It is no secret that the Courts of law in India are overburdened with an enormous number of cases pending before it. The litigation process is often long drawn out and time-intensive. As a means to alleviate this laborious process, the Vivad Se Vishwas Scheme was first tabled on 5 February, 2020 in the Lok Sabha; the amended bill was passed by the Lok Sabha on 04 March 2020 and subsequently passed by the Rajya Sabha on 13 March, 2020.
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The Direct Tax Vivad Se Vishwas Scheme permits Taxpayers with ongoing Direct Tax-based litigation disputes before the Commissioner of Income Taxes (Appeals), Income Tax Appellate Tribunals, Debt Recovery Tribunals, High Courts and Supreme Courts to pay the disputed Tax amounts due to the Government without any additional interests or penalties levied on them when paid within the time window set by the Government. Following the implementation of the scheme in 2020, the Government was met with immense Taxpayer turnout while the amount that was collected as tax during this scheme exceeded all expectations.
The Intent of the Direct Tax Vivad se Vishwas Act, 2020 is simple; a means to reduce direct-tax litigation before the Courts and other Adjudicatory Bodies while seeking to accumulate maximum revenue in the form of Direct Tax Payments. Moreover, following the COVID-19 global pandemic, the economy had taken a major hit and a considerable part of the population were struggling to manage their finances.
In addition to the waiver of penalty and interest, the Scheme also assured Taxpayers who are party to Direct-Tax Litigation of future immunity from scrutiny or levying of penalties or interests with regards to the same dispute/tax amount at any later stage, once the dispute is resolved. Further, the issue once resolved cannot be raised before any Appellate Forum, provided that no false information was provided by the Taxpayers during the process and no violations of the Income Tax Act, 1961 had taken place.
The Direct Tax Vivad se Vishwas Scheme is being reintroduced in 2024 (VsV 2.0). Similar to the Scheme introduced in 2020, VsV 2.0 permits Taxpayers that have appeals, writ petitions or special leave petitions before the Commissioner of Income Taxes (Appeals), Income Tax Appellate Tribunals, Debt Recovery Tribunals, High Courts and Supreme Courts as of 22 July, 2024 to not pay the interest and penalty over and above the disputed Tax amount.
Read More: Budget 2024-25 announces New Direct Tax Vivad se Vishwas Scheme, 2024
Taxpayers are to kindly note that the deadline for payment and certain other information regarding the VsV 2.0 Scheme are yet to be released by the Government.
Read on to know more about decided cases regarding the Direct Tax Vivad Se Vishwas Scheme:
“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 division bench of Justice Ujjal Bhuyan and Justice Milind N Jadhav had noted that in so far the prosecution against the petitioner is concerned, the same has been initiated under section 276-C(2) of the Income Tax 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.
The Supreme Court of India refused to condone delay in filing review petition against income tax order since the revenue department failed to state reasonable cause of delay. The Petitioner originally filed the petition challenging the communication dated 25th January 2021 withdrawing the earlier communication dated 21st October 2020 issued by the office of Chief Commissioner of Income Tax, Mumbai. By this communication dated 21st October 2020, petitioner was informed that they are eligible for resolution of tax disputes under the provisions of the Direct Tax Vivad Se Vishwas Act 2020.
The Bombay High Court held that the Reliance Industries conspired to commit offences under the Prevention of Corruption Act, casting shadow on monies sought to be offered to Income tax. The Two judge bench of Justice B V Nagarathna and Justice Ujjal Bhuyan held that “there is no error apparent on the face of the record or any merit in the Review Petition, warranting reconsideration of the order impugned.” The Review Petition was dismissed.
The Bombay High Court held that the Reliance Industries conspired to commit offences under Prevention of Corruption Act, casting shadow on monies sought to be offered to Income tax.
Petitioner is desirous of availing the benefit of DTVSV Act with respect to certain pending income tax litigations before various appellate levels. By an application dated 15th April 2020, petitioner sought clarification from the revenue with respect to its eligibility under the DTVSV Act. It would be evident that petitioner is charged with having conspired, inter alia, to commit acts of corruption which are punishable under the PC Act and hence, ex facie, there is a shadow of illegality on the money sought to be offered to tax. Thus, petitioner is not eligible under the DTVSV Act.
In a major move, a Division Bench of the Rajasthan High Court has recently directed the Income Tax Department to pay 6% interest for delayed refund under Direct Tax Vivad Se Vishwas Scheme (DTVSV Scheme).
The Division Bench of Justice Ashutosh Kumar and Justice Arun Bhansali observed that, the Delhi High Court in the case of Ms. Anjul while relying on one judgment of the Supreme Court in Union of India v. Tata Chemicals Limited held that the State having received the money without right and having retained and used it, is bound to make the party good, just as an individual would do under similar circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest.
