{"id":22536,"date":"2021-03-27T12:33:15","date_gmt":"2021-03-27T07:03:15","guid":{"rendered":"https:\/\/itatonline.org\/archives\/?p=22536"},"modified":"2021-03-27T12:33:15","modified_gmt":"2021-03-27T07:03:15","slug":"macrotech-developers-limited-vs-pcit-bombay-high-court","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/macrotech-developers-limited-vs-pcit-bombay-high-court\/","title":{"rendered":"Macrotech Developers Limited vs. PCIT (Bombay High Court)"},"content":{"rendered":"
\n

Macrotech Developers Limited v. PCIT WP No. 79 of 2021 dated March 25, 2021( Bom) (HC) <\/strong><\/p>\n

The Direct Tax Vivad se Vishwas Act, 2020 – Wilful attempt to evade tax -Tax deduction at source – Prosecution – Q. 73 of CBDT Circular 21 of 2020 dated 4\/12\/2020 would stand set aside and quashed.<\/strong> <\/strong><\/p>\n

Facts<\/strong>:
\n The petitioner sought a declaration that the clarification given by CBDT to question No.73 vide circular No.21 of 2020 dated December 04, 2020 is violative of Article 14 of the Constitution of India and thusis arbitrary and ultra vires to the provisions of the Direct Tax Vivad seVishwas Act, 2020 (VSVA<\/strong>) and the Direct Tax Vivad se Vishwas Rules, 2020.<\/p>\n

For the assessment year 2015-16, petitioner\/ its subsidiary (before merger) had filed return ofincome under section 139(1) of the Act. The balance of self-assessment tax after deduction of TDS was paid by the petitioner after the due date for filing of the return. <\/p>\n

The department issued notice to the petitioner on toshow cause as to why prosecution should not be initiated against thepetitioner under section 276-C(2) of the Act for alleged wilful attempt toevade tax on account of delayed payment of the balance amount of theself-assessment tax. Subsequently After the due process of law, instituted a case in the 38thMetropolitan Magistrate’s Court at Ballard Pier.<\/p>\n

The Ld. AO made certain disallowances towards workmen’s compensationand other related expenses for the AY 2015-16 vide order under section 143(3) of the Act. The disallowances were upheld by the CIT(A). The Petitioner preferred an appeal before the ITAT and the matter was pending before the ITAT.<\/p>\n

The CBDT issued impugned circular No.21\/2020 dated04.12.2020 giving further clarifications in respect of the VSVA. Question No.73 contained therein is when in the case of atax payer prosecution has been initiated for aparticular assessment year,with respect to an issue which is not in appeal, would he be eligible tofile declaration for issues which are in appeal for the said assessment.<\/p>\n

The Petitioner is prosecuted for delay in payment of self-assessment tax however is ineligible to settle a matter under VSVA for another issue. <\/p>\n

Held<\/strong>:
\n From a reading of the statement of objects and reasons what isdeducible is that the purpose for introduction of the Vivad se VishwasBill was to reduce tax disputes pertaining to direct taxes.<\/p>\n

The exclusion referred to in section 9(a)(ii) of VSVA is inrespect of tax arrear relating to an assessment year in respect of whichprosecution has been instituted on or before the date of filing ofdeclaration. Thus, what section 9(a)(ii) postulates is that the provisionsof the Vivad se Vishwas Act would not apply in respect of tax arrearrelating to an assessment year in respect of which prosecution has beeninstituted on or before the date of filing of declaration. Therefore, theprosecution must be in respect of tax arrear relating to an assessmentyear.<\/p>\n

The interpretation given by respondent No.2\/CBDT inthe answer to question No.73 is not in alignment with the legislativeintent which has got manifested in the form of section 9(a)(ii) of VSVA.
\n To hold that an assesseewould not be eligible to file a declaration because there is a pendingprosecution for the assessment year in question on an issue unrelated totax arrear would defeat the very purport and object of the Vivad seVishwas Act. Such an interpretation which abridges the scope ofsettlement as contemplated under the Vivad se Vishwas Act cannottherefore be accepted.<\/p>\n

Therefore, Q. 73 of CBDT Circular 21 of 2020 dated 4\/12\/2020 would stand set aside and quashed.<\/p><\/blockquote>\n

