Court rules in favor of taxpayer, affirming eligibility for tax dispute resolution under DTVSV Act.

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Case Name:

Sadruddin Tejani vs. Income Tax Officer & Anr. (High Court of Bombay)

Writ Petition No. 611, 606, 626, 590, 612, 601, 638, 593, 592, 596 & 625 of 2021

Date: 9th April 2021

Key Takeaways

• The court confirmed that a taxpayer with a pending revision application qualifies as an “eligible appellant” under the DTVSV Act.
• The ruling emphasized the importance of resolving tax disputes efficiently and highlighted the beneficial nature of the DTVSV Act for both taxpayers and the government.
• The court ordered the designated authority to issue Form-3, specifying the amount payable under the DTVSV Act.

Issue

Is a taxpayer with a pending revision application eligible to file a declaration under the DTVSV Act for tax arrears?

Facts

• The taxpayer, Sadruddin Tejani, filed a revision application under Section 264 of the Income Tax Act for the assessment years 1988-89 to 1998-99, seeking credit for tax payments totaling Rs. 12,43,000.
• This application was pending when the DTVSV Act was enacted, allowing taxpayers to resolve disputes over tax arrears.
• Tejani filed declarations under Section 4 of the DTVSV Act, but these were rejected by the designated authority without proper justification.

Arguments

• Petitioner’s Argument: Tejani argued that he met the definition of “disputed tax” under Section 2(1)(j)(F) of the DTVSV Act, as he would be liable for a significant tax demand if his revision application was rejected. He contended that the designated authority improperly rejected his declarations without valid reasons.
• Respondent’s Argument: The Income Tax Officer contended that there was no disputed tax since the income tax calculations were correct, and thus, Tejani’s application should not be accepted.

Key Legal Precedents

• DTVSV Act, 2020: The court referenced various sections of the DTVSV Act, particularly Section 2(1)(j)(F), which defines “disputed tax” in relation to pending revision applications.
• Section 264 of the Income Tax Act: This section allows taxpayers to seek revisions of tax assessments, which was central to Tejani’s claim of disputed tax.

Judgement

The court ruled in favor of Sadruddin Tejani, stating that he qualifies as an eligible appellant under the DTVSV Act. The court found that the designated authority had no grounds to reject his declarations and directed them to process his applications and issue Form-3 within two weeks. The ruling underscored the DTVSV Act’s purpose of facilitating tax dispute resolution.

FAQs

Q1: What does this ruling mean for Sadruddin Tejani?

A: Tejani can now proceed with his tax dispute resolution under the DTVSV Act, potentially reducing his tax liability.

Q2: What is the significance of the DTVSV Act?

A: The DTVSV Act aims to resolve tax disputes efficiently, providing taxpayers with a mechanism to settle their tax arrears without prolonged litigation.

Q3: Can the designated authority reject declarations under the DTVSV Act?

A: The court ruled that the designated authority must have valid reasons to reject declarations; arbitrary rejections are not permissible.

Q4: What happens next for Tejani?

A: The designated authority is required to process his declarations and issue the necessary documentation as per the court’s order.

By these Petitions filed under Article 226 of the Constitution of India, 1950, Petitioner is challenging the rejection of its declarations filed on 18th November, 2020 under Section 4(1) of the Direct Tax Vivad-Se-Vishwas Act, 2020 (“DTVSV” Act) for the eleven Assessment Years from A.Y. 1988-89 to 1998-99.

2. Petitioner has filed these Petitions for the following reliefs :-

“(a) That this Hon’ble Court may be pleased to issue under Article 226 of the Constitution of India an appropriate direction order or a writ including a writ in the nature of ‘Certiorari’ to call for the records and verify the declaration filed under section 4(1) of the DTVSV Act and direct the Respondent No.2 to accept the same;

(b) That the Hon’ble Court may be pleased to issue under Article 226 of the Constitution of India appropriate writ or order or direction including a writ in the nature of ‘Mandamus’ directing the Respondent No.2 to accept the declaration made by the Petitioner on 18th November, 2020 under section 4(1) of the DTVSV Act;

(c) That this Hon’ble Court may be pleased to issue under Article

226 of the Constitution of India an appropriate writ or order or

direction including a writ in the nature of ‘Prohibition’ restraining

the Respondent No.2 disposing off the application filed under

section 264 of the Act and recover the outstanding disputed

demand thereunder”.

3. A sojourn into the facts will be helpful to appreciate the

controversy. Petitioner who is stated to be engaged in the business of retail footwear under the shop name “Jolly Shoes”, has filed declarations in

Form-1 and undertaking in Form-2 in respect of each of the Assessment

Year from 1988-89 to 1997-98 under Section 4 (1) of the DTVSV Act on

18th November, 2020. However, the same has been rejected by updating

the status on the e-filing portal of the Petitioner on 30th January, 2021,

which shows the action on the DTVSV Forms filed by the Petitioner from

Assessment Year 1988-89 to 1997-98 as “Rejected”. Aggrieved by the

same, Petitioner is before us.

4. Petitioner had earlier filed returns of income for the

Assessment Years 1987-88 to 1998-99. Assessments for the Assessment

years 1987-88 to 1995-96 were reopened by issuance of notices under

Section 148 (1) of the Income Tax Act, 1961 (the Income Tax Act) and the

re-assessment proceedings were completed by passing of Assessment

Orders under Section 144 read with Section 147 of the Income Tax Act by

making additions on account of gross profit and unsecured loan. For the

Assessment Years 1996-97 to 1998-99, assessments were finalized under

Section 143(3) of the Income Tax Act. Pursuant to the said Assessment

Orders, Respondent No.1 raised following demands for those years by

issuing notice under Section 156 of the Income Tax Act:-

Assessment Year Demand raised u/s. 156 of the Act

1987-88 1,19,170/-

1988-89 5,53,774/-

1989-90 13,68,068/-

1990-91 23,57,128/-

1991-92 1,72,706/-

1992-93 13,21,156/-

1993-94 58,89,474/-

1994-95 29,75,306/-

1995-96 24,70,199/-

1996-97 15,21,293/-

1997-98 8,79,899/-

1998-99 1,37,122/-

Total:- 1,97,65,295/-

5. Being aggrieved by the Assessment Orders for the Assessment

Years 1987-88 to 1998-99, Petitioner preferred Appeals before the

Commissioner of Income Tax (Appeals) (CIT(A)), who confirmed the

Assessment Orders and passed a consolidated order dated 9th October,

2002 for all the Assessment Years.

6. Further, appeals were preferred by Petitioner before the

Income Tax Appellate Tribunal (ITAT) and the ITAT set aside the order of

the CIT(A) by its order dated 20th August, 2004 and restored the issue

back to the file of the first Respondent- Assessing Officer.

7. It is submitted that pending the proceedings before the

CIT(A) and the ITAT, proceedings to recover the outstanding demands

were initiated by the Tax Recovery Officer (TRO) and to avoid any

coercive action, Petitioner handed over cheques totaling to an amount of

Rs.12,43,000/- from time to time to the TRO, which appears to be

pursuant to an order of stay of demand by the ITAT.

8. Petitioner submits that the said amount of Rs.12,43,000/-

was adjusted only against the demand for Assessment Year 1987-88 and

not for demands for the various Assessment Years 1987-88 to 1998-99.