In a recent ruling the Delhi High Court quashed Form 3 issued under Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act) to re-calculate on the basis of the counter affidavit filed and thereby granting major relief to Rolls Royce industrial Power (India) Limited.
A Division Bench comprising Justices Rajiv Shakdher and Girish Kathpalia observed that “Accordingly, as agreed by counsel, the impugned forms issued to the petitioner are set aside. Liberty is however, given to the respondents/revenue to rework the calculations on the basis of stand taken in the counter-affidavit and thereafter, issue fresh forms, as deemed fit. After fresh forms are issued, if still aggrieved, the petitioner will have liberty to assail the same in accordance with the law.”
In a significant tax-friendly ruling, the Delhi High Court has observed that the software of the income tax department for tax payment shall be tailor-made in accordance with the taxpayer’s requirements.
Allowing the petitions, Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that “In the opinion of this Court, as the petitioners have paid the taxes, they should be given the credit for the challans paid in Form 3 under the said Act. The order/communication dated 7th April, 2022 rejecting credit of taxes deposited under the DTVSV Act on the hyper-technical ground that challans have been deposited under the minor head ‘200’ instead of ‘400’ is unfair, illegal and contrary to the objective of enacting the DTVSV Act, 2020.”
The Delhi High Court directed to progress the matter under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act) as there was refund of money after giving credit.
A Division Bench comprising Rajiv Shakdher and Girish Kathpalia observed that “Therefore, the writ petition is disposed of with a direction that the concerned authority will progress the matter under the 2020 Act, as per law, from the stage at which it is presently positioned. In so far as correction of the challan is concerned, steps in that behalf will be taken by the respondents/revenue and consequential refund of Rs.25 lakhs would be made. This exercise will be completed within three (3) weeks of the receipt of a copy of the order passed today.”
The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the revisional jurisdiction under section 263 of the Income Tax Act, 1961 cannot be invoked in respect of matters settled under the amnesty scheme, DTVSV.
Shri N.V. Vasudevan, Vice President and Ms. Padmavathy S., Accountant Member, while considering a second appeal by the assessee, held that in assessee’s case the issue of cash deposits during the demonetisation period have been considered by the AO in original assessment proceedings under Section 143(3) of the Act and the assessee has opted for DTVSV scheme for the additions made in this regard. Section 8 of DTVSV Act as quoted by the PCIT, clearly mentions that the immunity is not available for any proceedings other than those in relation to which the declaration has been made.
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.
The Delhi High Court held that the assessee is eligible to apply for settlement under the Direct Tax Vivad se Vishwas Act, 2020 (DTVSV Act) when the disputed tax arrears still exist.
A Division Bench of Justices Purushaindra Kumar Kaurav and Yashwant Varma observed that “Therefore, it becomes evident that once the CIT(A) has rejected the appeal of the assessee whether on merits or on delay aspect, the tax demand as reflected in the assessment order gets confirmed unless it is set aside or modified by other appellate authority. Thus, the disputed tax arrears still exist as on specified date and consequently, the assessee would be eligible to apply for settlement under the DTVSV Act.
The Allahabad High Court dismissed a writ petition filed under the Direct Tax Vivaad Se Vishwas, Act, 2020 (DTVSV Act) and ruled that the settlement of disputes outside courts is not fundamental or inherent right.
A Division Bench of Justices Shiv Shanker Prasad and Saumitra Dayal Singh observed that “In the first place, settlement of disputes outside courts/ judicial process is not a fundamental or inherent right of any litigant. That right was created by the statute i.e. the Act. Being a statutory right, the same may have been availed strictly in accordance with the statutory conditions and further inasmuch as it was a stipulation that the application/ declaration may be maintainable only if there was pending a litigation between the parties before the cut-off date, it remained from the petitioner to satisfy that condition.”
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 division bench of Justice Abhay Ahuja and Justice Sunil P.Deshmukh while examining the issue whether the assessment is on the basis of search initiated under Section 132, or requisition etc. made under Section 132A of the Income-tax Act, held that nowhere in the statements recorded, referred to in the assessment order is there any allegation that Petitioner was one of the parties that had booked any artificial gains. There is no allegation that any incriminating material belonging to Petitioner was obtained in the course of the search. The assessment therefore does not appear to be on the basis of search initiated under Section 132, or requisitions made under Section 132A of the Income-tax Act. Having regard to aforesaid, it is difficult to agree with the submissions made on behalf of the counsel for the Revenue that the assessment order is on the basis of search.