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
\nORDINARY ORIGINAL CIVIL JURISDICTION
\nWRIT PETITION NO.79 OF 2021
\nWITH
\nINTERIM APPLICATION (L) NO.1060 OF 2021
\nMacrotech Developers Limited \u2026 Petitioner
\nVs.
\nPrincipal Commissioner of Income Tax and others \u2026 Respondents
\nMr. V. Sridharan, Senior Advocate a\/w. Mr. Prakash Shah and Mr. Jas
\nSanghavi i\/b. PDS Legal for Petitioner.
\nMr. Suresh Kumar for Respondents.
\nCORAM : UJJAL BHUYAN &
\nMILIND N. JADHAV, JJ.
\nReserved on : FEBRUARY 1, 2021
\nPronounced on: MARCH 25, 2021
\nJudgment and Order : (Per Ujjal Bhuyan, J.)
\nHeard Mr. V. Sridharan, learned senior counsel along with Mr.
\nPrakash Shah, learned counsel for the petitioner and Mr. Suresh Kumar,
\nlearned standing counsel Revenue for the respondents.
\n2. By filing this petition under Article 226 of the Constitution of
\nIndia, petitioner seeks a declaration that the clarification given by
\nrespondent No.2 to question No.73 vide circular No.21\/2020 dated
\n04.12.2020 is violative of Article 14 of the Constitution of India and thus
\nis arbitrary and ultra vires to the provisions of the Direct Tax Vivad se
\nVishwas Act, 2020 and the Direct Tax Vivad se Vishwas Rules, 2020.
\nTherefore, petitioner seeks quashing of the said clarification and further
\nseeks a direction to respondent No.1 to accept the declaration filed by
\nthe petitioner on 23.09.2020 under the Direct Tax Vivad se Vishwas Act,
\n2020.
\n1\/23
\nWP79_21.odt
\n3. Case of the petitioner as pleaded in the writ petition is that it is a
\npublic limited company incorporated under the Companies Act, 1956
\nhaving its registered office at Mahalaxmi, Mumbai. It is engaged in the
\nbusiness of land development and construction of real estate properties.
\n4. Initially, Shreeniwas Cotton Mills Private Limited (‘Cotton Mills’
\nfor short) was a subsidiary of the petitioner. Subsequently it was merged
\nwith the petitioner on the strength of the amalgamation scheme
\nsanctioned vide order dated 07.06.2019 passed by the National Company
\nLaw Tribunal, Mumbai Bench. The merger had taken place with effect
\nfrom 01.04.2018. However, the pending tax demand against the cotton
\nmills under the Income Tax Act, 1961 (briefly ‘the Act’ hereinafter)
\ncontinued in the name of the cotton mills since migration of the
\npermanent account number of the cotton mills to the permanent account
\nnumber of the petitioner has not taken place. Therefore, it is pleaded that
\nthe tax demand of the cotton mills should be construed to be that of the
\npetitioner and reference to the petitioner would mean and include the
\npetitioner as well as the cotton mills.
\n5. For the assessment year 2015-16, petitioner had filed return of
\nincome under section 139(1) of the Act disclosing total income of
\nRs.2,05,71,01,650.00. The self-assessment income tax payable on the
\nreturned income as per section 115JB of the Act was
\nRs.69,92,08,851.00. At the time of filing of the return, an amount of
\nRs.27,34,77,755.00 was shown to have been paid by way of tax
\ndeducted at source. Balance of self-assessment tax of
\nRs.42,57,31,096.00 (Rs.69,92,08,851.00 less Rs.27,34,77,755.00) with
\ninterest thereon under sections 234A, 234B and 234C of the Act
\naggregating to Rs.12,36,74,855.00, totalling Rs.54,94,05,951.00 were
\npaid by the petitioner after the due date for filing of the return in the
\n2\/23
\nWP79_21.odt
\nfollowing manner:-
\nSr. No. Date Amount Paid (Rs.)
\n1. 05 July 2016 2,00,00,000
\n2. 31 August 2016 52,94,05,951
\nTOTAL 54,94,05,951
\n6. Respondent No.1 issued notice to the petitioner on 19.09.2017 to
\nshow cause as to why prosecution should not be initiated against the
\npetitioner under section 276-C(2) of the Act for alleged wilful attempt to
\nevade tax on account of delayed payment of the balance amount of the
\nself-assessment tax. Petitioner replied to the same on 05.10.2017
\ndenying the allegations made. Petitioner stated there was only a delay in
\npayment of self-assessment tax that too on account of cash flow
\npressures on the business which was promptly discharged within six
\nmonths and that there was no attempt made in any manner whatsoever to
\nevade payment of tax. Therefore, request was made to respondent No.1
\nto withdraw the show cause notice.
\n7. Petitioner was informed by respondent No.1 by letter dated
\n07.12.2018 that income tax department was actively considering the case
\nof the petitioner for alleged wilful attempt to evade payment of tax and
\ninterest. However, an offer was given to the petitioner for compounding
\nof the offence under section 279(2) of the Act to which petitioner replied
\nthat since there was no mala fide intent to evade payment of tax, the
\nproposed prosecution could be defended on merit. Therefore, petitioner
\ndid not apply for compounding under section 279(2) of the Act.
\n8. Similar notices as issued to the petitioner were issued by
\nrespondent No.1 to the directors of the cotton mills in their individual
\ncapacity to which the respective directors replied by denying the
\n3\/23
\nWP79_21.odt
\nallegations.
\n9. In the meanwhile, on 17.12.2017, the assessing officer passed the
\nassessment order for the assessment year 2015-16 under section 143(3)
\nof the Act. In the assessment order, assessing officer disallowed certain
\nexpenses claimed by the petitioner towards workmen’s compensation
\nand other related expenses. After disallowing such claim, assessing
\nofficer computed the tax liability of the petitioner at Rs.61.75 crores
\nwhich was inclusive of interest.
\n10. When the aforesaid assessment order dated 17.12.2017 was
\nchallenged by the petitioner in appeal, the appellate authority i.e.,
\nCommissioner of Income Tax (Appeals) dismissed the appeal and
\nupheld the assessment order vide order dated 27.12.2018.
\n11. Aggrieved by the order of Commissioner of Income Tax
\n(Appeals) dated 27.12.2018, petitioner preferred further appeal before
\nthe Income Tax Appellate Tribunal (briefly ‘the Tribunal’ hereinafter)
\nwhich was registered as ITA No.1538\/Mum\/2019. It is stated that the
\naforesaid appeal is pending before the Tribunal for final hearing.
\n12. While the appeal of the petitioner was pending before the
\nTribunal, central government enacted the Direct Tax Vivad se Vishwas
\nAct, 2020 which came into force on and from 17.03.2020. Primary