This, according to the Petitioner, was despite the fact that, the original

demand for the Assessment Year 1987-88 was only Rs.19,170/- and,

therefore the entire amount of Rs.12,43,000/- could not have been

adjusted for the tax liability for that year alone.

9. It is submitted that, pursuant to the order dated 20th August,

2004, passed by the ITAT, Respondent No.1 passed the Assessment Order

on 13th March, 2006 under Section 143(3) of the Income Tax Act for the

Assessment Years 1987-88 to 1998-99 against which, Petitioner filed

appeals before CIT(A). Vide order dated 23rd November, 2006, the CIT(A)

granted partial relief to the Petitioner, pursuant to which, Respondent

No.1 passed order on 23rd January, 2007, giving effect to the order passed

by the CIT(A). However, it is submitted that no credit for taxes paid on

regular assessment of Rs.15,86,151/- including Rs.12,43,000/- was given

while determining the demands for the respective years.

10. Being aggrieved by the partial relief granted by CIT(A),

Revenue filed appeals before the ITAT for Assessment Years 1988-89 to

1990-91 and 1992-93 to 1998-99, which were disposed of by order dated

18th December, 2008.

11. It is submitted that as the revised demand for Assessment

Year 1987-88 was only Rs.936/-, the payment of Rs.12,43,000/- has

been made to be adjusted against the revised demand for the Assessment

Years 1988-89 to 1998-99 as under:-

Assessment Year Disputed Tax (Amount in Rs.)

1988-89 3,122

1989-90 74,228

1990-91 96,577

1991-92 3,370

1992-93 46,971

1993-94 1,34,400

1994-95 1,48,535

1995-96 76,127

1996-97 75,555

1997-98 2,79,116

1998-99 17,432

Total:- 9,55,433/-

12. It is submitted that Petitioner filed rectification application

under Section 154 of the Income Tax Act for the Assessment Year 1987-88

to 1998-99, seeking credits for payments of Rs.15,86,151/- including

Rs.12,43,000/-, for adjustment of payments to the tune of Rs.12,43,000/-

against revised demand for the Assessment Year 1988-89 to 1998-99. This

rectification application was decided on 16th April, 2018, rejecting the

request for the aforesaid adjustment as credit of tax as per challan was

given to the Petitioner for Assessment Year 1987-88. The Assessing Officer,

vide order dated 16th April, 2018 gave credit of the taxes paid of regular

assessment of Rs.15,86,151/- and determined the refund for Assessment

Year 1987-88 of Rs.23,64,620/-(including interest u/s. 244A of the

Income Tax Act of Rs.11,22,380/-) and total tax demand for Assessment

Year 1988-89 to Assessment Year 1998-99 of Rs.90,77,160/- (including

interest u/s 220(2) of the Income Tax Act of Rs.47,75,722/-).

13. Aggrieved by the same, Petitioner sought remedy by filing

Revision Application dated 15th May, 2018 under Section 264 of the

Income Tax Act before the Principal Commissioner of Income Tax to

compute the tax demand for Assessment Year 1987-88 to Assessment Year

1998-99 after giving credit of Rs.12,43,000/- for the Assessment Years

1988-89 to 1998-99, which has been adjusted in the impugned order

against Assessment Year 1987-88 only, and which is pending.

14. Learned Counsel for the Petitioner, Mr. K. Gopal, submits that

pending this application under Section 264 of the Income Tax Act, the

Direct Tax Vivad Se Vishwas Act, 2020 came to be enacted on 17th March,

2020 to reduce pending income tax litigations, generate timely revenue

for the Government and benefit tax payers by providing for peace of mind,

certainty and saving time and resources that would otherwise be spent on

the long drawn and vexatious litigation process. The Direct Tax Vivad Se

Vishwas Rules, 2020 (the “DTVSV Rules”) were notified on 19th March,

2020, pursuant to which, Petitioner has filed declaration in Form – 1 and

undertaking in Form-2 as per Rule 3 of the DTVSV Rules with the

Designated Authority viz: Respondent No.2 on 18th November, 2020.

Petitioner claims that he is an Appellant as per Section 2(1)(a)(v) of the

DTVSV Act, inasmuch as he is a person who has filed an application for

revision under Section 264 of the Income Tax Act and the said

application is pending on the specified date viz: 31st January, 2020 as

defined in Section 2(1)(m) of the DTVSV Act. It is submitted that as

such he is an eligible Appellant as his application under Section 264 of

the Income Tax Act is pending on the specified date. He further submits

that in the Petitioner’s case, resolution of disputed tax has been

sought for. This he says is because as per Section 2(1)(j)(F) of the DTVSV

Act, “disputed tax” means the income tax (including surcharge and cess)

that would become payable by the Appellant under the provisions of

the Income Tax Act as computed in a case where an application for

revision under Section 264 of the Income Tax Act is pending as on the

specified date, was not to be accepted. He, therefore, submits that

Petitioner satisfies all the conditions to file declaration under Section 4 of the DTVSV Act and has accordingly done so by filing declarations for

each of the Assessment Years 1988-89 to 1998-99.

15. Upon receipt of the said applications, Respondent No.1 sent a

mail on 3rd December, 2020 to the Petitioner, stating that there is no

dispute in income tax calculation and requested Petitioner to give a

working of the disputed tax in relation to undisputed income for

Assessment Years 1987-88 to 1998-99 within 3 days, failing which, the

applications would be processed, considering the ‘disputed tax’ in relation

to disputed income as “Nil”. Learned Counsel for Petitioner has taken us

through the said mail from the 1st Respondent, relevant portion of which

is extracted as under:-

“ Kindly refer to the above.

Received your application under DTVsV Scheme for above

mentioned assessment years. On perusal of the same, it is seen that

you have opted for the scheme since your revision petition u/s. 264

of the I. T. Act is pending before the Pr. C.I,T. 17 Mumbai for A Y

1988 – 89 to 1998-99. The main ground of appeal as per your

petition u/s. 264 of the I.T. Act is to direct the A. O. to give credit to

regular tax paid challan’s of A. Y. 1987-88 at Rs.12,43,000/- to

various years i.e. for A. Y. 1988 to 1998 so that the interest u/s.

234B and 220(2) of the Act could be reduced considerably. There is

no dispute on the income arrived for A. Y. 1987 to 1998 in the

order passed u/s. 154 of the I. T. Act dated 16.04.2018 whereas in

your application in form – 1 Schedule X for A. Y. 1988 to 198

disputed income is shown nil, however, you have calculated

disputed tax. On perusal of the order passed u/s. 154 of the I. T. Act

and I.T. N. S-150 for A. Y. 1987 to 1998 dated 16-04-2108 it is seen

that Income Tax is correctly calculated, there is no dispute in

income tax calculation however you have mentioned disputed tax

against undisputed income in Form-1.

In view of the above, you are hereby given an opportunity to

submit your working of disputed tax in relation to undisputed

income for A. Y. 1987-88 to 1998-99 within 3 days from receipt of

the mail. If no reply is received within 3 days, your application for

DTVsV scheme will be processed accordingly considering the

disputed tax in relation to disputed income at Rs.Nil.”

