Assessee can limit settlement under Direct Tax Vivad Se Vishwas Act 2020 to specific disputes declared in application

The Delhi HC held that an assessee can confine settlement under the Direct Tax Vivad Se Vishwas Act, 2020 to specific disputes declared in their application. The court ruled that where the designated authority modified the assessee's declaration to include additional disputes not originally declared, this exceeded the scope of the assessee's intended settlement. The petition was allowed, directing authorities to issue a modified certificate under Section 5(1) limited to the assessee's original declaration regarding disallowance of derivative trading losses, excluding unrelated disputes from the consolidated revenue appeal.

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Issues Involved:

1. Whether the Assessee can confine the settlement of disputes under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act) to specific issues in its appeal while excluding others.
2. Interpretation of the terms "tax arrears," "disputed tax," and "appellant" under the DTVSV Act.
3. The impact of pending appeals and the filing of declarations under the DTVSV Act.

Detailed Analysis:

1. Confine Settlement of Disputes:

The primary issue addressed in this judgment is whether the Assessee can limit the settlement of disputes under the DTVSV Act to specific issues that were part of its appeal, excluding other disputes that were part of the Revenue's appeal. The court examined the provisions of the DTVSV Act, particularly Section 3, which allows a declarant to file a declaration for settling tax arrears. The court noted that the term "disputed tax" refers to the tax that is the subject matter of a pending appeal, writ petition, or special leave petition. Therefore, the Assessee is entitled to settle only the disputes that were part of its appeal (ITA No. 5958/Del/2014) concerning the disallowance of loss in trading derivatives, without being compelled to settle disputes from the Revenue's appeal (ITA No. 5411/Del/2014).

2. Interpretation of Key Terms:

The court delved into the definitions of "tax arrears," "disputed tax," and "appellant" as per the DTVSV Act. "Tax arrears" include the aggregate amount of disputed tax, interest, and penalties. "Disputed tax" is defined as the tax payable if an appeal is decided against the appellant. The court emphasized that "appellant" includes both the person who filed the appeal and the income tax authority. This interpretation supports the view that each appeal is treated as a separate dispute under the DTVSV Act, allowing the Assessee to choose which appeals to settle.

3. Impact of Pending Appeals and Declarations:

The court addressed the procedural aspect of filing declarations under the DTVSV Act. Section 4(2) of the Act indicates that filing a declaration results in the withdrawal of any pending appeal related to the disputed income. The court highlighted that the unit of settlement is the appeal itself, not the assessment year. This interpretation aligns with the Central Board of Direct Taxes (CBDT) Circular No.9/2020, which clarifies that each appeal is treated as a separate dispute. The court also noted that the Revenue's subsequent filing of an appeal does not alter the Assessee's right to settle specific disputes as per its declaration.

Conclusion:

The court concluded that the Assessee is entitled to confine the settlement under the DTVSV Act to the disputes that were part of its appeal (ITA No. 5958/Del/2014) and exclude the disputes from the Revenue's appeal (ITA No. 5411/Del/2014). The court directed the issuance of a modified certificate under Section 5(1) of the DTVSV Act, reflecting the Assessee's declaration. The petition was allowed, and the pending application was disposed of accordingly.

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