2025 (10) TMI 704 - HC - Income Tax

Authority erred rejecting DTVSV Scheme Form No.1 for manual appeal; directs processing under Rule 45 per CBDT guidance

HC held the authority erred in rejecting the petitioner's DTVSV Scheme Form No.1 on the ground that an appeal filed manually (due to petitioner being an ... Rejection of Application under the provisions of the DTVSV Scheme, 2024 - mandation to file application online - petitioner had challenged the assessment order for the Assessment Year 2012-13 by preferring an appeal in Form No.35 manually, as the petitioner is a Non-Resident Indian and was not having Aadhar number linked with PAN, so as to prefer an appeal online as per the provisions of Rule 45 of the Income Tax Rules, 1962 HE;D THAT:- As per the FAQ No.36 which is inserted by Guidance Note No. 2 of 2024 dated 16.12.2024, the CBDT has clarified that the assessee would be eligible for settlement under the DTVSV Scheme, 2024 as the appeal was pending as on 22.07.2024 and the disputed tax is to be calculated in the same manner as if the pending appeal on 22.07.2024 is yet to be disposed of, though appeal would have been disposed of on merits or otherwise. This Court in case of Tushar Agro Chemicals [2021 (7) TMI 1267 - GUJARAT HIGH COURT] and in case of Atul Roshanlal Gupta [2024 (9) TMI 93 - GUJARAT HIGH COURT] has in similar circumstances while considering the similar Scheme called “Kar Vivad Samadhan Scheme”, held that even if the appeal is filed with a delay, it is to be treated as pending on the specified date. Also see NEELABEN GHANSHYAMBHAI PARMAR [2025 (9) TMI 1135 - GUJARAT HIGH COURT] The respondent-authority was not justified in rejecting the declaration in Form No. 1 filed by the petitioner under the DTVSV Scheme, 2024 on the ground that appeal filed by the petitioner was an invalid appeal as the same was not filed as per Rule 45 of the Rules. Respondent – authority is directed to process the declaration in Form No. 1 filed by the petitioner under the DTVSV Scheme, 2024. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether a declaration under the Direct Tax Vivad Se Vishwas Scheme, 2024 (DTVSV Scheme, 2024) in Form No.1 is invalidly rejectable on the sole ground that the appellate remedy (appeal in Form No.35) was filed manually and not online in purported non-compliance with Rule 45 of the Income-tax Rules, 1962. 2. Whether the Designated/Respondent Authority is entitled, at the stage of considering eligibility under the DTVSV Scheme, 2024, to adjudicate the maintainability, validity or competence of an appeal that was pending as on the specified date (22.07.2024), or whether the only relevant question for eligibility is whether an appeal was pending on that specified date. 3. The legal effect of Guidance Note / FAQ No.36 (CBDT Circular) and prior judicial pronouncements on whether an appeal that was pending on the specified date remains eligible for settlement under the Scheme even if subsequently disposed of or held to be invalid. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of rejection of Form No.1 on ground of manual (non-online) filing of appeal contrary to Rule 45 Legal framework: DTVSV Scheme, 2024 (Chapter VI, Sections 88-99 of Finance (No.2) Act, 2024); eligibility requires proceedings to be pending on the specified date (22.07.2024); Rule 45 of Income-tax Rules, 1962 prescribes mode of filing appeals (amendment effective 01.03.2016 introducing online filing requirements). Precedent treatment: The Court relied on earlier decisions holding that for analogous settlement schemes an appeal pending on the specified date satisfies eligibility even if the appeal is irregular, time-barred or would later be held incompetent (decisions applying the Kar Vivad Samadhan Scheme and authorities such as Tushar Agro Chemicals and Atul Roshanlal Gupta; Supreme Court dicta cited on distinction between pendency and competence). Interpretation and reasoning: The Scheme's eligibility criterion focuses on pendency as of the specified date, not on preliminary adjudication of validity. The Court emphasised that whether an appeal was filed online under Rule 45 concerns maintainability - a matter for the appellate forum - and not a threshold for declaring that no appeal was pending on the specified date. The Tribunal/Designated Authority cannot convert the eligibility check into an adjudication on competence; doing so would frustrate the legislative object of settling disputes and generating revenue by excluding litigants whose appeals were pending but subsequently found irregular. Ratio vs. Obiter: Ratio - rejection of a declaration under the Scheme solely