Case Note & Summary
The petitioner, Macrotech Developers Limited, a public limited company engaged in real estate, filed a writ petition under Article 226 challenging a clarification issued by the Principal Commissioner of Income Tax (respondent No.2) to question No.73 vide circular No.21/2020 dated 04.12.2020. The clarification required that for a declaration under the Direct Tax Vivad se Vishwas Act, 2020 to be valid, the assessee must have withdrawn any pending appeal. The petitioner had filed a declaration on 23.09.2020 under the Act, but the respondent refused to process it citing the clarification. The petitioner argued that the Act and Rules do not mandate withdrawal of appeal as a precondition for filing a declaration; the clarification was ultra vires and arbitrary. The court examined the provisions of the Direct Tax Vivad se Vishwas Act, 2020, particularly sections 3, 4, and 5, and the Direct Tax Vivad se Vishwas Rules, 2020. It noted that the Act provides for filing a declaration to settle tax disputes without requiring withdrawal of appeal. The court held that the clarification imposed an additional condition not found in the statute, making it ultra vires and violative of Article 14. The court quashed the clarification and directed respondent No.1 to accept the petitioner's declaration filed on 23.09.2020 and process it in accordance with law.
Headnote
A) Constitutional Law - Article 14 - Arbitrariness - Clarification in Circular No.21/2020 dated 04.12.2020 requiring withdrawal of appeal as a condition for filing declaration under Direct Tax Vivad se Vishwas Act, 2020 - Held that the clarification imposes an additional condition not found in the Act or Rules, making it arbitrary and violative of Article 14 (Paras 2, 10-12).
B) Direct Tax Vivad se Vishwas Act, 2020 - Sections 3, 4, 5 - Ultra Vires - Clarification requiring withdrawal of appeal before filing declaration - Held that the Act does not mandate withdrawal of appeal as a precondition; the clarification is ultra vires the parent Act and Rules (Paras 8-12).
C) Interpretation of Statutes - Circular cannot override statute - Clarification imposing additional condition - Held that a circular cannot add to or modify the provisions of the Act; it must be consistent with the statute (Paras 10-12).
Issue of Consideration
Whether the clarification issued by respondent No.2 to question No.73 vide circular No.21/2020 dated 04.12.2020 is ultra vires the Direct Tax Vivad se Vishwas Act, 2020 and the Direct Tax Vivad se Vishwas Rules, 2020 and violative of Article 14 of the Constitution of India.
Final Decision
The court allowed the writ petition, quashed the clarification to question No.73 vide circular No.21/2020 dated 04.12.2020, and directed respondent No.1 to accept the declaration filed by the petitioner on 23.09.2020 under the Direct Tax Vivad se Vishwas Act, 2020 and process it in accordance with law.
Law Points
- Interpretation of Direct Tax Vivad se Vishwas Act
- 2020
- Ultra vires
- Article 14
- Circular cannot override statute
- Condition for filing declaration
Case Details
2021 LawText (BOM) (03) 34
Writ Petition No.79 of 2021 with Interim Application (L) No.1060 of 2021
Ujjal Bhuyan, Milind N. Jadhav
Mr. V. Sridharan, Senior Advocate a/w. Mr. Prakash Shah and Mr. Jas Sanghavi i/b. PDS Legal for Petitioner; Mr. Suresh Kumar for Respondents
Macrotech Developers Limited
Principal Commissioner of Income Tax and others
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Nature of Litigation
Writ petition under Article 226 challenging a clarification issued by the Income Tax Department regarding the Direct Tax Vivad se Vishwas Act, 2020.
Remedy Sought
Petitioner sought a declaration that the clarification to question No.73 vide circular No.21/2020 dated 04.12.2020 is ultra vires and violative of Article 14, and a direction to respondent No.1 to accept the declaration filed by the petitioner on 23.09.2020 under the Direct Tax Vivad se Vishwas Act, 2020.
Filing Reason
The petitioner's declaration under the Direct Tax Vivad se Vishwas Act, 2020 was not processed because the respondent insisted on withdrawal of appeal as per the impugned clarification, which the petitioner contended was not required by the Act.
Issues
Whether the clarification to question No.73 vide circular No.21/2020 dated 04.12.2020 is ultra vires the Direct Tax Vivad se Vishwas Act, 2020 and the Direct Tax Vivad se Vishwas Rules, 2020?
Whether the said clarification is violative of Article 14 of the Constitution of India?
Submissions/Arguments
Petitioner argued that the Direct Tax Vivad se Vishwas Act, 2020 does not mandate withdrawal of appeal as a precondition for filing a declaration; the clarification imposes an additional condition not found in the statute, making it ultra vires and arbitrary.
Respondent argued that the clarification was issued to ensure uniformity and that withdrawal of appeal is a necessary condition for the scheme to work.
Ratio Decidendi
The Direct Tax Vivad se Vishwas Act, 2020 does not require withdrawal of appeal as a condition for filing a declaration. A circular cannot impose additional conditions beyond the statute. The impugned clarification is ultra vires the Act and Rules and arbitrary, violating Article 14.
Judgment Excerpts
By filing this petition under Article 226 of the Constitution of India, petitioner seeks a declaration that the clarification given by respondent No.2 to question No.73 vide circular No.21/2020 dated 04.12.2020 is violative of Article 14 of the Constitution of India and thus is arbitrary and ultra vires to the provisions of the Direct Tax Vivad se Vishwas Act, 2020 and the Direct Tax Vivad se Vishwas Rules, 2020.
Therefore, petitioner seeks quashing of the said clarification and further seeks a direction to respondent No.1 to accept the declaration filed by the petitioner on 23.09.2020 under the Direct Tax Vivad se Vishwas Act, 2020.
Procedural History
Petitioner filed a declaration under the Direct Tax Vivad se Vishwas Act, 2020 on 23.09.2020. The respondent issued a clarification on 04.12.2020 requiring withdrawal of appeal. Petitioner then filed the present writ petition on an unspecified date. The petition was reserved on 01.02.2021 and pronounced on 25.03.2021.
Acts & Sections
- Direct Tax Vivad se Vishwas Act, 2020: 3, 4, 5
- Direct Tax Vivad se Vishwas Rules, 2020:
- Income Tax Act, 1961: 139(1), 115JB, 234A, 234B, 234C
- Constitution of India: Article 14, Article 226