\nobjective of the Direct Tax Vivad se Vishwas Act, 2020 (briefly ‘the
\nVivad se Vishwas Act’ hereinafter) is to reduce pending tax litigations
\npertaining to direct taxes and in the process, grant considerable relief to
\nthe eligible declarants while at the same time generating substantial
\nrevenue for the government.
\n4\/23
\nWP79_21.odt
\n13. Circular No.9 of 2020 dated 22.04.2020 was issued by respondent
\nNo.2 whereby certain clarifications were given in the form of question
\nand answer. Be it stated that the central government vide notification
\ndated 18.03.2020 has made the Direct Tax Vivad se Vishwas Rules 2020
\n(briefly ‘the Vivad se Vishwas Rules’ hereinafter).
\n14. With a view to settling the pending tax demand, petitioner
\nsubmitted a declaration in terms of Vivad se Vishwas Act on 23.09.2020
\nin the name of the cotton mills in respect of the tax dues for the
\nassessment year 2015-16 which is the subject matter of the appeal
\npending before the Tribunal.
\n15. While the petitioner’s declaration dated 23.09.2020 was pending,
\nit came to know that respondent No.1 had passed an order on 03.05.2019
\nauthorizing the Joint Commissioner of Tax (OSD) to initiate criminal
\nprosecution against the cotton mills and its directors by filing complaint
\nbefore the competent magistrate in respect of the delayed payment of
\nself-assessment tax for the assessment year 2015-16. On the basis of
\nsuch sanction order, income tax department has filed criminal complaint
\nunder section 276-C(2) read with section 278B of the Act before the 38th
\nMetropolitan Magistrate’s Court at Ballard Pier which has been
\nregistered as Criminal Case No.470\/SW\/2019. However, no progress has
\ntaken place in the said criminal case.
\n16. Respondent No.2 issued impugned circular No.21\/2020 dated
\n04.12.2020 giving further clarifications in respect of the Vivad se
\nVishwas Act. Question No.73 contained therein is when in the case of a
\ntax payer prosecution has been initiated for the assessment year 2012-13,
\nwith respect to an issue which is not in appeal, would he be eligible to
\nfile declaration for issues which are in appeal for the said assessment
\n5\/23
\nWP79_21.odt
\nyear and in respect of which prosecution has not been launched? The
\nanswer given to this is that ineligibility to file declaration relates to an
\nassessment year in respect of which prosecution has been instituted on or
\nbefore the date of declaration. Since for the assessment year 2012-13
\nprosecution has already been instituted, the tax payer would not be
\neligible to file declaration for the said assessment year even on issues
\nnot relating to prosecution.
\n17. It is the grievance of the petitioner that on the basis of the answer
\ngiven to question No.73 as alluded to hereinabove its declaration would
\nbe rejected since the declaration pertains to the assessment year 2015-16
\nand prosecution has been launched against the petitioner for delayed
\npayment of self-assessment tax for the assessment year 2015-16.
\n18. It is in this context that the present writ petition has been filed
\nseeking the reliefs as indicated above.
\n19. Respondents have filed a common affidavit through Mr. Abhay
\nDamle, Principal Commissioner of Income Tax, Central-4, Mumbai.
\nReferring to section 9(a)(ii) of the Vivad se Vishwas Act, it is submitted
\nthat the same is an exclusionary clause. While clause (a) of section 9
\nexcludes certain class of cases on the basis of tax arrears, clauses (b), (c)
\nand (d) exclude certain class of persons on the basis of grave violation of
\ncertain enactments from the ambit of the Vivad se Vishwas Act. On that
\nbasis, it is contended that as per section 9(a)(ii), tax arrears relating to an
\nassessment year in respect of which prosecution has been instituted on or
\nbefore the date of filing of declaration are excluded from the ambit of
\nthe Vivad se Vishwas Act. As per the said provision, once prosecution is
\ninstituted in respect of an assessment year to which the tax arrears relate
\nthen the appeal pertaining to such assessment year is not eligible for
\n6\/23
\nWP79_21.odt
\nsettlement under the Vivad se Vishwas Act. This is what has been
\nclarified by answer to question No.73 of circular No.21\/2020 dated
\n04.12.2020.
\n19.1. It is submitted that the exclusion as per section 9(a)(ii) applies to
\nan assessment year and hence all the tax arrears of that assessment year.
\nIntention of the statute is not to bifurcate the tax liability of an
\nassessment year into parts that qualify for settlement under the Vivad se
\nVishwas Act and those which do not qualify for such settlement.
\nExclusion of such class of cases is reasonable. It is further clarified that
\nunlike the exclusion under clauses (b) to (d) of section 9 which debars a
\nperson from filing declaration under the Vivad se Vishwas Act, the
\nexclusion under sub-clause (ii) of clause (a) of section 9 only excludes
\nan assessment year from settlement under the Vivad se Vishwas Act.
\nHowever, such person is not barred from seeking settlement under the
\nVivad se Vishwas Act for assessment years that are not excluded. In this
\nconnection, reference has been made to question No.74 of circular
\nNo.21\/2020 and the answer given thereto as per which prosecution in
\none assessment year would not debar an assessee from filing declaration
\nfor another assessment year, if it is otherwise eligible.
\n19.2. Respondents have contended that under the Act, there is a
\nprovision for compounding of offences in respect of which prosecution
\nhas been initiated. In the circular No.9\/2020 dated 22.04.2020, it has
\nbeen clarified that an assessee would be eligible to file declaration under
\nthe Vivad se Vishwas Act if he compounds his offence before filing of
\ndeclaration.
\n19.3. In view of above, it is contended that the answer given to question
\nNo.73 of circular No.21\/2020 is reasonable and rational having nexus to
\n7\/23
\nWP79_21.odt
\nthe object sought to be achieved by the Vivad se Vishwas Act. In the
\ncircumstances, respondents seek dismissal of the writ petition.
\n20. Mr. Sridharan, learned senior counsel for the petitioner has
\nreferred to the statement of objects and reasons while introducing the
\nVivad se Vishwas Bill in the Parliament as well as the statement made by