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 division bench of Justice Abhay Ahuja and Justice Sunil P. Deshmukh after hearing Mr. Percy Pardiwalla, Senior Advocate for Petitioner pointed out that the objective of the Scheme is to not only benefit the taxpayer, but also the Revenue’s collection. 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.
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 comprisingJustice Manmohan and Justice Manmeet Pritam Singh Arora observed that the rectification order dated 15th February 2021, effectively resulted in a re-assessment of income and not rectification. Further viewed that the objection raised by the Audit Party regarding the lawwas debatable in light of the Circular bearing No. 26 (LXXVI-3) dated 7th July 1955, and it could not have formed the basis for passing a rectification order under Section 154 of the Act.
The Bombay High Court has recently reversed a claim for deduction under Section 80-IB(10) of the Income Tax Act, 1961 as genuine hardships were faced by the tax consultant and returns had to be filed after lapse of the prescribed time. The Division Bench observed that the denial order is liable to be set aside as there was sufficient cause for condonation of delay under Section 119(2)(b) of the Income Tax Act.
Observing that, “We do not find that the omission to file petitioner’s return by the income tax consultant to be an act of negligence”, the Division Bench of Justice Abhay Ahuja and Justice Dhiraj Singh Thakur opined that, “The authorities should refrain from over analysis which leads to paralysis of justice.” The authorities under the Direct Tax Vivad Se Vishwas Act (DTVSV) Act were also directed to act in accordance with the said findings and amend Form 3 in respect of the amounts to be paid by the petitioner, in the benefit alternatively opted by the petitioner, as provided under the Direct Tax Vivad Se Vishwas Act, 2020.
The Income Tax Appellate Tribunal (ITAT) Chennai Bench recently in an application filed before it held that the Appeal prior to declaration under Direct Tax Vivad Se Vishwas Act shall revive on failure to settle income tax dues.
The aforesaid observation was made by the Chennai ITAT, The Revenue challenging the maintainability of appeal filed by the assessee company Lifecell International Private Limited in ITA in light of declaration filed by the assessee under Direct Tax VivadSe Vishwas Act, 2020(DTVSVS).
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.
A Division Bench of Justices Arun Kumar Singh Deshwal and Siddhartha Varma observed that “The petitioner’s application for condonation of delay of three days was also rejected by the Chairman of the Central Board of Direct Tax by order. The fact of dropping of cheque in the drop box as well as the accident of the petitioner was not disputed by the respondent in the counter affidavit. Now the fact remained is whether the delay of three days in depositing the arrears of tax can be condoned, considering the fact of unforeseen circumstances which were beyond the control of the petitioner.”
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.
The Bombay High Court ruled that the Delayed self-assessment tax payment cannot be tax arrear for Vivad se Vishwas Scheme. The division bench of Justice Ujjal Bhuyan and Justice Milind N.Jadhav noted that 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.
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.
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.
Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya observed that the scheme has been brought about bearing in mind various factors. There is no compulsion on the assessee to avail the benefit of the scheme as it is purely optional. Therefore, an assessee may choose or may not choose to avail the benefit of the scheme. The assessee has filed an affidavit stating that she was advised to avail the benefit of scheme in the event the revenue prefers an appeal before this Court against the decision of the Tribunal which was in favour of the assessee.
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 consisting of Justices Mukta Gupta and Anish Dayal ruled that the VSV Act is not a taxing statute but one which provides a dispute resolution scheme for tax disputes and it was the intent of the legislature to include all sorts of disputes under the VSV Act, even if they were pending before the Commissioner of Income Tax or the courts.
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.
It was observed that the FAQ No.59 of Circular No.21/2020 dated 4th December, 2020 issued by CBDT to the extent it contemplates admission of appeal before filing of declaration as a condition precedent in order for the appeal to be treated as pending and to be eligible for settlement under the VSV Act is contrary to law.
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). In appeal, The tribunal by the impugned order had allowed the assessee’s appeal and set aside the order passed by the Commissioner of Income Tax (Appeals) and consequently set aside the assessment order.
The Division Bench of Justice T S Sivagnanam and Justice Hiranmay Bhattacharya observed that, “had the appeal been preferred within the period of limitation the assessee could have filed an application well before the time stipulated under the Scheme.” 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.”
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.
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.
While allowing the petition, the Delhi High Court condoned the delay in depositing the balance amount of tax and directed the Income Tax Department to accept the balance amount as stipulated in Form-III on the ground that unforeseen and extraneous circumstances which were beyond the control of the petitioner and resulted in delayed depositing the balance tax can be condoned considering the lockdown period on account of COVID-19 from 25.3.2020.
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