because the appeal was filed manually (and not online) is impermissible where the appeal was pending on the specified date. Obiter - procedural implications of Rule 45 do not affect the substantive eligibility under the Scheme beyond pendency. Conclusion: The Designated Authority's rejection for want of online filing under Rule 45 was not justified; an appeal filed manually and pending on 22.07.2024 meets the Scheme's pendency requirement for eligibility. Issue 2: Competence of the Designated Authority to assess maintainability/validity of pending appeals for Scheme eligibility Legal framework: Sections 88-99 of the DTVSV Scheme, 2024 (notably sections defining 'specified date' and requiring that proceedings be pending on that date); Guidance Notes/FAQs issued by CBDT under Section 97; principles of statutory interpretation concerning special Code-like settlement schemes. Precedent treatment: Adopted the line of authority treating settlement schemes as self-contained codes where the test is pendency on the specified date and not the substantive validity of the pending remedy (references to Supreme Court decisions and Gujarat High Court precedents affirming that an appeal remains an appeal even if irregular and that validity is for appellate determination). Interpretation and reasoning: The Court held that the statutory scheme aims to curtail pending litigation and therefore treats all proceedings pending on the specified date as eligible irrespective of later determinations on validity. The Designated Authority, when processing Form No.1, is constrained to determine factual pendency on the specified date and not to resolve legal objections as to maintainability; the latter is for the appellate forum and cannot be a ground to disqualify an applicant from the Scheme retrospectively. Ratio vs. Obiter: Ratio - a Designated Authority cannot reject a declaration on the ground that the appeal was invalid or incompetent when the appeal was, in fact, pending on the specified date. Obiter - the broader policy rationale of treating settlement schemes as codes to end litigation. Conclusion: The Authority's enquiry must be limited to whether an appeal was pending on 22.07.2024; it is not empowered to make a preclusive determination that the appeal was invalid for purposes of denying Scheme benefits. Issue 3: Effect of CBDT Guidance Note/FAQ No.36 and application of prior decisions where appeals were subsequently disposed of or found invalid Legal framework: CBDT Guidance Note No.1/2024 and Guidance Note No.2/2024 (inserting FAQ No.36); Scheme provisions defining 'specified date'; ancillary Circulars/Notifications extending computation and filing dates. Precedent treatment: The Court treated FAQ No.36 as clarifying that an appeal pending on the specified date remains eligible even if subsequently disposed of on merits or dismissed as withdrawn; earlier jurisprudence under similar schemes held analogous positions and was followed. Interpretation and reasoning: FAQ No.36 expressly answers that cases where an appeal was pending on the specified date but subsequently disposed of remain eligible and that disputed tax is to be computed as if the appeal were still pending on that date. That clarification aligns with judicial precedents which interpret settlement schemes pragmatically to avoid denial of benefits based on subsequent events. The Court found the Guidance Note to be a relevant departmental clarification that supports the petitioner's eligibility and limits the Authority's power to reject on maintainability grounds. Ratio vs. Obiter: Ratio - FAQ No.36 is a determinative clarification for eligibility under the Scheme and supports treating pendency on the specified date as conclusive for admission to the Scheme; Obiter - observations on the underlying policy aims of the Scheme and administrative guidance hierarchy. Conclusion: CBDT FAQ No.36 reinforces that an appeal pending on 22.07.2024 suffices for eligibility; subsequent invalidation or disposal does not negate eligibility and the disputed tax must be computed as if the appeal remains pending on that date. Relief and consequential direction Applying the above analysis, the Court concluded that the impugned communication rejecting the Form No.1 declaration solely on the ground of alleged invalidity of the appeal (for not being filed online) was unsustainable. The rejection was quashed and set aside and the Authority was directed to process the declaration in accordance with the Scheme within a stipulated period (12 weeks), limited to the Scheme's criteria and without adjudicating appeal maintainability for the purpose of eligibility.