and seizure. In so far sub-clause (ii) is concerned, 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. Likewise in subclause (iii), provisions of the said Act would not be applicable in respect of tax arrear relating to any undisclosed income from a source located outside India or undisclosed asset located outside India. Finally, under sub-clause (iv), the exclusion would be in respect of tax arrear relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent No.2 to issue directions or orders to the income tax authorities from time to time, section 12 is the rule making provision. 29. In exercise of the powers conferred by sub-section (2) of section 12 read with sub-sections (1) and (5) of section 4 and sub-sections (1) and (2) of section 5 of the Vivad se Vishwas Act, central government has made the Direct Tax Vivad se Vishwas Rules, 2020 (already referred to as the 'Vivad se Vishwas Rules'). Rule 7 says that order by the designated authority under sub-section (2) of section 5 in respect of payment of amount payable by the declarant as per certificate granted under subsection (1) of section 5 shall be in Form No.5. A perusal of Form No.5 which is appended to the Vivad se Vishwas Rules would show that it is an order for full and final settlement of tax arrear under section 5(2) read with section 6 of the Vivad se Vishwas Act. Here also, if we analyze clause (b) it is seen that immunity is granted to the declarant from prosecution or from imposition of penalty in respect of the tax arrear. 29.1. Therefore, if we look at the scheme of the Act and the Rules as a whole we find that the basic thrust is settlement in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 this assessment year and in respect of which prosecution has not been launched? Ans. The ineligibility to file declaration relates to an assessment year in respect of which prosecution has been instituted on or before the date of declaration. Since in this example, for the same assessment year (2012-13) prosecution has already been instituted, the taxpayer is not eligible to file declaration for this assessment year even on issues not relating to prosecution. 31.1. From the above, it is seen that the answer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 No.73 vide circular No.21/2020 dated 04.12.2020 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 dated 23.09.2020 would have to be decided by respondent No.1 in conformity with the provisions of the Vivad se Vishwas Act dehors the answer given to question No.73 which we have set aside and quashed. 35. Writ petition is accordingly allowed to the extent indicated above. However, there shall be no order as to cost. 36. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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