Court Invalidates Circular, Orders Acceptance of Application under DTVSV Act

The court set aside the answer to Question No. 71 of Circular No. 21/2020 and allowed the petition, directing the respondents to accept the petitioner's application under the DTVSV Act. The court emphasized that the circular's classification was unsustainable and violated Article 14 of the Constitution of India. The petition was allowed in terms of the prayer clauses, and the rule was made absolute with no order as to costs.

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Issues Involved:
1. Rejection of Petitioner’s declaration under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act).
2. Legality of CBDT Circular No. 21/2020, particularly Question No. 71.

Detailed Analysis:

1. Rejection of Petitioner’s Declaration under DTVSV Act:
The petitioner, a registered charitable trust, filed its income tax return for the financial year 2009-10, disclosing 'Nil' income. However, an intimation under section 143(1) of the Income Tax Act, 1961, was received, determining an income of Rs. 69,36,357/- and a total tax liability of Rs. 31,83,240/-. The petitioner filed an appeal with the Commissioner of Income Tax (Appeals) (CIT-A), which was dismissed on the ground of belated filing. Subsequently, the petitioner applied under the DTVSV Act, submitting Form No. 1, but the declaration was rejected based on CBDT Circular No. 21/2020, Question No. 71, which stated that appeals against intimation under section 143(1) are eligible only if adjustments are made under sub-clauses (iii) to (vi) of clause (a) of section 143(1). The petitioner contended that this rejection digressed from the intention and purpose of the DTVSV Act, which does not distinguish between adjustments under different sub-clauses of section 143(1).

2. Legality of CBDT Circular No. 21/2020, Question No. 71:
The court examined the provisions of the DTVSV Act and the relevant sections of the Income Tax Act. It noted that the DTVSV Act aims to resolve disputed tax matters and does not classify appeals based on the sub-clauses of section 143(1). The court found that the circular’s exclusion of appeals under sub-clauses (i) and (ii) of section 143(1) was arbitrary, unreasonable, and discriminatory, lacking any rationale or material basis. The court referenced previous judgments indicating that circulars should not contradict or nullify statutory provisions and should not be adverse to the assessee. The court concluded that the answer to Question No. 71 in the circular overreached the purpose of the DTVSV Act and was divorced from its object and purpose.

Conclusion:
The court set aside the answer to Question No. 71 of Circular No. 21/2020 and allowed the petition, directing the respondents to accept the petitioner’s application under the DTVSV Act. The court emphasized that the circular’s classification was unsustainable and violated Article 14 of the Constitution of India. The petition was allowed in terms of the prayer clauses, and the rule was made absolute with no order as to costs.

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