16 In reply, Petitioner has filed a detailed submission dated 5th

December, 2020, which for the sake of convenience, is reproduced as

under:-

“ Submissions of the Applicant:

9. For the sake of convenience, the Applicant divides his

submissions into two parts as under:-

9.1 Submissions on the claims made by the Applicant in the said

application (Paragraph 10)

9.2 Submissions dealing with the specific queries raised by Your

Honour in the mail/ notice dated 03.12.2020 under consideration

(Paragraph 11)

10. The Applicant at the outset draws Your Honour’s attention to

the following definitions as mentioned u/s. 2 of the “the Act, 2020”

and submits as under:-

10.1. Section 2(1)(a)(v):- Section 2(1)(a) defines the terms

“appellant” and Section 2(1)(a)(v) as under:-

“person who has filed an application for revision under section 264

of the Income Tax Act and such application is pending on specified

date”

The Applicant submits that since his applications for revision for the

years under consideration are pending on specified date (i.e.

31.01.2020), the Applicant is an “appellant” as per the aforesaid

definition.

10.2 Section 2(1)(c) defines “declarant” as under:-

“Declarant means a person who files declaration under Section 4”

Since the applicant has made valid declarations u/s. 4 r.w.s. 3 of the

“the Act, 2020”, the Applicant duly satisfies the aforesaid definition

as well.

10.3 Section 2(1)(d) defines declaration as “declaration” means

the declaration filed under Section 4.

The Applicant submits that since all the declarations are filed u/s.

3 r.w.s. 4 of the Act, 2020, the Applicant is required to be

considered as “declarant” under the scheme.

10.4 Section 2(1)(j)(f) defines ‘disputed tax’ in the case of

application for revision pending before 264 of the specified date

and it reads as under:-

“in a case where an application for revision under section 264 of

the Income Tax Act is pending as on the specified date, the amount

of tax payable by the Appellant if such application for revision

was not to be accepted.”

The Applicant mentions that his revision applications for the

aforesaid years are pending before the learned PCIT on 31.01.2020

and the Applicant would be liable to pay the total demand of

Rs.88,90,180/- (including the income tax of Rs. 8,06,968/-) if his

main contention of granting credit/ adjustment of taxes of

Rs.12,43,000/- against the revised demands of subsequent years

were not accepted and all the revision applications filed by the

Applicant were to be rejected. Thus, the Applicant humbly submits

the definition of “disputed tax” gets duly satisfied in the facts under

consideration. For the sake of easy reference, the Applicant makes a

following table depicting the quantum ‘disputed tax’ under

consideration separately year wise:

Assessment Years Disputed Tax (Amounts in Rs.)

1988-89 3,192/-

1989-90 74,228/-

1990-91 96,577/-

1991-92 3,370/-

1992-93 46,971/-

1993-94 1,34,400/-

1994-95 1,48,435/-

1995-96 76,127/-

1996-97 75,555/-

1997-98 2,79,116/-

1998-99 17,432/-

10.1. Section 2(1)(a)(v):- Section 2(1)(a) defines the terms “appellant”

and Section 2(1)(a)(v) as under:-

“person who has filed an application for revision under section 264

of the Income Tax Act and such application is pending on specified

date”

The Applicant submits that since his applications for revision for the

years under consideration are pending on specified date (i.e.

31.01.2020), the Applicant is an “appellant” as per the aforesaid

definition.

10.5 Section 2(1)(o) of “the Act, 2020” defines tax arrears as

under:-

“(o) Tax arrears 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”.

The Applicant submits that from the aforesaid table, it is discernible

that the amount / quantum of disputed tax is pending for all the

years under consideration and thus, the definition of “disputed tax”

duly gets satisfied in the present facts.

10.6 Now, proceeding further the Applicant draws Your

Honour’s attention to section 3 and section 4 of the Act, 2020 and

submits that a conjoint reading of both the sections lays down the

procedure to be adopted/ followed by a person/ declarant under

the scheme after satisfying the aforesaid eligible conditions. The

relevant parts of Section 3 and 4 of the Act, 2020 reads as under:-

Section 3: Subject to the provisions of this Act, where a

declarant files [under the provisions of this Act on or before such

date as may be notified], a declaration to the designated authority

in accordance with the provisions of Section 4 in respect of tax

arrears, then notwithstanding anything contained in the income tax

Act or any other law for the time being in force, the amount

payable by the declarant under this Act shall be as under, namely

(a) Where the tax arrears is the aggregate amount of disputed

tax, interest chargeable or charged on such disputed tax, and

penalty leviable or levied on such disputed tax”, in that case, the

amount payable under this Act shall be the amount of disputed

tax”.

Section 4 (1) The declaration referred to in section 3 shall be

filed by the declarant before the designated authority in such form

and verified in such manner as may be prescribed.

10.7 From the aforesaid sections, the Applicant submits that

the applications filed by him under the scheme with the intention to

settle the dispute in relation to “disputed tax” for the years under

consideration are valid and thus, the Applicant requests the learned

competent authority (i.e. the learned PCIT) to process the said

applications and oblige.

11 Now, the Applicant specifically deals with the

objections raised by Your Honour in the mail/ reply dated 3rd

December, 2020. The relevant part of the said mail/ notice is

reproduced as under:

“ The main ground of appeal as per your petition u/s. 264 of

the I.T. Act is to direct the A. O. to give credit to regular tax paid

challan’s of A. Y. 1987-88 at Rs.12,43,000/- to various years i.e. for

A. Y. 1988 to 1998 so that the interest u/s. 234B and 220(2) of the

Act could be reduced considerably. There is no dispute on the

income arrived for A. Y. 1987-1998 in the order passed u/s. 154 of

the I. T. Act dated 16.04.2018 whereas in your application in form

1 schedule X. for A. Y. 1988 to 1998 disputed income is shown nil,

however, you have calculated disputed tax. On perusal of the order

passed u/s. 154 of the I. T. Act and I.T. N.S150 for A. Y, 1987 to

1998 dated 16.04.2018 it is seen that Income tax is correctly

calculated, there is no dispute in income tax calculation however

you have mentioned disputed tax against undisputed income in

Form-I.”

11.1 The Applicant at the outset submits that the aforesaid

objection is factually incorrect. From the facts narrated in the

applications filed u/s. 264 of the Act as well as the present

correspondence, it is clear that the Applicant has challenged the

inaction on the part of the learned AO, with regard to granting

credit of taxes of Rs.12,43,000/- paid by the Applicant. Thus, the

main dispute under consideration is “non-allowance of tax credit of

Rs.12,43,000/- for the relevant years.” The Applicant draws Your

Honour’s attention tot he specific prayers sought in his revision

applications which are self-explanatory and factually support the

aforesaid contention of the Applicant.

“Thus, the Applicant prays that your honours may be pleased to:

A. The Ld. A. O. may be directed to compute the tax demand for

A Y 1987-88 to A Y 1998-99 and demand may be raised after giving

credit of the taxes paid amounting to Rs.12,43,000/- which have

been adjusted in the impugned order against A Y 1987-88 only.

B. The Ld AO may be directed to compute the tax demand for

A Y 1987-88 to 1998-99 by restricting the charge of the interest

u/s. 220(2) of the Act till October’ 2013.

C. That, your honours may be pleased to pass such further and

other order as the facts and circumstances of the case may require.”

In the light of the aforesaid submission, the Applicant submits that

it is incorrect to mention that the Applicant has raised only one

issue (i.e. the issue of computation of interest u/s. 234 and 220(2)

of the Act) in his revision applications for the years under

consideration. It is submitted that adjustment/ credit of taxes paid

on regular assessment is a statutory right of the Applicant/ assessee

and the same cannot be equated with or considered as “disputed in

relation to calculation of interest” merely on the fact that the issue

of tax credit has a consequential effect on the interest calculation.