\nthe Hon’ble Finance Minister in her Budget speech on 01.02.2020 and
\nsubmits that the scheme introduced by way of the Vivad se Vishwas Act
\nis to reduce litigation in direct taxes. A huge amount of disputed tax
\narrears is locked up in appeals at various stages and the amount of
\ndisputed direct tax arrears as on 30.11.2019 was Rs.9.32 lakh crores
\nwhich is roughly almost one year of direct tax collections; besides, tax
\ndisputes consume enormous amount of time, energy and resources of
\nboth the tax payers and of the government. Therefore, resolution of
\npending tax disputes is the need of the hour. This will not only benefit
\nthe government by generating timely revenue but also the tax payers
\nwho will be able to deploy the time, energy and resources saved by
\nopting for such dispute resolution towards their business activities.
\nTherefore, while examining or considering a declaration filed under the
\nVivad se Vishwas Act, the above aspects need to be borne in mind.
\n20.1. Mr. Sridharan has meticulously referred to various provisions of
\nthe Vivad se Vishwas Act particularly the definition of ‘tax arrear’ as
\nappearing in section 2(1)(o) and submits that the entire scheme of
\nsettlement centers around tax arrear. Referring to section 9(a) of the
\nVivad se Vishwas Act, he submits that language of this section is very
\nclear in as much as this section provides that provisions of the Vivad se
\nVishwas Act would not apply in respect of tax arrear as covered by the
\nfour situations enumerated thereunder. As per sub-clause (i), provisions
\nof the Vivad se Vishwas Act would not apply in respect of tax arrear
\n8\/23
\nWP79_21.odt
\nrelating to an assessment year in respect of which an assessment has
\nbeen made under section 143(3) or section 144 or section 153A or
\nsection 153C of the Act on the basis of search initiated under section 132
\nor section 132A of the Act if the amount of disputed tax exceeds Rs.5
\ncrores. Sub-clause (ii) says that the tax arrear must relate to an
\nassessment year in respect of which prosecution has been instituted on or
\nbefore the date of filing of the declaration. Under sub-clause (iii), the tax
\narrear must relate to any undisclosed income from a source located
\noutside India or undisclosed asset located outside India; and under subclause
\n(iv), the tax arrear must relate to an assessment or re-assessment
\nmade on the basis of information received under an agreement referred
\nto in section 90 or section 90A of the Act if it relates to any tax arrear.
\n20.2. Mr. Sridharan submits that a careful reading of section 9(a)(ii)
\nwould go to show that the thrust of the said provision is that provisions
\nof the Vivad se Vishwas Act would not apply in respect tax arrear
\nrelating to an assessment year in respect of which prosecution has been
\ninstituted on or before the date of filing of declaration. Therefore, the
\nprosecution must be relatable to the tax arrear of an assessment year and
\nif interpreted in this manner the word ‘of’ appearing in sub-clause (ii)
\nshould be read as ‘for’.
\n20.3. In contradistinction to what is intended by section 9(a), under
\nsections 9(b), (c), (d) and (e), the exclusion pertains to any person who is
\naccused of infringing provisions of the related statutes. In (b), the
\nprovisions are of Conservation of Foreign Exchange and Prevention of
\nSmuggling Activities Act, 1974; in (c), it is Unlawful Activities
\n(Prevention) Act, 1967, the Narcotic Drugs and Psychotropic Substances
\nAct, 1985, Prevention of Corruption Act, 1988, Prevention of Money
\nLaundering Act, 2002 and Prohibition of Benami Property Transactions
\n9\/23
\nWP79_21.odt
\nAct, 1988; in (d), prosecution should be initiated by an income tax
\nauthority for any offence punishable under the provisions of the Indian
\nPenal Code; and under (e), Special Court (Trial of Offences relating to
\nTransactions in Securities) Act, 1992. He, therefore, submits that there is
\na fundamental distinction between the exclusionary provision of section
\n9(a) on the one hand and sections 9(b), (c), (d) and (e) on the other hand.
\nWhile in the case of the former the exclusion is in respect of tax arrear
\nrelating to an assessment year, in the case of the later the exclusion
\npertains to a person who has suffered disability or prosecution under the
\nmentioned statutes. If this is the position then the answer given to
\nquestion No.73 contained in the circular No.21\/2020 would be contrary
\nto the statutory mandate. The answer given is only an interpretation. As
\nper the said interpretation, the ineligibility to file declaration relates to
\nan assessment year in respect of which prosecution has been instituted
\non or before the date of declaration. Since in question No.73 prosecution
\nwas initiated against the tax payer for assessment year 2012-13, for the
\nsaid assessment year, the tax payer would not be eligible to file
\ndeclaration even on issues not relating to prosecution. Mr. Sridharan
\nsubmits that this interpretation is not only erroneous but is ultra vires the
\nmandate of section 9(a)(ii) of the Vivad se Vishwas Act. By way of a
\ncircular or interpretation, the statutory requirement or intention of the
\nlegislature cannot be curtailed or narrowed down.
\n20.4. In the circumstances, he submits that the answer given to question
\nNo.73 is liable to be discarded and on the correct interpretation of
\nsection 9(a)(ii) of the Vivad se Vishwas Act declaration of the petitioner
\nis liable to be accepted.
\n21. On the other hand, Mr. Suresh Kumar, learned counsel for the
\nrespondents contends that a careful reading of section 9(a) of the Vivad
\n10\/23
\nWP79_21.odt
\nse Vishwas Act would go to show that the disability to file declaration is
\nqua assessment year. If any prosecution is pending for any assessment
\nyear then the tax payer would not be eligible to file declaration for the
\nsaid assessment year. To buttress his point, he has referred to question
\nNo.74 in the circular No.21\/2020 and the answer given thereto. The
\nquestion is that if there is a prosecution against an assessee for a
\ndifferent assessment year and the pending appeal is for a different
\nassessment year, would it debar the assessee from the benefit of the
\nscheme? The answer given to this is that prosecution in one assessment
