Beneficial interpretation of Vivad se Vishwas scheme prevents denial of settlement benefit on a rigid delay-cutoff reading.

The Direct Tax Vivad se Vishwas Act, 2020 is to be read as a beneficial settlement scheme for resolving pending direct tax disputes, and declarations should not be rejected on a rigid reading of a CBDT circular on delayed appeals. Where an appeal is accompanied by a pending condonation application and delay is later condoned, the appeal relates back to the date it should have been filed and is treated as pending for the scheme. The circular's cutoff for condonation was held to be clarificatory, not an inflexible bar, because an artificial distinction between similarly placed declarants would be inconsistent with the object of dispute resolution and Article 14. The settlement window remained time-bound, but the declarations could not be denied on that cutoff alone.

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Issues: Whether an assessee, whose appeal was accompanied by a pending application for condonation of delay and whose declaration under the Direct Tax Vivad se Vishwas Act, 2020 was filed within the extended period, could be denied the benefit of the scheme on the ground that the condonation application was filed after the date of the CBDT circular; and whether the cutoff in the circular could be treated as mandatory to reject the declaration.

Analysis: The Act was enacted as a settlement mechanism for pending direct tax disputes and its provisions defining appellant, declarant, disputed penalty, tax arrear, declaration, payment and the role of the designated authority had to be read in a manner that advanced the object of dispute resolution. The CBDT circular answering the relevant question on condonation treated certain delayed appeals as pending where the delay application had been filed before the circular date and the appeal was later admitted. The Court held that the circular was only clarificatory in nature and could not be read so rigidly as to create an artificial cutoff that defeated the statutory scheme. Once delay is condoned, the appeal relates back to the date when it ought to have been filed, and the pendency must be understood accordingly. A restrictive reading would create an unreasonable classification among similarly placed declarants and would be inconsistent with Article 14 of the Constitution of India. The Court also noted that the settlement window itself remained time-bound and was not being extended indefinitely.

Conclusion: The cutoff date in the CBDT circular was not sacrosanct, the petitioner remained eligible to avail the settlement scheme, and rejection of the declarations was unsustainable.

Ratio Decidendi: A clarificatory CBDT circular under the settlement scheme cannot be construed so rigidly as to defeat the beneficial object of the Act where the appeal, upon condonation of delay, relates back and is to be treated as pending for the purpose of the declaration.

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