Thus, the Applicant states that the first objection as raised by Your

Honour is contrary to the provisions of the Act.

11.2 In the said notice, Your Honour has observed that there

is no undisputed income in relation to disputed tax. On the said

observation, the Applicant submits that the scheme has nowhere

enunciated a pre-condition of existence of “disputed income” in

order to settle the quantum of disputed tax. It is pertinent to note

that the definition of disputed tax operated separately without

bearing any nexus with the quantum of disputed income. As

explained herein above, the disputed tax is computed by

considering tax which would be payable by an Applicant if his

appeal/ application u/s. 264 was to be rejected without having any

relevance of quantum of the disputed income involved in such an

appeal or a revision application. Even the scheme defines disputed

income in a reverse manner giving reference to the quantum of

disputed tax. The definition of disputed income mentioned u/s.

2(1)(g) of the “The Act, 2020” reads as under:-

“Disputed income” in relation to an assessment year, means the

whole or so much of the total income as is relatable to the disputed

tax.”

In the light of the aforesaid submission, the Applicant states that

the Applications preferred by him are in consonance with the

provisions of the Act, 2020 and requests Your Honour to process

the same.

12. Before closing the present submission, the Applicant clarifies

that he has not made any elaborate submissions on the merits of

the applications filed by him u/s. 264 of the Act and the present

submission is limited only to the aspect of the validity/ eligibility of

the Applicant’s application filed for the respective years under the

scheme. Further, the Applicant in order to avoid unnecessary

repetition of the documents which have already been attached to

his revision applications prefer not to submit the same one more

time with the present submission. However, the Applicant mentions

that if Your Honour seeks any document/ clarification, the

Applicant shall be pleased to provide. In the view of the above, the

Applicant requests shall be pleased to provide. In the view of the

above, the Applicant requests Your Honour to accept his all

applications and process the same under the scheme.”

17. Thereafter, admittedly, an opportunity of personal hearing

was given to the Petitioner, wherein the aforesaid submissions were

reiterated. However, Respondent No.2 has rejected the applications by

updating the status on the e-filing portal of the Petitioner on 30th January, 2021, which according to the Petitioner, has been done in an arbitrary manner without passing any order and without assigning any reason for the same and, therefore, he prays that the 2nd Respondent be directed to

accept the Form-1 declarations filed by the Petitioner.

18. Learned Counsel for the Petitioner Mr. K. Gopal reiterates the

submissions made in the Petition and the Rejoinder as he purports to take

us through the provisions of Section 2(1)(a) of the DTVSV Act with

respect to the definition of “Appellant”. He submits as referred to herein

above earlier that pursuant to Section 2(1) (a)(v), in view of the

pendency of the Petitioner’s application for revision u/s. 264 of the

Income Tax Act, Petitioner is eligible Appellant. The said provision is

reproduced as under:-

“2 Definitions:- (1) In this Act, unless the context otherwise

requires - “(a) ‘appellant’ means -

(v) a person who has filed an application for revision under

section 264 of the Income Tax Act and such application is pending

as on the specified date.”

19. He also takes us to the definition of “disputed income” which

is defined in Section 2(1)(g), and which is quoted as under:-

(g) “disputed income” in relation to an assessment year, means

the whole or so much of the total income as is relatable to the

disputed tax.”

20. He submits that, it is clear from the above definition that

disputed income is something which is relatable to the disputed tax and

not the other way round. He, submits that, therefore, the definition of

disputed tax in Section 2(1)(j) (F) becomes very much relevant. The same

is quoted as under:-

(j) “disputed tax” in relation to an assessment year or financial

year, as the case may be, means the income tax, including surcharge

and cess (hereafter in this clause referred to as the amount of tax)

payable by the appellant under the provisions of the Income Tax

Act, 1961 (43 of 1961), as computed hereunder:

(F) in a case where an application for revision under section 264

of the Income Tax Act is pending as on the specified date, the

amount of tax payable by the appellant if such application for

revision was not to be accepted.”

21. He submits that the disputed tax in the case of Petitioner

would mean the amount of income tax including surcharge and cess

payable by the Appellant under the Income Tax Act, if the application for

revision u/s. 264 of the Act was not to be accepted. According to him, if

the Petitioner’s Revision Application for the Assessment Years 1988-89 to

1998-99, which are pending before the PCIT as on 31st January, 2020 are

rejected i.e. if the main contention of granting credit/ adjustment of taxes

of Rs.12,43,000/- against revised demands of subsequent years (i.e. not

including Assessment Year 1987-88) were not accepted, then Petitioner

would be liable to pay a total demand of Rs.88,90,180/- including income

tax, interest. Learned Counsel also draws our attention to Section 2(1)(o)

of the DTVSV Act, which defines tax arrear as under:-

“(o) Tax arrears 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.”.

22. He submits that considering that since the total amount of

demand upon rejection will have a substantial interest component u/s.

234B and 220(2) of the Income Tax Act, the definition of ‘tax arrears’ as

above also gets satisfied in the facts of the case. He, therefore submits that it is not correct for the Revenue to say that there is no dispute in income tax calculation. He would submit that there is disputed tax against the income as declared in Form-1 and which is a subject matter of pending

Revision Application. Therefore, to say that the disputed income is ‘Nil’

is not correct. Referring to the 1st Respondent’s e-mail communication

dated 3rd December, 2020, he would submit that the main dispute under

consideration is disallowance of tax credit of Rs.12,43,000/- for the

relevant years and that it is incorrect to mention that same is being

done to considerably reduce interest u/s. 234 B and 220(2) of the Income

Tax Act. He submits that adjustment/credit of taxes paid on regular

assessment is a statutory right of the Applicant/ Assessee and the same

cannot be equated with or considered as ‘dispute in relation to calculation

of interest’ merely on the fact that the issue of tax credit has a

consequential effect on the interest calculation.

23. He would submit that by Petitioner’s reply dated 5th

December, 2020, it was explained as to how there was disputed tax and in

view of the definition of disputed tax as above, what is relevant is that,

there should be disputed tax, and disputed income, in the context of the

DTVSV Act, is to be determined on the basis of the disputed tax and not

the other way around. He submits that, therefore, the department has

grossly erred in rejecting the applications made under the DTVSV Act.

24. Mr. Gopal, learned Counsel for the Petitioner would submit

that Petitioner does not fall under section 4(6) nor within the

disqualifications provided in Section 9 of the DTVSV Act, a fact which is

not disputed by the petitioner and, therefore, Respondent No.2 is not

justified in rejecting the declarations filed by Petitioner under Section 4(1) of the DTVSV Act.

25. He also submits that the Respondent within the time period

prescribed under Section 5(1) of the Act i.e. within 15 days from the date

on which the declaration is filed, is required to determine disputed tax

payable under the DTVSV Act which may not be the same as declared by

the Petitioner in the Forms 1 and 2 but the Respondent has no jurisdiction

to reject the valid declaration filed by the Petitioner.