\nyear would not debar an assessee from filing declaration for any other
\nassessment year if he is otherwise eligible.
\n21.1. Mr. Suresh Kumar submits that there is a distinction between the
\nstage of finding out of eligibility to seek exemption and stage of
\napplying the nature of exemption. Referring to the decision of the
\nSupreme Court in the case of Commissioner of Customs (Import),
\nMumbai Vs. Dilip Kumar and Company, (2018) 9 SCC 1, he submits
\nthat in the case of exemption notifications a strict interpretation has to be
\napplied at the stage of eligibility; but once that stage is crossed, the
\nbenefits available to a declarant is to be construed liberally. Adverting to
\nthe facts of the present case, he submits that provisions of section 9(a)(ii)
\nhas to be construed strictly. Viewed in that context, the departmental
\ninterpretation given as answer to question No.73 reflects the correct
\nposition. He, therefore, seeks dismissal of the writ petition.
\n22. Submissions made by learned counsel for the parties have been
\nduly considered.
\n23. Before adverting to the Vivad se Vishwas Act, we may usefully
\nextract the relevant portion of the budget speech of the Hon’ble Finance
\n11\/23
\nWP79_21.odt
\nMinister made on 01.02.2020 which reads thus:-
\n\u201c Sir, in the past our government has taken several
\nmeasures to reduce tax litigations. In the last budget, Sabka
\nVishwas Scheme was brought in to reduce litigation in indirect
\ntaxes. It resulted in settling over 1,89,000 cases. Currently,
\nthere are 4,83,000 direct tax cases pending in various appellate
\nforums i.e. Commissioner (Appeals), ITAT, High Court and
\nSupreme Court. This year, I propose to bring a scheme similar
\nto the indirect tax Sabka Vishwas for reducing litigations even
\nin the direct taxes.
\nUnder the proposed \u2018Vivad se Vishwas\u2019 scheme, a
\ntaxpayer would be required to pay only the amount of the
\ndisputed taxes and will get complete waiver of interest and
\npenalty provided he pays by 31st March, 2020. Those who avail
\nthis scheme after 31st March, 2020 will have to pay some
\nadditional amount. The scheme will remain open till 30th June,
\n2020.
\nTaxpayers in whose cases appeals are pending at any
\nlevel can benefit from this scheme.
\nI hope that taxpayers will make use of this opportunity to
\nget relief from vexatious litigation process.\u201d
\n23.1. Thus, what was intended by the Hon’ble Finance Minister was to
\nbring a scheme similar to the Sabka Vishwas (Legacy Dispute
\nResolution) Scheme, 2019 which pertained to indirect taxes. The object
\nof the Vivad se Vishwas scheme is to reduce litigations in direct taxes. It
\nwas pointed out that under the scheme, a tax payer would be required to
\npay only the amount of disputed taxes and would get complete waiver of
\ninterest and penalty subject to payment by the specified date. In case of
\npayment made after the specified date, the tax payer would have to pay
\nsome additional amount. As per her speech, tax payers in whose cases
\nappeals were pending at any level could avail the benefit from the
\nscheme.
\n24. Let us now read the statement of objects and reasons of the Vivad
\nse Vishwas Bill when introduced in the Parliament which later on
\n12\/23
\nWP79_21.odt
\nbecame the Vivad se Vishwas Act. The statement of objects and reasons
\nreads as under:-
\n\u201c Over the years, the pendency of appeals filed by
\ntaxpayers as well as Government has increased due to the fact
\nthat the number of appeals that are filed is much higher than the
\nnumber of appeals that are disposed. As a result, a huge amount
\nof disputed tax arrears is locked-up in these appeals. As on the
\n30th November, 2019, the amount of disputed direct tax arrears
\nis Rs. 9.32 lakh crores. Considering that the actual direct tax
\ncollection in the financial year 2018-19 was Rs.11.37 lakh
\ncrores, the disputed tax arrears constitute nearly one year direct
\ntax collection.
\n2. Tax disputes consume copious amount of time, energy
\nand resources both on the part of the Government as well as
\ntaxpayers. Moreover, they also deprive the Government of the
\ntimely collection of revenue. Therefore, there is an urgent need
\nto provide for resolution of pending tax disputes. This will not
\nonly benefit the Government by generating timely revenue but
\nalso the taxpayers who will be able to deploy the time, energy
\nand resources saved by opting for such dispute resolution
\ntowards their business activities.
\n3. It is, therefore, proposed to introduce the Direct Tax
\nVivad se Vishwas Bill, 2020 for dispute resolution related to
\ndirect taxes, which, inter alia, provides for the following,
\nnamely:\u2014
\n(a) the provisions of the Bill shall be applicable to appeals
\nfiled by taxpayers or the Government, which are
\npending with the Commissioner (Appeals), Income tax
\nAppellate Tribunal, High Court or Supreme Court as
\non the 31st day of January, 2020 irrespective of
\nwhether demand in such cases is pending or has been
\npaid;
\n(b) the pending appeal may be against disputed tax,
\ninterest or penalty in relation to an assessment or
\nreassessment order or against disputed interest,
\ndisputed fees where there is no disputed tax. Further,
\nthe appeal may also be against the tax determined on
\ndefaults in respect of tax deducted at source or tax
\ncollected at source;
\n(c) in appeals related to disputed tax, the declarant shall
\nonly pay the whole of the disputed tax if the payment
\nis made before the 31st day of March, 2020 and for the
\npayments made after the 31st day of March, 2020 but
\n13\/23
\nWP79_21.odt
\non or before the date notified by Central Government,
\nthe amount payable shall be increased by 10 per cent.
\nof disputed tax;
\n(d) in appeals related to disputed penalty, disputed interest
\nor disputed fee, the amount payable by the declarant
\nshall be 25 per cent. of the disputed penalty, disputed
\ninterest or disputed fee, as the case may be, if the
\npayment is made on or before the 31st day of March,
\n2020. If payment is made after the 31st day of March,
\n2020 but on or before the date notified by Central
\nGovernment, the amount payable shall be increased to
\n30 per cent. of the disputed penalty, disputed interest
\nor disputed fee, as the case may be.
\n4. The proposed Bill shall come into force on the date it
