Court grants extension for tax payment under the Sabka Vishwas Scheme due to COVID-19 impact.

Case Name:

CWP No. 1952 of 2021

Key Takeaways

• The court recognized the extraordinary circumstances of the COVID-19 pandemic as a valid reason for extending tax payment deadlines.
• The ruling emphasizes the importance of considering the financial hardships faced by businesses during the pandemic.
• The decision allows for a recalculation of tax liabilities under the Sabka Vishwas Scheme, highlighting the court’s willingness to provide relief to taxpayers in distress.

Issue

Did the petitioner deserve an extension for tax payment under the Sabka Vishwas Scheme due to the financial impact of COVID-19?

Facts

• Parties Involved: Oak Construction & Properties Pvt. Ltd. (Petitioner) vs. Union of India & Others (Respondents).
• The petitioner operates a hotel in Shimla and faced financial difficulties due to the pandemic, which led to an inability to pay tax dues by the original deadline.
• The petitioner had previously entered into an installment agreement to pay outstanding service tax but struggled to meet the payment schedule due to the pandemic’s impact on business operations.
• The petitioner filed for relief under the Sabka Vishwas Scheme, which was designed to resolve legacy tax disputes.

Arguments

• Petitioner’s Argument: The petitioner argued that the pandemic severely affected their ability to generate revenue, justifying a request for an extension to pay tax dues. They sought to quash the demand notices and requested a recalculation of their tax liability under the amnesty scheme.
• Respondents’ Argument: The respondents contended that the time for availing the benefits of the scheme had expired and that the petitioner was not entitled to any further relief.

Key Legal Precedents

• The court referenced Section 127(5) of the Finance Act, 2019, which outlines the timeline for tax payment under the Sabka Vishwas Scheme.
• The court also considered the Supreme Court’s suo motu order dated 23.03.2020, which extended the period of limitation for all legal proceedings due to the pandemic, emphasizing that the extraordinary circumstances warranted a flexible approach to deadlines.

Judgement

The court ruled in favor of the petitioner, allowing them additional time to pay their tax dues. The court ordered the respondents to recalculate the tax liability under the Sabka Vishwas Scheme, taking into account the financial difficulties caused by the pandemic. The demand notices issued were quashed, and the court emphasized the need for a fair assessment of the petitioner’s situation.

FAQs

Q: What does this ruling mean for Oak Construction & Properties Pvt. Ltd.?

A: The ruling allows the company to have more time to pay its tax dues and ensures that their tax liability is recalculated fairly, considering the impact of COVID-19.

Q: How does this case affect other businesses facing similar issues?

A: This case sets a precedent that courts may consider the financial hardships caused by the pandemic when evaluating tax payment deadlines, potentially benefiting other businesses in similar situations.

Q: What is the Sabka Vishwas Scheme?

A: The Sabka Vishwas Scheme is a government initiative aimed at resolving legacy disputes related to service tax and central excise, allowing taxpayers to settle their dues with reduced penalties.

Q: Can the government deny extensions for tax payments in the future?

A: While the government can set deadlines, this ruling indicates that courts may grant extensions based on extraordinary circumstances, such as a pandemic, if justified.