26. Mr. Gopal, learned Counsel for the Petitioner submits that the

object behind the enactment is to settle tax disputes and to reduce

litigation. The Act confers benefits upon tax payers, who can put an end

to the litigation by paying specified percentages of tax and obtain

immunity from penalty and prosecution and when Petitioner has come

forward and filed valid declarations, the Designated Authority instead of

issuing Form 3 u/s. 5 of the DTVSV Act has simply updated the portal on

30th January, 2021 with the remark “Rejected” which is not contemplated

in the scheme of the DTVSV Act.

27. He would, therefore, submit that this is a fit case for

interference by this Court and accordingly submits that the Petition as

prayed for, be allowed.

28. Per contra, the Revenue has filed its affidavit in reply where

it is admitted that Petitioner is an Appellant as per Section 2(1)(a)(v) of

the DTVSV Act. Further stating that the applications of the Petitioner

have not been rejected on that ground but on the ground that there is

no disputed tax.

29 Mr. Sham Walve, learned standing counsel for the Revenue

seeks to rely upon and takes us through paragraphs 5, 8, 10, 11, 12 and

23 of the said reply. For the sake of convenience, the said paragraphs are

reproduced here under:-

“5:- I say that, as per the definition of “appellant” mentioned in

Sec.2(1)(a)(v) of The Direct Tax Vivad se Vishwas Act, 2020

(henceforth referred as DTVSV Act), the Petitioner is an appellant

under DTVSV Act. Also, the Petitioner’s case does not fall in any of

the categories mentioned in Section 9 of DTVSV Act. Hence, the

contention of the petitioner that he is an “appellant” under DTVSV

Act, is found to be correct and is not the reason for rejection of

application under DTVSV Act, made by the appellant.

8:- On perusal of order passed u/s. 154 of the Act, it is seen that

the Income Tax (Income Tax including cess and surcharge) is

correctly calculated in the case of petitioner and no dispute in

income tax calculation was raised. Further, it is noticed that the

primary ground raised in revision u/s. 264 of the Act, is to direct

the A.O. to give credit of regular taxes challan’s paid for A.Y. 1987-

88 of Rs.12,43,000/- to A. Ys. 1988-89 to 1998-99 so that interest

u/s. 234 B and 220(2) of the Act, could be reduced considerably.

Accordingly, appellant was asked as to why he has claimed

“disputed tax” in Form-1 of DTVSV Act even though there is no

disputed income in appellant’s case. To which the appellant replied

that ‘disputed tax’ u/s. 2(1)(j)(f) which provides that “in a case

where an application for revision u/s. 264 of the Act, is pending as

on specified date, the amount of tax payable by the appellant if

such application for revision was not to be accepted.”

The petitioner submitted that the revision application preferred u/s.

264 of the Act, is pending and the petitioner would be liable to

pay the total demand of Rs.88,90,180/- if the main contention

of granting credit of taxes of Rs.12,43,000/- against the revised

demand of subsequent years is not accepted and the revision

application filed by the petitioner is rejected. Thus, the definition

of ‘disputed tax’ gets duly satisfied in the facts under

consideration. The appellant had further submitted that it is

incorrect to mention that he has raised only one issue (i.e. the

issue of computation of interest u/s 234 and 220(2) of the Act, in

the revision application.

10:- From plain reading of Sec. 2(j)(F) of DTVSV Act, 2020 it is

clear that disputed tax means the income tax including surcharge

and cess. Nowhere in Sec. 2(j)(F) of DTVSV Act, 2020, it is

mentioned that disputed tax includes interest viz. 234A, B, C or

220(2) of the Act, etc. or credit of challans given or to be given etc.

This definition of “disputed tax” as per Sec. 2(j)(F) of DTVSV Act,

2020 is emphasized upon solely for the reason that the declaration

of petitioner’s application under VSV Act, relates to the “disputed

tax”. There after, query was raised on account of “disputed tax”

against the Petitioner.

The Petitioner vide submission made on 05.12.2020 submitted

that the revision application preferred u/s. 264 of the Act, is

pending and the petitioner would be liable to pay the total

demand of Rs.88,90,180/- if the main contention of granting

credit of taxes Rs.12,43,000/- against the revised demand of

subsequent years is not accepted and the revision application filed

by the petitioner is rejected. Thus, the definition of “disputed tax”

gets duly satisfied in the facts under consideration.

11:- Careful perusal of the revision application u/s. 264 of the Act,

and the above reply of the assessee, revealed that the petitioner

has never contested against the income tax demand raised in order

u/s. 154 of the Act, tax (i.e. income tax, including surcharge and

cess) calculated thereon from A. Y. 1987-88 to 1998-99. However,

the only request or contention behind revision application made by

the assessee is to compute the tax demand for A. Y. 1987-88 to

1998-99 after giving credit of the taxes paid amounting to

Rs.12,43,000/- which have been adjusted against A. Y. 1987-88

only. Nowhere in the revision application u/s. 264 of the Act, has

the petitioner objected to the income tax demand (income tax

including surcharge and cess) raised by the AO for A. Ys. 1987-88

to 1998-99, in fact, he has only contended that the AO has treated

the tax payments made by the petitioner against disputed demands,

only against A. Y. 1987-88. Also, the AO determined the tax

demand of Rs.90,77,170/- of which principal tax demand is

Rs.10,50,699/- whereas balance is towards interest u/s. 234 of

Rs.32,40,483/- and interest u/s. 220(2) of the Act till 30.04.2018

(Rs.26,60,926). This reduction in demand is attributed to the fact

that as per orders dt. 18.04.2018 for A. Y. 1987-88, the interest

payable to the assesee u/s. 244A is calculated at 0.5% pm, whereas

interest u/s. 234B/ 220(2) is computed at 1% pm. This results into

the penalization of assesse, inspite of having paid taxes. In view of

the above stated facts, the assessee’ ground on which the appellant

was defending that he has satisfied the definition of “disputed tax”

as per DTVSV Act, is infructuous.

12:- I say that the petitioner under the revision petition u/s. 264

of the Act, has applied for waiver of interest u/s. 220(2) of the Act,

even though the matter does not fall under the ambit of the

provisions of Sec. 264 of the Act. The revision petition u/s. 264 of

the Act cannot be a remedy for waiver of interest u/s. 220 (2) of

the Act. The petitioner for waiver of interest has to apply to the

appropriate authority and revision petition u/s. 264 of the Act

cannot be a route for waiver of interest u/s. 220(2) of the Act.

23:- With reference to paragraphs 3.10(iv) of the petition, I say

that the contention of the petitioner that definition of ‘tax arrears’

as per provisions of Sec.2(1)(o) of DTVSV Act, is satisfied is found

to be correct. In fact the petitioner himself if accepting the fact that

the disputed tax for A.Ys. 1988-89 to 1998-99 and tax arrears

implies to the same demand. For further clarity:

Disputed Tax – Income Tax including surcharge and cess-

Tax Arrears – Disputed tax plus interest and penalty leviable or

levied. Hence, the petitioner himself is contracting his statement

made in Para 3.10(iv) that he has satisfied the definition of

“disputed tax” as per Sec.2(1)(j)(F) of DTVSV Act, simply for the

fact that the “disputed tax” which the petitioner has declared in

application under DTVSV Act, is nothing but the “Tax Arrears” and

this is clear from petitioner’s explanations given in various

submissions and in this Para as well.”

30. The learned Counsel for the Revenue submits that there has

been no challenge by the Petitioner to the income tax demand and,

therefore, there is no disputed income nor disputed tax. Petitioner is only

seeking remedy of waiver of interest which cannot be by way of an

application under Section 264 of the Income Tax Act. He submits that

Petitioner is, therefore, not entitled to the reliefs claimed as rejections by the designated authority are justified.