\nreceives the assent of the President and declaration may be
\nmade thereafter up to the date to be notified by the
\nGovernment.\u201d
\n24.1. From a reading of the statement of objects and reasons what is
\ndeducible is that the purpose for introduction of the Vivad se Vishwas
\nBill was to reduce tax disputes pertaining to direct taxes. It was noted
\nthat amount of disputed direct tax arrears as on 30th November, 2019 was
\nRs.9.32 lakh crores bottled up in appeals across the spectrum which is
\nalmost a year’s direct tax collection. Not only that a good amount of
\ntime, energy and resources are consumed in such tax disputes, both on
\nthe part of the government as well as on the part of the tax payers.
\nSettlement of such tax disputes will, therefore, not only benefit the
\ngovernment by generating timely revenue but also the tax payers who
\nwould then be able to deploy the time, energy and resources saved by
\nopting for such dispute resolution towards their business activities. The
\nprovisions of the Bill were made applicable to appeals filed by the
\nassessees or by the revenue pending before the Commissioner (Appeals),
\nIncome Tax Appellate Tribunal, High Court or Supreme Court and that
\nsuch pending appeals may be against disputed tax, interest or penalty in
\nrelation to an assessment or re-assessment.
\n14\/23
\nWP79_21.odt
\n25. Preamble of the Vivad se Vishwas Act describes the same as an act
\nto provide for resolution of disputed tax and for matters connected
\ntherewith or incidental thereto. Section 2 thereof provides for definitions
\nof various expressions used in the Vivad se Vishwas Act. As per section
\n2(1)(g), ‘disputed income’ in relation to an assessment year has been
\ndefined to mean the whole or so much of the total income as is relatable
\nto the disputed tax. \u2018Disputed tax\u2019 is defined in section 2(1)(j) to mean
\nincome tax including surcharge and cess in relation to an assessment
\nyear or financial year as the case may be payable by the appellant under
\nthe provisions of the Act in the manner computed under the said
\nprovision. Similarly, \u2018disputed fee\u2019, \u2018disputed interest\u2019 and \u2018disputed
\npenalty\u2019 have also been defined under sections 2(f), 2(h) and 2(i). Under
\nsection 2(1)(h), ‘disputed interest’ has been defined to mean the interest
\ndetermined in any case under the provisions of the Act where such
\ninterest is not charged or chargeable on disputed tax; and an appeal has
\nbeen filed by the appellant in respect of such interest. Finally, ‘tax arrear’
\nhas been defined in section 2(1)(o) in the following manner:-
\n\u201c(o) \u2018tax arrear\u2019 means,-
\n(i) the aggregate amount of disputed tax, interest
\nchargeable or charged on such disputed tax, and
\npenalty leviable or levied on such disputed tax; or
\n(ii) disputed interest; or
\n(iii) disputed penalty; or
\n(iv) disputed fee,
\nas determined under the provisions of the Income Tax
\nAct.\u201d
\n25.1. Thus, \u2018tax arrear\u2019 would mean the aggregate amount of disputed
\ntax, interest chargeable or charged on such disputed tax and penalty
\nleviable or levied on such disputed tax or disputed interest or disputed
\npenalty or disputed fee as determined under the provisions of the Act.
\n26. Section 3 deals with the amount payable by a declarant. A reading
\n15\/23
\nWP79_21.odt
\nof section 3 makes it clear that where a declarant files a declaration
\nunder the Vivad se Vishwas Act, the same is in respect of tax arrear. A
\nstatement is provided thereunder determining the amount payable
\ndepending upon the nature of tax arrear.
\n26.1. Filing of declaration and particulars to be furnished are dealt with
\nin section 4. Sub-section (1) says that the declaration shall be filed by
\nthe declarant before the designated authority in the prescribed format. As
\nper sub-section (2), upon filing of such declaration any appeal pending
\nbefore the Income Tax Appellate Tribunal or Commissioner (Appeals) in
\nrespect of the disputed income or disputed interest or disputed penalty or
\ndisputed fee and the tax arrear shall be deemed to have been withdrawn
\nfrom the date on which certificate is issued under section 5(1). As per
\nsub-section (3), where the appeal or writ petition is pending in the High
\nCourt or in the Supreme Court, the declarant is required to withdraw
\nsuch appeal or writ petition with the leave of the Court after issuance of
\ncertificate under sub-section (1) of section 5.
\n26.2. Section 5 provides for the time and manner of payment. As per
\nsub-section (1), the designated authority shall within a period of fifteen
\ndays from the date of receipt of the declaration by order determine the
\namount payable by the declarant in accordance with the provisions of the
\nVivad se Vishwas Act and grant a certificate to the declarant containing
\nparticulars of the tax arrear and the amount payable after such
\ndetermination. While under sub-section (2), the declarant is required to
\npay the amount determined under sub-section (1) within fifteen days,
\nsub-section (3) makes it clear that once an order is passed under subsection
\n(1) that would be conclusive as to the matters stated therein,
\nwhich cannot be re-opened.
\n16\/23
\nWP79_21.odt
\n26.3. Section 6 provides for immunity from prosecution or imposition
\nof penalty or levy of interest in respect of tax arrear once section 5
\ncomes into play.
\n27. Section 9 is relevant. This section provides for instances where
\nVivad se Vishwas Act would not apply. Section 9(a) mentions four
\ninstances where provisions of the Vivad se Vishwas Act would not be
\napplicable. Section 9(a) reads as under:-
\n\u201c9. The provisions of this Act shall not apply-
\n(a) in respect of tax arrear,–
\n(i) relating to an assessment year in respect of which an
\nassessment has been made under sub-section (3) of section 143
\nor section 144 or section 153A or section 153C of the Incometax
\nAct on the basis of search initiated under section 132 or
\nsection 132A of the Income-tax Act, if the amount of disputed
\ntax exceeds five crore rupees;
\n(ii) relating to an assessment year in respect of which
\nprosecution has been instituted on or before the date of filing
\nof declaration;
\n(iii) relating to any undisclosed income from a source
