Case Note & Summary
The petitioner, an individual assessee, filed her return for Assessment Year 2012-2013 declaring income of Rs.94,91,780. The assessment was reopened under Section 147 of the Income Tax Act, 1961, and an assessment order dated 18 December 2019 was passed under Section 143(3) read with Section 147 accepting the returned income but charging interest under Sections 234A, 234B and 234C totaling Rs.16,86,800. Aggrieved by this interest demand, the petitioner filed an appeal before the Commissioner of Income Tax (Appeals) on 17 March 2020, after expiry of the 30-day limitation period. The Direct Tax Vivad Se Vishwas Act, 2020 came into force, and the petitioner filed a declaration and undertaking in Form 1 on 18 December 2020 offering to settle the disputed interest amount. The designated authority rejected the declaration on 30 January 2021 on the ground that there was no disputed income because the return had been accepted and interest was mandatory. The petitioner also received a communication on 30 January 2021 that the delay in filing the appeal had been condoned. Consequently, she filed a revised Form 1 on 30 January 2021, but the revised declaration was again rejected on 17 March 2021 for the same reason and additionally that the appeal was not pending on the specified date. The petitioner challenged these rejections before the Bombay High Court. The core legal issues were whether interest under Sections 234A, 234B and 234C constitutes disputed interest under the VSV Act and whether an appeal filed after limitation with condonation of delay is pending on the specified date. The court examined the definitions under the VSV Act, noting that tax arrear includes disputed interest and disputed interest includes interest determined under the Income Tax Act where an appeal has been filed. Section 3 prescribes the amount payable as 25% or 30% of disputed interest depending on the date of payment. The court also considered CBDT Circular No.21 of 2020, Question 59, which deems an appeal pending if the time limit expired between 1 April 2019 and 31 January 2020, the condonation application was filed before 4 December 2020, and the appeal was admitted before the declaration. Relying on its earlier decision in Writ Petition (Lodging) No.12932 of 2021 and the Delhi High Court decision in Shyam Sunder Sethi v. Pr. Commissioner of Income Tax-10, the court held that an appeal is pending from the date of filing until disposal and admission is not a prerequisite. Since condonation of delay had been allowed by 30 January 2021, the appeal was pending on the specified date. The court set aside the rejection order as bad in law and directed the designated authority to process the declaration and pass orders under the VSV Act. The petition was disposed of with no order as to costs, and a direction was issued that if the amount determined under revised Form 3 was not paid within one week, a premium of 10% on the interest amount payable should be paid by the petitioner.
Headnote
A) Direct Tax - Vivad Se Vishwas Scheme - Disputed Interest - Direct Tax Vivad Se Vishwas Act, 2020, Sections 2(1)(a)(i), 2(1)(h)(ii), 2(1)(o), 3; Income Tax Act, 1961, Sections 234A, 234B, 234C - The designated authority rejected the declaration on the ground that there was no disputed income because the assessee's returned income had been accepted and only mandatory interest was disputed. The court held that the VSV Act contains no exclusion for interest under Sections 234A/234B/234C; tax arrear includes disputed interest and disputed interest includes interest determined where an appeal has been filed; Section 3 prescribes 25% or 30% of disputed interest as amount payable. Held rejection on this ground was bad in law and the authority must process the declaration (Paras 6, 10). B) Direct Tax - Vivad Se Vishwas Eligibility - Pendency of Appeal and Condonation of Delay - Direct Tax Vivad Se Vishwas Act, 2020, Section 2(1)(a); CBDT Circular No.21 of 2020 dated 04.12.2020, Q.59; Income Tax Act, 1961, Section 246A - Revenue alleged the appeal was not pending on the specified date because it was filed after limitation on 17.03.2020 and condonation was not granted before filing Form 1. The court found condonation of delay had been allowed by 30.01.2021, and relying on its earlier order in Writ Petition (Lodging) No.12932 of 2021 and Delhi High Court in Shyam Sunder Sethi held that an appeal is pending from filing until disposal and admission is not required; a delayed appeal with condonation filed before 04.12.2020 would be deemed pending. Held rejection was invalid and authorities directed to process forms (Paras 7-10).
Issue of Consideration
Whether a declaration under the Direct Tax Vivad Se Vishwas Act, 2020 can be rejected on the ground that there is no disputed income because only interest under Sections 234A, 234B and 234C of the Income Tax Act, 1961 is disputed; whether an appeal filed after limitation but with condonation of delay allowed can be considered pending on the specified date for eligibility under the VSV Act.
Final Decision
The order of rejection issued by respondent no.1 was held to be bad in law. Respondent no.1 was directed to process the declaration cum undertaking filed by the petitioner under the provisions of the VSV Act and pass orders accordingly. The petition was disposed of with no order as to costs. It was further directed that if the amount determined under revised Form 3 is not paid within one week thereof, a premium of 10% on the interest of the amount payable should be paid by the petitioner.
Law Points
- The Direct Tax Vivad Se Vishwas Act
- 2020 does not exclude interest charged under Sections 234A
- 234B or 234C of the Income Tax Act
- 1961 from settlement
- Section 3 of the VSV Act allows settlement of disputed interest at 25% or 30% depending on payment date
- 'Tax arrear' under Section 2(1)(o) of the VSV Act includes disputed interest
- 'Disputed interest' under Section 2(1)(h)(ii) of the VSV Act means interest determined under the Income Tax Act where an appeal has been filed by the appellant in respect of such interest
- 'Appellant' under Section 2(1)(a)(i) of the VSV Act includes a person in whose case an appeal or writ petition or special leave petition has been filed either by him or by the Income Tax Authority or by both before an appellate forum and is pending as on the specified date
- For appeals with time limit expired between 1 April 2019 and 31 January 2020 and condonation application filed before 4 December 2020
- the appeal is deemed pending on the specified date if admitted before the declaration
- Pendency of an appeal for VSV Act is from filing until disposal and admission is not required