31. We have heard learned Counsel for the parties. We have also

with their assistance, perused the papers and proceedings in the matter as

well as the relevant provisions of the DTVSV Act as well as the DTVSV

Rules.

32. The basic facts set out above are not in dispute. Without

getting into the merits of the demands by the Revenue or the Application

for Revision under Section 264 of the Income Tax Act by the Petitioner, it

would be relevant to note that, it is not in dispute that Petitioner had filed application under Section 264 of the Income Tax Act for adjustment/credit of Rs.12,43,000/-paid earlier in respect of the tax demands for Assessment Years 1988-89 to 1998-99 as according to him, this amount had been adjusted only against the demand for the A.Y 1987-88. While

this application was pending, the Direct Tax Vivad Se Vishwas Act, 2020

came to be enacted followed by Direct Tax Vivad Se Vishwas Rules, 2020.

Petitioner filed applications under the DTVSV Act and Rules vide

declarations in Form-1 dated 18th November, 2020 and waiver

undertakings in Form-2 for each of the 11 years for the period 1988-89 to

1998-99 to avail of beneficial tax payments to end the litigation with the

Revenue-Authorities. Pursuant to the filing of these applications, on 3rd

December, 2020, Respondent No.1 called upon the Petitioner to submit

working of disputed tax in relation to undisputed income for A.Y 1987-88

to 1998-99, stating that, Petitioner had mentioned disputed tax in the

Form-1 despite the disputed income shown as ‘Nil’ in the 154 proceedings,

tax having been calculated correctly for Assessment Years 1987 to 1998

and there being no dispute in income tax calculation and despite that, the

Petitioner had calculated disputed tax and filed the declarations under the

DTVSV Act. The main purpose of the application under section 264 of the

Income Tax Act being only to considerably reduce the interest under

Sections 234-B and 220(2) of the Income Tax Act by seeking to adjust the

credit of regular tax paid challans for Assessment Year 1987-88 of

Rs.12,43,000/- to various years i.e. to Assessment Years 1988-89 to

1998-99 even though Petitioner would be liable to pay a total demand of

Rs.88,90,180/- including a large interest component if the revision

application under section 264 was to be rejected.

33. The issue really is whether Petitioner satisfies the definition of

‘disputed tax’ as contained in the DTVSV Act and Rules so as to be

considered to have filed a valid declaration in Form-1 and waiver

undertaking in Form-2. Going by the above submission and the definition

of disputed tax as contained in section 2(1)(j)(F) of the DTVSV Act as

contended by the Petitioner, it appears from the facts that the Petitioner

would fall within the said definition. We find merit in the submissions

made on behalf of the Petitioner.

34. It would, therefore be apposite to refer to the legislative

background of the DTVSV Act. For this purpose, firstly, the relevant

portion of the budget speech of the Hon’ble Finance Minister made on 1st

February, 2020 is quoted as under:-

“Sir, in the past our government has taken several measures

to reduce tax litigations. In the last budget, Sabka Vishwas Scheme

was 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 forms 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 the 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 case 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.”

35. 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 litigations in direct taxes, where

the tax payer would have to pay disputed tax.

36. Also, the statement of objects and reasons for bringing the

said legislation, reads as under:-

“ Over the years, the pendency of appeals filed by taxpayers as

well as Government has increased due to the fact that the number

of appeals that are filed is much higher than the number of appeals

that are disposed. As a result, a huge amount of disputed tax

arrears is locked-up in these appeals. As on the 30th November,

2019, the amount of disputed direct tax arrears is Rs.9.32 lakh

crores. Considering that the actual direct tax collection in the

financial year 2018-19 was Rs.11.37 lakh crores, the disputed tax

arrears constitute nearly one year direct tax collection.

2. Tax disputes consume copious amount of time, energy and

resources both on the part of the Government as well as taxpayers.

Moreover, they also deprive the Government of the timely collection

of revenue. Therefore, there is an urgent need to provide for

resolution of pending tax disputes. This will not only benefit the

Government by generating timely revenue but also the taxpayers

who will be able to deploy the time, energy and resources saved by

opting for such dispute resolution towards their business activities.

3. It is, therefore, proposed to introduce the Direct Tax Vivad se

Vishwas Bill, 2020, for dispute resolution related to direct taxes,

which, inter alia, provides for the following namely:-

(a) the provisions of the Bill shall be applicable to appeals filed

by tax payers or the Government, which are pending with the

Commissioner (Appeals), Income Tax Appellate Tribunal, High

Court or Supreme Court as on the 31 st day of January, 2020

irrespective of whether demand in such cases is pending or has

been paid;

(b) the pending appeal may be against disputed tax, interest or

penalty in relation 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 not 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 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 it receives

the assent of the President and declaration may be made thereafter

up to the date to be notified by the Government.”

37. It therefore emerges that the DTVSV Act has been enacted to

address the urgent need to provide for resolution of pending tax disputes

where a huge amount of disputed tax arrears of over Rs.9.32 lakh crores is

locked-up. The DTVSV Act is aimed not only to benefit the Government by

generating timely revenue but also to benefit the taxpayers by providing

them peace of mind, certainty and saving time and resources rather than

spending the same otherwise, enabling the taxpayers to be able to deploy

the time, energy and resources saved, by opting for such dispute

resolution, towards their business activities. The Act confers benefit on the tax payers who can put an end to tax litigation by paying specified

percentage of tax and obtain immunity from penalty and prosecution and

waiver of interest. In the context of the issue at hand, it would be

pertinent to refer to the preamble to the DTVSV Act.

38. The preamble clearly provides that this is an Act to provide

for resolution of disputed tax and for matters connected therewith or

incidental thereto. The emphasis is on disputed tax and not on disputed

income.

39. Also for the purpose of our discussion, it would be pertinent

to set forth the following provisions of the DTVSV Act.

“2. Definitions – (1) In this Act, unless the context otherwise

requires -

(a) ‘appellant’ means-

(i) a person in whose case an appeal or a writ petition or special

leave petition has been filed either by him or by the income-tax

authority or by both, before an appellant forum and such appeal or

petition is pending as on the specified date;

(v) a person who has filed an application for revision under

section 264 of the Income tax and such application is pending as on

the specified date.”

“(g) – disputed income – in relation to an assessment year, means

the whole or so much of the total income as is relatable to the

disputed tax.”

“(j) ‘disputed tax’, in relation to an assessment year or financial

year, as the case may be, means the income tax, including surcharge

and cess (hereafter in this clause referred to as the amount of tax)

payable by the appellant under the provisions of the Income tax

Act, 1961 (43 of 1961), as computed hereunder:-

(A) in a case where any appeal, writ petition or special leave

petition is pending before the appellate forum as on the specified

date, the amount of tax that is payable by the appellant if such

appeal or writ petition or special leave petition was to be decided

against him;

(B) in a case where an order in an appeal or in writ petition has

been passed by the appellate forum on or before the specified date,

and the time for filing appeal or special leave petition against such

order has not expired as on that date, the amount of tax payable by

the appellant after giving effect to the order so passed;

(C) in a case where the order has been passed by the Assessing

Officer on or before the specified date, and the time for filing

appeal against such order has not expired as on that date, the

amount of tax payable by the appellant in accordance with such

order;

(D) in a case where objection filed by the appellant is pending

before the Disputed Resolution Panel under section144C o the

Income-tax Act as on the specified date, the amount of tax payable

by the appellant if the Disputed Resolution Panel was to confirm the

variation proposed in the draft order;

(E) in a case where Disputed Resolution Panel has issued any

direction under sub-section (5) of section 144C of the Income-tax

Act and the Assessing Officer has not passed the order under sub-

section (13) of that section on or before the specified date, the

amount of tax payable by the appellant as per the assessment order

to be passed by the Assessing Officer under sub-section (13)

thereof;

(F) in a case where an application for revision under section 264

of the Income-tax Act is pending as on the specified date, the

amount of tax payable by the appellant if such application for

revision was not to be accepted.”