\nlocated outside India or undisclosed asset located outside
\nIndia;
\n(iv) relating to an assessment or reassessment made on
\nthe basis of information received under an agreement referred
\nto in section 90 or section 90A of the Income-tax Act, if it
\nrelates to any tax arrear;\u201d
\n27.1. As per sub-clause (i), provisions of the Vivad se Vishwas Act
\nwould not apply in respect of tax arrear relating to an assessment year in
\nrespect of which an assessment has been made including on the basis of
\nsearch and seizure. In so far sub-clause (ii) is concerned, provisions of
\nthe Vivad se Vishwas Act would not apply in respect of tax arrear
\nrelating to an assessment year in respect of which prosecution has been
\ninstituted on or before the date of filing of declaration. Likewise in subclause
\n(iii), provisions of the said Act would not be applicable in respect
\n17\/23
\nWP79_21.odt
\nof tax arrear relating to any undisclosed income from a source located
\noutside India or undisclosed asset located outside India. Finally, under
\nsub-clause (iv), the exclusion would be in respect of tax arrear relating to
\nan assessment or re-assessment made on the basis of information
\nreceived under an agreement referred to in section 90 or section 90A of
\nthe Act.
\n27.2. Therefore, from a careful and conjoint reading of the various subclauses
\ncomprised in section 9(a), we find that the thrust of the said
\nprovision is in respect of tax arrear which appears to be the common
\nthread running through all the sub-clauses. Extricating clause (ii) from
\nthe above, we find that the exclusion referred to in section 9(a)(ii) is in
\nrespect of tax arrear relating to an assessment year in respect of which
\nprosecution has been instituted on or before the date of filing of
\ndeclaration. Thus, what section 9(a)(ii) postulates is that the provisions
\nof the Vivad se Vishwas Act would not apply in respect of tax arrear
\nrelating to an assessment year in respect of which prosecution has been
\ninstituted on or before the date of filing of declaration. Therefore, the
\nprosecution must be in respect of tax arrear relating to an assessment
\nyear. We are of the view that there is no ambiguity in so far the intent of
\nthis provision is concerned and as pointed out by the Supreme Court in
\nDilip Kumar and Company (supra), a statute must be construed
\naccording to the intention of the Legislature and that the courts should
\nact upon the true intention of the Legislature while applying and
\ninterpreting the law. Therefore, what section 9(a)(ii) stipulates is that the
\nprovisions of the Vivad se Vishwas Act shall not apply in the case of a
\ndeclarant in whose case a prosecution has been instituted in respect of
\ntax arrear relating to an assessment year on or before the date of filing of
\ndeclaration. The prosecution has to be in respect of tax arrear which
\nnaturally is relatable to an assessment year.
\n18\/23
\nWP79_21.odt
\n27.3. If we look at clauses (b) to (e) of section (9), we find that there is
\na clear demarcation in section 9 in as much as the exclusions provided
\nunder clause (a) is in respect of tax arrear whereas in clauses (b) to (e),
\nthe thrust is on the person who is either in detention or facing
\nprosecution under the special enactments mentioned therein. Therefore,
\nif we read clauses (b) to (e) of section 9, it would be apparent that such
\ncategories of persons would not be eligible to file declaration under the
\nVivad se Vishwas Act in view of their exclusion in terms of section 9(b)
\nto (e).
\n28. While section 10 empowers respondent No.2 to issue directions or
\norders to the income tax authorities from time to time, section 12 is the
\nrule making provision.
\n29. In exercise of the powers conferred by sub-section (2) of section
\n12 read with sub-sections (1) and (5) of section 4 and sub-sections (1)
\nand (2) of section 5 of the Vivad se Vishwas Act, central government has
\nmade the Direct Tax Vivad se Vishwas Rules, 2020 (already referred to
\nas the ‘Vivad se Vishwas Rules’). Rule 7 says that order by the designated
\nauthority under sub-section (2) of section 5 in respect of payment of
\namount payable by the declarant as per certificate granted under subsection
\n(1) of section 5 shall be in Form No.5. A perusal of Form No.5
\nwhich is appended to the Vivad se Vishwas Rules would show that it is
\nan order for full and final settlement of tax arrear under section 5(2) read
\nwith section 6 of the Vivad se Vishwas Act. Here also, if we analyze
\nclause (b) it is seen that immunity is granted to the declarant from
\nprosecution or from imposition of penalty in respect of the tax arrear.
\n19\/23
\nWP79_21.odt
\n29.1. Therefore, if we look at the scheme of the Act and the Rules as a
\nwhole we find that the basic thrust is settlement in respect of tax arrear.
\nUnder section 9 certain categories of assessees are excluded from
\navailing the benefit of the Vivad se Vishwas Act. While those persons
\nwho are facing prosecution under serious charges or those who are in
\ndetention as mentioned in clauses (b) to (e) are excluded, the exclusion
\nunder clause (a) is in respect of tax arrear which is further circumscribed
\nby sub-clause (ii) to the extent that if prosecution has been instituted in
\nrespect of tax arrear of the declarant relating to an assessment year on or
\nbefore the date of filing of declaration, he would not be entitled to apply
\nunder the Vivad se Vishwas Act. Now tax arrear has a definite
\nconnotation under the Vivad se Vishwas Act in terms of section 2(1)(o)
\nwhich has to be read together with sections 2(f) to 2(j).
\n30. Having noticed the above, we may mention that respondent No.2
\nhad issued Circular No.9 \/ 2020 dated 22.04.2020 issuing certain
\nclarifications in respect of the Vivad se Vishwas Act. The clarifications
\nhave been issued in the form of question and answer upto question
\nNo.55. Question No.22 and the answer given thereto is relevant, which
\nis extracted hereunder:-
\n\u201c22. In the case of an assessee prosecution has been instituted
\nand is pending in court. Is assessee eligible for the Vivad se
\nVishwas? Further, where the prosecution has not been instituted
\nbut the notice has been issued, whether the assessee is eligible
\nfor Vivad se Vishwas?
\nAns: Where only notice for initiation of prosecution has been
