Tax Dispute Resolved Under Vivad Se Vishwas Scheme

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Case Name:

K. Balasubramaniam Vs. Commissioner of Income Tax (High Court of Madras)

T.C.A.No.510 of 2019

Date: 22nd December 2020

Key Takeaways:

• The case highlights the use of the Vivad Se Vishwas Scheme to resolve tax disputes.
• The court allowed the assessee to file a declaration under the scheme, which aims to settle tax disputes amicably.
• The appeal can be restored if the decision under the scheme is unfavorable to the assessee.

Issue

Was the Tribunal justified in confirming the addition of Rs.19,48,400/- as unexplained investment for the assessment year 2003-04?

Facts

• The appellant, K. Balasubramaniam, challenged an order by the Income Tax Appellate Tribunal, Chennai, which confirmed an addition of Rs.19,48,400/- as unexplained investment.
• The dispute arose from the assessment year 2003-04, where the impounded books showed only advances of Rs.3,14,500/- for that year.
• The appellant decided to resolve the dispute under the Vivad Se Vishwas Scheme, a government initiative to settle tax disputes.

Arguments

• Appellant’s Argument: The appellant argued that the addition was unjustified as the impounded books showed a cumulative balance of advances over the years, not just for the assessment year in question.
• Respondent’s Argument: The respondent, represented by the Revenue, maintained that the addition was based on the impounded books, which were part of the regularly maintained accounts.

Key Legal Precedents

The case did not specifically cite past legal precedents but focused on the application of the Vivad Se Vishwas Scheme under the Direct Tax Vivad Se Vishwas Act, 2020.

Judgement

The court did not make a final decision on the substantial questions of law due to the appellant’s decision to file a declaration under the Vivad Se Vishwas Scheme. The court directed the appellant to file the necessary forms and allowed for the appeal to be restored if the scheme’s outcome was not favorable.

FAQs

Q1. What is the Vivad Se Vishwas Scheme?

A1. The Vivad Se Vishwas Scheme is a government initiative to resolve tax disputes by allowing taxpayers to settle their cases by paying a specified amount, thus avoiding prolonged litigation.

Q2. What happens if the scheme’s decision is unfavorable?

A2. The court has allowed the appellant to restore the appeal if the decision under the scheme is not in their favor.

Q3. Why didn’t the court decide on the substantial questions of law?

A3. The court deferred the decision because the appellant chose to resolve the dispute under the Vivad Se Vishwas Scheme, which could potentially settle the matter without further litigation.

1. This appeal has been filed by the assessee under Section 260 (of Income Tax Act, 1961) A of the Income Tax Act, 1961 ('the Act' for brevity), challenging the order dated 24.09.2009 passed by the Income Tax Appellate Tribunal, Chennai, 'D' Bench ('the Tribunal' for brevity) in I.T.A.No.659/Mds/2009 for the Assessment Year 2003-04. This appeal was admitted on 25.07.2019 on the following Substantial Questions of Law:

“1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the addition of Rs.19,48,400/- as unexplained investment of the assessment year 2003-04 when, even as per the Assessing Officer, the impounded books show only advances of Rs.3,14,500/- in this year?

2. Whether the order of the Tribunal confirming the addition was perverse, especially in the context of reliance on books impounded in survey, which show the cumulative balance of advances over the years as of Rs.19.48 lakhs and not as advances pertaining to this year alone?

3. Whether the Tribunal was justified in confirming the addition based on the impounded books recording the advances till 13.1.2003, which are part of the regularly maintained books of accounts and hence, the cumulative balance of advances cannot be added as the unexplained investment? And

4. Whether the Tribunal was justified in confirming the addition when it admits that addition was not made on the basis of statement but on the basis of impounded books, which forms part of the regularly maintained books of accounts?”

2. We have heard Mr.T.Vasudevan, learned counsel appearing for the appellant/ assessee and Ms.V.Pushpa, learned Junior Standing counsel for the respondent/Revenue.

3. The learned counsel for the appellant / assessee, on instructions, submitted that the appellant / assessee intends to avail the benefit of Vivad Se Vishwas Scheme ('VVS Scheme' for brevity) and in this regard, the assessee is taking steps to file the application / declaration in Form No.I.

4. It may not be necessary for this Court to decide the Substantial Questions of Law framed for consideration on account of certain subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) to provide for resolution of disputed tax and for matters connected therewith or incidental thereto. The Act of the Parliament received the assent of the President on 17th March 2020 and published in the Gazette of India on 17th March 2020.

5. In terms of the said Act, the assessee has been given an option to put an end to the tax disputes, which may be pending at different levels either before the First Appellate Authority or before the Tribunal or before the High Court or before the Hon'ble Supreme Court of India. Under Section 2(j) (of Income Tax Act, 1961) “disputed tax” has been defined. In terms of Section 3 (of Income Tax Act, 1961), where a declarant means a person, who files a declaration under Section 4 (of Income Tax Act, 1961) on or before the last date files a declaration to the designated authority in accordance with the provisions of Section 4 (of Income Tax Act, 1961) 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 shall be determined in terms of Section 3 (of Income Tax Act, 1961)(a-c) thereunder.

6. The First Proviso to Section 3 (of Income Tax Act, 1961) states that in 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 stipulated in Section 3 (of Income Tax Act, 1961) calculated on such issue, in such a manner as may be prescribed. The second proviso deals with the cases, where the matter is before the Commissioner (Appeals) or before the Dispute Resolution Panel. The third proviso deals with cases, where the issue is pending before the Income Tax Appellate Tribunal. The filing of the declaration is as per Section 4 (of Income Tax Act, 1961) and the particulars to be furnished are also mentioned in the Sub Sections of Section 4 (of Income Tax Act, 1961). Section 5 (of Income Tax Act, 1961) deals with the time and manner of the payment and Section 6 (of Income Tax Act, 1961) deals with Immunity from initiation of proceedings in respect of offence and imposition of penalty in certain cases. Section 9 (of Income Tax Act, 1961) deals with cases, where the Act 3 of 2020 will not be applicable.

7. As observed, the assessee is given liberty to restore this appeal in the event the ultimate decision to be taken on the declaration to be filed by the assessee under Section 4 of the Income Tax Act, 1961 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.

8. In the light of the above, we direct the appellant / assessee to file the Form No.I and the competent authority shall process the application / declaration in accordance with the Act and pass appropriate orders as expeditiously as possible preferably within a period of six (6) weeks from the date on which the declaration is filed in the proper form.

9. With this direction, the Tax Case Appeal stands disposed of with the aforementioned liberty and Consequently, the Substantial Questions of Law are left open. No costs.

T.S.SIVAGNANAM, J.

AND

V.BHAVANI SUBBAROYAN, J.