Petitioner eligible for benefits under DTVSV Scheme 2024 as draft order finalized under Section 144C

The HC held that the petitioner is eligible for benefits under the DTVSV Scheme, 2024, as the draft assessment order under section 144C was passed on 30.03.2022, and no objections were filed within the stipulated period. The assessed income in the draft order became final, making the petitioner liable to pay tax accordingly. Consequently, the impugned order rejecting the declaration under Form No. 1 was quashed and set aside. The AO was directed to process the declaration in accordance with the DTVSV Scheme, 2024.

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ISSUES:

Whether a declaration filed under section 91 of the Finance (No. 2) Act, 2024 for availing benefit under the Direct Tax Vivad Se Vishwas Scheme, 2024 (DTVSV Scheme) can be rejected on the ground of pendency of a writ petition challenging the notice issued under section 148 of the Income Tax Act, 1961.Whether the passing of a draft assessment order under section 144C of the Income Tax Act, 1961 constitutes determination of "disputed tax" making the assessee eligible for the DTVSV Scheme despite no final assessment order having been passed.Interpretation of the definition of "appellant" and "disputed tax" under sections 89(1)(a) and 89(1)(j) of the Finance (No. 2) Act, 2024 in the context of pending writ petitions and draft assessment orders.Whether the guidance provided by Question No. 26 of the CBDT Circular No. 12/2024 (FAQs) excluding cases with pending writs and no assessment order passed applies where a draft assessment order has been passed but no final order due to court stay.

RULINGS / HOLDINGS:

The declaration filed under section 91 of the Finance (No. 2) Act, 2024 cannot be rejected merely because a writ petition challenging the section 148 notice is pending, as the petitioner qualifies as an "appellant" under section 89(1)(a)(i) of the Act.The draft assessment order passed under section 144C on 30.03.2022 crystallizes the amount of tax payable by the petitioner, and in absence of any objections filed within the prescribed time, the draft order is to be treated as final assessment under section 144C(3)(b) of the Income Tax Act, 1961.The petitioner's eligibility under the DTVSV Scheme arises from the fact that the writ petition was pending on the specified date and the disputed tax is ascertainable based on the draft assessment order, satisfying the definitions in sections 89(1)(a) and 89(1)(j) of the Finance (No. 2) Act, 2024.The CBDT FAQ No. 26, which excludes cases with pending writs and no assessment order passed, does not apply where a draft assessment order has been passed and no objection has been filed, as the assessed income and tax liability are effectively determined.The impugned order rejecting the declaration under the DTVSV Scheme is quashed and set aside, and the designated authority is directed to process the declaration in accordance with the Scheme.

RATIONALE:

The Court applied the statutory definitions contained in sections 89(1)(a) and 89(1)(j) of the Finance (No. 2) Act, 2024, which define "appellant" to include persons with pending appeals or writ petitions on the specified date, and "disputed tax" as the tax payable if such appeal or petition were decided against the appellant.Section 144C of the Income Tax Act, 1961, was interpreted to mean that a draft assessment order becomes final if no objections are filed within thirty days, thus fixing the tax liability for the purpose of the Scheme.The Court distinguished the facts from the CBDT FAQ No. 26, noting that the FAQ applies only where no assessment order (draft or final) has been passed, whereas here a draft assessment order had crystallized the tax liability before the writ petition was pending.No doctrinal shift or dissent was noted; the decision follows a strict interpretation of the statutory scheme to allow settlement of disputes pending before appellate forums under the DTVSV Scheme.

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