\nissued without prosecution being instituted, the assessee is
\neligible to file declaration under Vivad se Vishwas. However,
\nwhere the prosecution has been instituted with respect to an
\nassessment year, the assessee is not eligible to file declaration
\nfor that assessment year under Vivad se Vishwas, unless the
\nprosecution is compounded before filing the declaration.\u201d
\n30.1. From the above, what is discernible is that where only notice for
\n20\/23
\nWP79_21.odt
\ninitiation of prosecution has been issued, assessee would be eligible to
\nfile declaration. However, once prosecution is instituted with respect to
\nan assessment year, the assessee would not be eligible to file declaration
\nfor that assessment year unless the prosecution is compounded before
\nfiling the declaration.
\n31. In the circular No.20 \/ 2020 dated 04.12.2020, respondent No.2
\nissued further clarifications in respect of Vivad se Vishwas Act. In the
\ncircular dated 22.04.2020, the clarifications were upto question No.55.
\nIn the circular dated 04.12.2020 further clarifications have been given
\nfrom question No.56 onwards upto question No.89. Question No.73 and
\nthe answer given thereto has been impugned by the petitioner by
\ncontending that on the basis of such interpretation declaration of the
\npetitioner is liable to be rejected. Question No.73 and the answer given
\nthereto are as under:-
\n\u201c73. In the case of a taxpayer, prosecution has been instituted
\nfor assessment year 2012-13 with respect of an issue which is
\nnot in appeal. Will he be eligible to file declaration for issues
\nwhich are in appeal for this assessment year and in respect of
\nwhich prosecution has not been launched?
\nAns. The ineligibility to file declaration relates to an
\nassessment year in respect of which prosecution has been
\ninstituted on or before the date of declaration. Since in this
\nexample, for the same assessment year (2012-13) prosecution
\nhas already been instituted, the taxpayer is not eligible to file
\ndeclaration for this assessment year even on issues not relating
\nto prosecution.\u201d
\n31.1. From the above, it is seen that the answer given to question No.73
\nis an improvement over the answer given to question No.22. Here it is
\nasserted that the ineligibility to file declaration relates to an assessment
\nyear in respect of which prosecution has been instituted on or before the
\ndate of declaration. If prosecution has already been instituted for a
\nparticular assessment year, the tax payer would not be eligible to file
\n21\/23
\nWP79_21.odt
\ndeclaration for the said assessment year even on issues not relating to
\nprosecution.
\n32. We are afraid such an interpretation given by respondent No.2 in
\nthe answer to question No.73 is not in alignment with the legislative
\nintent which has got manifested in the form of section 9(a)(ii). The
\nineligibility to file declaration is in respect of tax arrear relating to an
\nassessment year in respect of which prosecution has been instituted.
\nTherefore, to say that the ineligibility under section 9(a)(ii) relates to an
\nassessment year and if for that assessment year a prosecution has been
\ninstituted, then the tax payer would not be eligible to file declaration for
\nthe said assessment year even on issues not relating to prosecution
\nwould not only be illogical and irrational but would be in complete
\ndeviation from section 9(a)(ii). Such an interpretation would do violence
\nto the plain language of the statute and, therefore, cannot be accepted.
\nWe have already discussed in detail section 9(a)(ii) and we have no
\nhesitation to hold that either on a literal interpretation or by adopting a
\npurposive interpretation, the only exclusion visualized under the said
\nprovision is pendency of a prosecution in respect of tax arrear relatable
\nto an assessment year as on the date of filing of declaration and not
\npendency of a prosecution in respect of an assessment year on any issue.
\nThe debarment must be in respect of the tax arrear as defined under
\nsection 2(1)(o) of the Vivad se Vishwas Act. To hold that an assessee
\nwould not be eligible to file a declaration because there is a pending
\nprosecution for the assessment year in question on an issue unrelated to
\ntax arrear would defeat the very purport and object of the Vivad se
\nVishwas Act. Such an interpretation which abridges the scope of
\nsettlement as contemplated under the Vivad se Vishwas Act cannot
\ntherefore be accepted.
\n22\/23
\nWP79_21.odt
\n33. In so far the prosecution against the petitioner is concerned, the
\nsame has been initiated under section 276-C(2) of the Act because of the
\ndelayed payment of the balance amount of the self-assessment tax. Such
\ndelayed payment cannot be construed to be a tax arrear within the
\nmeaning of section 2(1)(o) of the Act. Therefore such a prosecution
\ncannot be said to be in respect of tax arrear. Because such a prosecution
\nis pending which is relatable to the assessment year 2015-16, it would be
\nin complete defiance of logic to debar the petitioner from filing a
\ndeclaration for settlement of tax arrear for the said assessment year
\nwhich is pending in appeal before the Tribunal.
\n34. Considering the above, the clarification given by respondent No.2
\nby way of answer to question No.73 vide circular No.21\/2020 dated
\n04.12.2020 is not in consonance with section 9(a)(ii) of the Vivad se
\nVishwas Act and, therefore, the same would stand set aside and quashed.
\nDeclaration of the petitioner dated 23.09.2020 would have to be decided
\nby respondent No.1 in conformity with the provisions of the Vivad se
\nVishwas Act dehors the answer given to question No.73 which we have
\nset aside and quashed.
\n35. Writ petition is accordingly allowed to the extent indicated above.
\nHowever, there shall be no order as to cost.
\n36. In view of the above order passed in the writ petition, no further
\norder is called for in Interim Application (L) No.1060 of 2021, which is
\naccordingly disposed of.
\n(MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.)
\n23\/23
\nMinal Parab<\/p>\n","protected":false},"excerpt":{"rendered":"

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. 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.<\/p>\n

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