(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.”

40. Section 3 with respect to the tax amount payable by declarant

also assumes significance and is quoted hereunder:-

“3: Amount payable by declarant:- Subject to the provisions of

this Act, where a declarant files under the provisions of this Act on

or before the last date, a declaration to the designated authority in

accordance with the provisions of section 4 in respect of tax arrear,

then, notwithstanding anything contained in the Income-tax Act or

any other law for the time being in force, the amount payable by

the declarant under this Act shall be as under, namely:-

Sl. No. Nature of tax appear Amount payable under this Act on or

before 31st day of March, 2020 Amount payable under this Act on or after the 1st day of April, 2020 but on or before the last date.

(a) Where the tax arrear is the

aggregate amount of disputed

tax, interest chargeable or

charged on such disputed tax

and penalty leviable or levied

on such disputed tax.

Amount of the disputed tax

The aggregate of the

amount of disputed tax

and ten per cent of

disputed tax; provided

that where the ten per

cent of disputed tax

exceeds the aggregate

amount of interest

chargeable or charged on

such disputed tax and

penalty leviable or levied

on such disputed tax, the

excess shall be ignored

for the purpose of

computation of amount

payable under this Act.

(b) Where the tax arrear includes

the tax, interest or penalty

determined in any assessment

on the basis of search under

section 132 or section 132A

of the Income Tax Act,

The aggregate of the

amount of disputed

tax, and twenty five

per cent of the

disputed tax; provided

that where the twenty-

five per cent of

The aggregate of the

amount of disputed tax

and thirty-five percent of

disputed tax; provided

that where the thirty-five

per cent of disputed tax

exceeds the aggregate

disputed tax exceeds

the aggregate amount

of interest chargeable

or charged on such disputed tax and

penalty leviable or levied on such

disputed tax, the excess shall be

ignored for the purpose of

computation of amount payable under this Act.

amount of interest

chargeable or charged on

such disputed tax and

penalty leviable or levied

on such disputed tax, the

excess shall be ignored

for the purpose of

computation of amount

payable.

(c) Where the tax arrear relates

to disputed interest or

disputed penalty or disputed

fee

Twenty-five per cent

of disputed interest or

disputed penalty or

disputed fee.

Thirty-five per cent of

disputed interest or

disputed penalty or

disputed fee.

Provided that in a case where an appeal or writ petition or

special leave petition is filed by the income-tax authority on any

issue before the appellate forum, the amount payable shall be one-

half of the amount in the table above calculated on such issue, in

such manner as may be prescribed:

Provided further that in a case where an appeal is filed before

the Commissioner (Appeals) or objections is filed before the

Dispute Resolution Panel by the appellant on any issue on which he

has already got a decision in his favour from the Income-tax

Appellate Tribunal (where the decision on such issue is not reversed

by the High Court or the Supreme Court) or the High Court (where

the decision on such issue is not reversed by the Supreme Court),

the amount payable shall be one-half of the amount in the table

above calculated on such issue, in such manner as may be

prescribed:

Provided also that in a case where an appeal is filed by the

appellant on any issue before the Income-tax Appellate Tribunal on

which he has already got a decisions in his favour from the High

Court (where the decision on such issue is not reversed by the

Supreme Court), the amount payable shall be one-half of the

amount in the table above calculated on such issue, in such manner

as may be prescribed.”

Counsel for the parties submit that the date in the second

column is now 30th day of April, 2021 instead of 31st day of March, 2020.

41. Sections 4 and 5 read as under:-

“4. (1) The declaration referred to in section 3 shall be filed by

the declarant before the designated authority in such form and

verified in such manner as may be prescribed.

(2) Upon the filing the declaration, any appeal pending before the

Income Tax Appellate Tribunal or Commissioner (Appeals), in

respect of the disputed income or disputed interest or disputed

penalty or disputed fee and tax arrear shall be deemed to have been

withdrawn from the ate on which certificate under sub-section (1)

of section 5 is issued by the designated authority.

(3) Where the declarant has filed any appeal before the appellate

forum or any writ petition before the High Court or the Supreme

Court against any order in respect of tax arrear, he shall withdraw

such appeal or writ petition with the leave of the Court wherever

required after issuance of certificate under sub-section (1) of

section 5 and furnish proof of such withdrawal along with the

intimation of payment to the designated authority under sub-

section (2) of section 5.

(4) Where the declarant has initiated any proceeding for

arbitration, conciliation or mediation, or has given any notice

thereof under any law for the time being in force or under any

agreement entered into by India with any other country or territory

outside India whether for protection of investment or otherwise, he

shall withdraw the claim, if any, in such proceedings or notice after

issuance of certificate under sub-section (1) of section 5 and furnish

proof of such withdrawal along with the intimation of payment to

the designated authority under sub-section (2) of section 5.

(5) Without prejudice to the provisions of sub-sections (2), (3) and

(4), the declarant shall furnish an undertaking waiving his right,

whether direct or indirect, to seek or pursue any remedy or any

claim in relation to the tax arrear which may otherwise be available

to him under any law for the time being in force, in equity, under

statute or under any agreement entered into by India with any

country or territory outside India whether for protection of

investment or otherwise and the undertaking shall be made in such

form and manner as may be prescribed.

(6) The declaration under sub-section (1) shall be presumed never

to have been made if,-

(a) any material particular furnished in the declaration is

found to be false at any stage;

(b) the declarant violates any of the conditions referred to in

this Act;

(c) the declarant acts in any manner which is not in

accordance with the undertaking given by him under sub-

section(5), and in such cases, all proceedings and claims which were

withdrawn under section 4 and all the consequences under the

Income Tax Act against the declarant shall be deemed to have been

revived.

(7) No appellate forum or arbitrator, conciliator or mediator shall

proceed to decide any issue relating to the tax arrear mentioned in

the declaration in respect of which an order has been made under

sub-section (1) of section 5 by the designated authority or the

payment of sum determined under that section.

5.(1) The designated authority shall, within a period of fifteen days

from the date of receipt of the declaration, by order, determine the

amount payable by the declarant in accordance with the provisions

of this Act and grant a certificate to the declarant containing

particulars of the tax arrear and the amount payable after such

determination, in such form as may be prescribed.

(2) The declarant shall pay the amount determined under sub-

section (1) within fifteen days of the date of receipt of the

certificate and intimate the details of such payment to the

designated authority in the prescribed form and thereupon the

designated authority shall pass an order stating that the declarant

has paid the amount.

