2023 (6) TMI 1291 - HC - Income Tax

FAQ 61 of CBDT Circular 21/2020 restricting DTVSV-A eligibility to appeals 'dismissed in limine' struck down as unlawful -A

Bombay HC held that FAQ 61 of CBDT Circular 21/2020, which restricted DTVSV-A settlement eligibility to appeals 'dismissed in limine,' is unlawful as ... Miscellaneous Application u/s 254 (2) rejected as not covered under the Direct Tax Vivad Se Viswas Act, 2020 (‘DTVSV-A’) as it was not filed in pursuance of an appeal ‘dismissed in limine’ - HELD THAT:- As with regard to the condition in answer to FAQ 61, viz. ‘Appeal dismissed in limine’ we are of the view that the qualifying words ‘in limine’ that apparently restrict the eligible assessees for availing settlement under the DTVSV, are contrary to its object and reasons. The Apex Court in the case of UCO Bank, Calcutta [1999 (5) TMI 3 - SUPREME COURT] and Commissioner of Central Excise, Bolpur vs Ratan Melting & Wire Industries [2008 (10) TMI 5 - SUPREME COURT] the additional qualification viz. “in limine” added to the word Appeal is adverse to the assessee, against the mandate of DTVSV-A and thus contrary to law. It would be appropriate that the ratio laid down in the above cases with regard to ‘construing a remedial statute’ be followed in the present case in as much as DTVSV-A is a beneficial statute. The Delhi High Court in the case of Medeor Hospital Limited v Principal Commissioner of Income Tax [2022 (11) TMI 26 - DELHI HIGH COURT] and Tushar Agro Chemical [2021 (7) TMI 1267 - GUJARAT HIGH COURT] have held that CBDT cannot issue circulars adverse to the assessee. For the reasons aforesaid we hold that the FAQ 61 of the circular 21/2020 dated 4th December 2020 issued by the CBDT to the extent that it restricts appeals to the ones ‘dismissed in limine’ are not only adverse to the interest of the assessee but also contrary to the object and reasons of DTVSV-A. ORDER: FAQ No. 61 of the Circular 21 of 2020 issued by the Respondent no. 1 is struck down. The impugned rejection order dated 3rd August 2021 passed by Respondent No. 2 is quashed and set aside. The Respondent No. 2 is directed to issue acknowledgment in Form 3 against the application made by the Petitioner in Form 1 and Form 2. Issues Involved:1. Eligibility of the Miscellaneous Application (MA-2) under the Direct Tax Vivad Se Viswas Act, 2020 (DTVSV-A).2. Interpretation and applicability of FAQ No. 61 of Circular No. 21 of 2020.3. Whether the term 'dismissed in limine' in FAQ No. 61 is contrary to the objectives of DTVSV-A.Summary:Issue 1: Eligibility of the Miscellaneous Application (MA-2) under the Direct Tax Vivad Se Viswas Act, 2020 (DTVSV-A)The Petitioner sought quashing of the impugned rejection order dated 3rd August 2021, which stated that the Miscellaneous Application (MA-2) filed under section 254(2) of the Income Tax Act, 1961 was not covered under DTVSV-A as it was not filed in pursuance of an appeal 'dismissed in limine.' The Petitioner argued that MA-2 should be considered a pending appeal, thereby making them eligible for the benefits under DTVSV-A. The Court found that the rejection of MA-2 was incorrect as one of the grounds remained undecided, and thus, MA-2 was a pending application for adjudication.Issue 2: Interpretation and Applicability of FAQ No. 61 of Circular No. 21 of 2020The Petitioner contended that FAQ No. 61, which states that only MAs related to appeals 'dismissed in limine' are eligible under DTVSV-A, should be read broadly to include their case. The Court noted that the objective of DTVSV-A is to reduce pending income tax disputes and generate timely revenue for the Government. The Court held that the additional qualification 'in limine' added to the word 'Appeal' in FAQ No. 61 was contrary to the object and reasons of DTVSV-A.Issue 3: Whether the term 'dismissed in limine' in FAQ No. 61 is contrary to the objectives of DTVSV-AThe Court referred to the judgments of the Apex Court in UCO Bank, Calcutta vs. Commissioner of Income Tax and Commissioner of Central Excise, Bolpur vs. Ratan Melting & Wire Industries, which held that circulars issued by the Board should not be adverse to the assessee and should be in line with the statutory provisions. The Court concluded that the term 'dismissed in limine' in FAQ No. 61 was adverse to the assessee and contrary to the objectives of DTVSV-A, which aims to reduce litigation and provide a fair settlement process.Conclusion:The Court struck down FAQ No. 61 of Circular 21 of 2020 to the extent that it restricts appeals to the ones 'dismissed in limine.' The impugned rejection order dated 3rd August 2021 was quashed, and the Respondent No. 2 was directed to issue acknowledgment in Form 3 against the application made by the Petitioner in Form 1 and Form 2. The rule was made absolute with no costs, and all parties were directed to act on the authenticated copy of the Order.