Court quashes revenue's orders, directs Form 3 restoration under VSV Act. Assessee entitled to benefits.

The court allowed the writ petition, quashing the revenue's orders and directing the restoration and processing of the Form 3 declaration under the VSV Act within eight weeks. The court held that the assessee had the right to avail the VSV Act's benefits, emphasizing that the State cannot benefit from its own wrong. Additionally, the court clarified that processing declarations under the VSV Act should continue even after the Scheme's closure, as long as declarations were filed before the Scheme's end date.

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Issues Involved:
1. Validity of the withdrawal of Form 3 declaration under the Direct Tax Vivad Se Vishwas Act, 2020 (VSV Act).
2. Applicability of Circular No. 21/2020 issued by the CBDT.
3. Effect of condonation of delay in filing the appeal.
4. Right of the assessee to avail the benefit of the VSV Act.
5. Revenue's contention based on the timing of the appeal filing.
6. The principle that the State cannot take advantage of its own wrong.
7. Continuation of processing declarations under the VSV Act after the Scheme's closure.

Detailed Analysis:

1. Validity of the Withdrawal of Form 3 Declaration:
The assessee challenged the order by the Assistant Commissioner of Income Tax rejecting the revival of Form 3 declaration issued under the VSV Act. The court noted that the revenue did not cite any statutory provision empowering them to withdraw a Form 3 declaration once issued. The court emphasized that without a specific provision in the Act or Rules, the Department could not withdraw or cancel the Form 3 declaration. The court held that the Form 3 declaration, once issued, should be processed to its logical conclusion, either in favor of the assessee or otherwise.

2. Applicability of Circular No. 21/2020 Issued by the CBDT:
The revenue referred to Question No. 59 in Circular No. 21/2020, which clarified the eligibility criteria for filing appeals under the VSV Act. The court examined whether this Circular applied to the assessee's case, where the appeal was filed on 8th January 2021. The court observed that the Circular covered cases where appeals were filed with an application for condonation of delay between 1st April 2019 and 31st January 2020. The court concluded that the revenue's interpretation was incorrect, as the appeal was time-barred and the delay had been condoned.

3. Effect of Condonation of Delay in Filing the Appeal:
The court discussed the legal effect of condoning the delay in filing the appeal. The delay of 400 days was condoned on 20th January 2021, making it as if the appeal had been filed within the original time limit. The court cited the Kerala High Court's decision in S.V. Suhasini Devi & Anr. vs. Padmanabhan Madhavan, which held that condonation of delay should be treated as if the appeal was filed within the time allowed by law. Consequently, the court held that the appeal should be treated as filed not later than 13th December 2019.

4. Right of the Assessee to Avail the Benefit of the VSV Act:
Given the condonation of delay, the court held that the assessee was within his right to avail the benefit of the VSV Act. The declaration filed by the assessee was deemed valid and had to be processed in accordance with the VSV Act's provisions.

5. Revenue's Contention Based on the Timing of the Appeal Filing:
The revenue contended that the assessee could not benefit from the Scheme as the appeal was filed after 31st January 2020. The court rejected this argument, emphasizing that the appeal should be treated as if filed within the original time limit due to the condonation of delay.

6. The Principle That the State Cannot Take Advantage of Its Own Wrong:
The court cited the Supreme Court's decision in Superintendent of Taxes, Dhubri & Ors. vs. M/s. Onkarmal Nathmal Trust, stating that the State cannot take advantage of its own wrong and lack of diligence. The court applied this principle to the case, concluding that the revenue's actions were not justified.

7. Continuation of Processing Declarations Under the VSV Act After the Scheme's Closure:
The court addressed the revenue's argument that the Scheme had ended and processing the declaration was not possible. The court disagreed, noting that the Scheme had been periodically extended, with the last extension until 31st October 2021. The court held that the Department must act on declarations filed before the Scheme's closure and process them in accordance with the law.

Conclusion:
The court allowed the writ petition, quashing the revenue's orders dated 9th September 2021 and 15th July 2021. The court directed the revenue to restore and process the Form 3 declaration within eight weeks. The related appeal by the revenue was closed, with liberty granted to restore the appeal if the assessee's declaration under the VSV Act was rejected for valid reasons.

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