(3) Every order passed under sub-section (1), determining amount

payable under this Act, shall be conclusive as to matters stated

therein and no matter covered by such order shall be reopened in

any other proceeding under the Income Tax Act or under any other

law for the time being in force or under any agreement, whether for

protection of investment or otherwise, entered into by India with

any other country or territory outside India.”

42. Under the provisions of this Act, tax payers have been given

an option to settle their tax disputes by making a declaration to

designated authority and paying specified percentage of disputed tax as

per section 3 of the DTVSV Act.

43. Section 3 of the DTVSV Act provides that where a declarant

files a declaration to the designated authority in accordance with the

provisions of section 4 in respect of tax arrears, the amount payable

would be the amount of disputed tax as is applicable in the cases referred

to in the table in the said section. Under section 4, the form of declaration and the particulars to be furnished before the designated authority are provided for. Rules stipulate that declaration has to be filed in Form-1 under section 4(1) of the Act read with Rule 3(1) of the Rules. Also an undertaking in Form-2 under section 4(5) of the Act read with Rule 3(2) of the Rules is to be filed by appellant under the Act, which admittedly has been filed by the petitioner.

44. It is stated in section 4 (5) that, declarant is to furnish an

undertaking waiving his right to seek or pursue any remedy or claim in

relation to the tax arrears which may be available to him in law or equity

under statute or under any agreement.

45. It is also stated in section 4(6) that declaration under sub

section 1 shall be presumed never to have been made if-

(a) any material particular(s) furnished in the declaration, is

found to be false at any stage;

(b) the declarant violates any of the conditions referred to in the

Act;

(c) the declarant acts in any manner which is not in accordance

with the undertaking given by him under sub section (5)

and in such cases, all the proceedings and claims which were

withdrawn under section 4 and all the consequences under the

Income Tax Act against the declarant shall be deemed to have been

revived.

46. Section 9 specifies the matters in respect of which the DTVSV

Act shall not apply, such as where the tax arrears in respect of which, the

disputed tax amount exceeds Rs.5 crores in respect of assessments made

under section 143(3) or 144 or 153-A or 153-C on the basis of search

initiated under Section 132 or 132-A or if on or before the date of filing of the declarations, the tax arrears relates to an assessment year in respect of which prosecution has been instituted or if it relates to un-disclosed income or the source located out side India or un-disclosed asset located out side India or it relates to assessment or re-assessment made on the basis of information received under the agreement refers to in section 90 or section90-A of the Income Tax Act, in relation to any tax arrears, or to persons in respect of whom detentions have been made under COFEPOSA

Act, 1974 or in respect of prosecutions for any offence under UAPA, 1967,

NDPS 1985, Prevention of Corruption Act, 1988, PMLA 2002, Prohibition

of Benami Property Transaction Act, 1988 or such persons have been

convicted of any such offences punishable under those Acts or to any

person in respect of whom prosecution has been initiated by an income

tax authority for an offence punishable under the Indian Penal Code or for

the purposes of enforcement of any civil law under Section 3 of the

Special Court (Trial and offence relating to transaction in securities) Act,

1992 etc.

47. It would also pertinent to quote the following provisions from

the Direct Tax Vivad se Vishwas Rules 2020 (DTVSV Rules):-

“2. Definition – In these rules, unless the context otherwise

requires-

(b) ‘dispute’ means appeal, writ or special leave petition

filed or appeal or special leave petition to be filed by the declarant

or the income-tax authority before the Appellate Forum, or

arbitration, conciliation or mediation initiated or given notice

thereof, or objections filed on or to be filed under Section 264 of

the Income-tax Act.”

“3. Form of declaration and undertaking:- (1) The declaration

under sub-section (1) of section 4 shall be made in Form-1 to the

designated authority.

(2) The undertaking referred to in sub-section (5) of section 4

shall be furnished in Form-2 along with the declaration.

(3) The declaration under sub-rule (1) and the undertaking

under sub-rule (2), as the case may be, shall be signed and verified

by the declarant or any person competent to verify the return of

income on his behalf in accordance with section 140 of the Income-

tax Act,1961.

(4) The designated authority on receipt of declaration shall issue

a receipt electronically in acknowledgment thereof.”

“4. Form of certificate by designated authority:- The designated

authority shall grant a certificate electronically referred to in sub-

section (1) of section 5 in Form 3.

7. Order by designated authority – the 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

sub-section (1) of section 5, shall be in Form-5.”

48. From the above exposition, what emerges is that for a

declarant to file a valid declaration, there should be disputed tax in the

case of such a declarant. As can be seen from the aforesaid undisputed

fact that Petitioner having filed revision application under Section 264 of

the Income Tax Act for the Assessment Years 1988-89 to 1998-99 for

credit/ adjustment of Rs.12,43,000/- which application is pending before

the Commissioner. Petitioner, admittedly being an eligible Appellant,

squarely satisfies the definition of “disputed tax” as contained in Section

2(1) (j)(F) of the DTVSV Act, 2020. This is because, if the revision

application under Section 264 of the Income Tax Act is rejected, then the

Petitioner would purportedly be liable to pay a demand of Rs.88,90,180/-

including income tax, interest. Petitioner as eligible Appellant has filed

declaration under section 4 with the designated authority under the

provisions of Section 4 of the DTVSV Act in respect of tax arrears which

include the disputed tax which will become payable as may be determined

by designated authority under Section 3. A look at definition of ‘tax

arrears’ clearly refers to an aggregate of the amount of disputed tax,

interest chargeable or charged on such disputed tax etc. determined

under the provisions of Income Tax Act.

49. We are of the view that this is not only a case where there is a

disputed tax but also tax arrears as referred to in section 3 of the DTVSV

Act. The respondents have not raised any objection under any provision

of the DTVSV Act or DTVSV Rules with respect to the declarations or

undertakings furnished by the Petitioner nor have they passed any order

let alone a reasoned or speaking order rejecting the said declarations. The

Respondents have summarily rejected the declarations without their being

any such provision in the DTVSV Act or the Rules. There also does not

appear to be any fetter on the Designated Authority to determine disputed

tax of an amount other than that declared by the petitioner.

50. From a plain reading of the provisions of the DTVSV Act and

the Rules set out above, it emerges that the Respondent- Designated

Authority would have to issue Form-3 as referred to in Section 5 (1)

specifying the amount payable in accordance with section 3 of the DTVSV

Act in the case of declarant who is an eligible appellant not falling under

section 4(6) nor within the exceptions in section 9 of the DTVSV Act,

which fact appears to be undisputed. As also observed by us earlier, the

case of the Petitioner would be covered by the definition of disputed tax

as per Section 2(1)(j)(F) of the DTVSV Act. It has to be kept in mind in

view of what has been observed by us earlier, that the DTVSV Act is a

beneficial legislation for both the Revenue and the tax payer.

51. In view of the aforesaid discussion, we are of the view that

the Designated Authority under the DTVSV Act viz Respondent No.2 in

this case is not justified in rejecting the declarations filed by the Petitioner.

52. Accordingly, we set aside the rejections. We direct the

Respondent No.2 to consider the applications made by Petitioner by way

of declarations dated 18th November, 2020 in Form-1 as per law and

proceed with according to the scheme of the DTVSV Act and Rules in the

light of above discussion within a period of two weeks from the date of

this order.

53. Petition is allowed in the above terms. No order as to costs.

54. Parties to act on an ordinary copy of this order duly

authenticated by the Associate of this Court.