2025 (1) TMI 509 - HC - Income Tax

Petitioner wins partial relief under Direct Tax Vivad Se Vishwas Act with reduced tax computation rate

Umesh Navnitlal Shah HUF Versus Income Tax Officer – Circle 18 (3) (5), Mumbai, Principal Commissioner of Income Tax – 19 (Designated Authority under Direct Tax Vivad se Vishwas Act, 2020) Mumbai, Commissioner of Income Tax (Appeals) – 29 Mumbai.

The Bombay HC partially allowed the petition under the Direct Tax Vivad Se Vishwas Act. The court rejected petitioner's attempt to include Rs. ... Determining the disputed tax under the Direct Tax Vivad Se Vishwas Act - calculation is based on the premise that a search was executed in some other taxpayer’s case and that this was not a case of voluntary disclosure by the Petitioner or that this was not a “non-search” case - as submitted that the calculation should have been based on the rate of 100% of the disputed tax, not 125% - addition towards the claim of LTCG u/s 68 - HELD THAT:- There is no material on record to show that the Petitioner retracted from the concession given regarding the addition u/s 68 either by raising an additional ground or otherwise in such an appeal. Only after the DTVSV Act came into force, or rather, only after the CBDT issued its Circular dated 04 December 2020, was an attempt made by the Petitioner to belatedly amend the Appeal Memo and challenge the addition. While giving the Petitioner benefits of the DTVSV Scheme, the Respondents correctly refused to consider this belated attempt to amend the Appeal Memo, claiming that even Rs. 2,02,50,919/- constituted a “disputed tax”. Such approbation and reprobation were quite correctly not appreciated by the Respondents. The Respondents' approach is consistent with the DTVSV Act and the CBDT circular dated 04 December 2020. DTVSV Act aims to settle tax disputes pending in Courts and other adjudicatory authorities as of the specified date. The petitioner attempted to post facto and belatedly expand the scope of the dispute to include amounts that the Petitioner had explicitly conceded as liable to additions. The Petitioner never appealed such additions and restricted its appeal only to the addition of Rs. 9,11,037/- under Section 69C of the Income Tax Act. The Petitioner also paid the tax on the added amount of Rs. 2,02,50,919/- towards LTCG. By such a belated expansion of the disputes, the object of the DTVSV Act or the amnesty schemes cannot be frustrated. The remedies under Articles 226 and 227 of the Constitution are discretionary and equitable. Such jurisdiction must be exercised to promote justice. Here is the Petitioner, who conceded and acknowledged the addition of Rs. 2,02,50,919/- towards LTCG, which was incorrectly claimed. It paid tax on this amount without any serious demur. Naturally, therefore, the Assessment Order dated 26 December 2016, which made the addition based upon such concession/acknowledgement, could not have been ordinarily appealed by the Petitioner. Petitioner, therefore, did not appeal this addition in the Memo of Appeal lodged on 27 January 2017. By attempting to amend the appeal memo belatedly and after the specified date, this amount of Rs. 2,02,50,919/- towards LTCG cannot be considered the disputed tax amount. If this is permitted, the Petitioner, by such a subterfuge or by creating an artificial dispute, will claim a refund of the tax paid without demur or claim concessions even with respect to undisputed taxes already paid. Accordingly, we are satisfied that the Respondents did not act illegally or arbitrarily in not considering the additional grounds concerning the addition u/s 68 in determining the amount payable under the DTVSV Act. Therefore, the challenge on this count is liable to be rejected and is hereby rejected. Petitioner is on firm ground in contending that the Petitioner’s case was not a “search case”, or that it was a “non-search case”, and therefore, the computation at the rate of 125% as also FAQ 70 of Circular dated 04 December 2020 could be adopted. The record shows, and in fact, it was conceded by the Respondents, that the Petitioner’s case was a “non-search case”. Therefore, the computation could not be at the rate of 125% but had to be at the rate of only 100%. The decision in Bhupendra Mehta [2021 (5) TMI 47 - BOMBAY HIGH COUR] supports the Petitioner’s case regarding the computation of the tax payable amount at 100% instead of 125%. The Respondents conceded this position at the stage of arguments and in the Principal Commissioner’s Affidavit dated 17 July 2021. Accordingly, limited interference on this aspect is called for in this matter. Considering that the Affidavit was filed on 17 July 2021, this revised Form-3 should have been issued by now. In any event, we direct that revised Form-3 determining the amount payable at the rate of 100% of the disputed tax for the Assessment Year 2014-15 should be issued by the Competent Authority to the Petitioner within 30 (thirty) days from today, along with all consequential benefits. Claim for including addition u/s 68 for benefits under the DTVSV Act/Scheme is rejected. However, the Petitioner’s contention about determining the amount payable at the rate of 100% of the disputed tax for the Assessment Year 2014-15 is allowed, and the Respondents are directed to issue the revised Form-3 as undertaken by them in their Affidavit within 30 (thirty) days from today along with all consequential benefits. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the calculation of the amount payable under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act) at the rate of 125% was legal, given the classification of the Petitioner's case as a 'search case' or 'non-search case'.Whether the Respondents erred in not considering additional grounds raised by the Petitioner for determining the disputed tax under the DTVSV Act.The applicability and interpretation of CBDT Circular No.21 of 2020 concerning additional grounds filed in appeals.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Calculation of the Amount Payable under the DTVSV ActRelevant legal framework and precedents: The DTVSV Act provides a scheme for settling tax disputes. The calculation of the amount payable is governed by Section 3 of the DTVSV Act. The case of Bhupendra Harilal Mehta was cited, which dealt with similar issues regarding the classification of cases under the DTVSV Act.Court's interpretation and reasoning: The court noted that the Respondents conceded that the Petitioner's case was a 'non-search case'. Therefore, the calculation should be at the rate of 100% instead of 125%.Key evidence and findings: Paragraph 34 of the Principal Commissioner's Affidavit acknowledged the error in classifying the case as a 'search case'.Application of law to facts: The court applied the legal framework of the DTVSV Act and the precedent set by Bhupendra Mehta to determine that the correct rate for calculation was 100%.Treatment of competing arguments: The Respondents agreed with the Petitioner's argument on this point, and the court directed the issuance of a revised Form-3 reflecting the correct calculation.Conclusions: The court concluded that the Petitioner's case was a 'non-search case', and the amount payable should be calculated at 100%.Issue 2: Consideration of Additional Grounds for Disputed TaxRelevant legal framework and precedents: The DTVSV Act defines 'disputed tax' and outlines the process for determining it. CBDT Circular No.21 of 2020 provides guidance on considering additional grounds filed before the specified date.Court's interpretation and reasoning: The court found that the Petitioner's attempt to amend the appeal to include additional grounds was belated and not in accordance with the DTVSV Act or the CBDT Circular.Key evidence and findings: The Petitioner did not challenge the addition of Rs. 2,02,50,919/- in its initial appeal and only attempted to do so after the specified date.Application of law to facts: The court applied the definition of 'disputed tax' and the provisions of the CBDT Circular to determine that the additional grounds were not timely filed and could not be considered.Treatment of competing arguments: The court rejected the Petitioner's arguments regarding transitional issues and software glitches due to a lack of evidence.Conclusions: The court concluded that the additional grounds could not be considered for determining disputed tax under the DTVSV Act.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'The remedies under Articles 226 and 227 of the Constitution are discretionary and equitable. Such jurisdiction must be exercised to promote justice.'Core principles established: The classification of cases as 'search' or 'non-search' under the DTVSV Act must be accurate for the correct calculation of the payable amount. Additional grounds must be filed before the specified date to be considered under the DTVSV Act.Final determinations on each issue: The court directed the issuance of a revised Form-3 for the Petitioner's case at the rate of 100%. The court rejected the Petitioner's claim for considering additional grounds for disputed tax.The judgment provides clarity on the application of the DTVSV Act, emphasizing the importance of timely filing and accurate classification of cases for determining the amount payable under the scheme.