Declarant entitled under DTVSV Scheme, 2024 as appeal pending on 22 July 2024; rejection of Form-1 quashed

HC held the Designated Authority erred in rejecting the declarant's Form-1 under the DTVSV Scheme, 2024 on the ground that no valid appeal was pending. The Court found the appeal was pending as of the specified date (22.07.2024) and therefore the declarant met the statutory eligibility. The communication rejecting the declaration dated 28.03.2025 was quashed and set aside, and the Designated Authority was directed to process the Form-1 in accordance with the Scheme. The petitions were allowed and disposed of.

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ISSUES PRESENTED AND CONSIDERED

1. Whether a taxpayer whose appeal before the appellate authority was pending on the specified date (22.07.2024) is eligible to file a declaration under the Direct Tax Vivad Se Vishwas Scheme, 2024 (DTVSV Scheme, 2024) even if, subsequently, the appeal was held non-maintainable or delay in filing such appeal was not condoned.

2. Whether the Designated Authority under the DTVSV Scheme, 2024 is permitted to reject a declaration on the ground that the appeal which was pending on the specified date was invalid, incompetent or time-barred (i.e., to adjudicate the validity/maintainability of the appeal for determining eligibility).

3. The legal effect and bearing of Guidance Note/FAQ No.36 (CBDT Circulars) which provides that cases where an appeal was pending on 22.07.2024 remain eligible even if disposed subsequently, and the computation of disputed tax as if the appeal were yet to be disposed.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Eligibility where appeal was pending on specified date but later held non-maintainable / delay not condoned

Legal framework: Sections 88-99 (Chapter IV) of Finance (No. 2) Act, 2024 (DTVSV Scheme, 2024), in particular definition of "specified date" (22.07.2024) in section 89(1)(n) and the declaration/payment provisions in section 90 read with section 91. Relevant administrative guidance: CBDT Guidance Notes/Circulars incorporating FAQ No.36; Notification fixing last date for filing declaration.

Precedent treatment: The Court followed and applied prior decisions holding that pendency of an appeal for statutory schemes is to be determined by whether an appeal was filed and pending on the relevant date, without qualifying it by validity or competence - including reliance on: (i) Supreme Court authority holding that an appeal may be "pending" even if ultimately found incompetent/time-barred; (ii) earlier High Court decisions addressing similar scheme contexts which held that a declaration cannot be rejected merely because the appeal was irregular or delay not condoned.

Interpretation and reasoning: The object and scheme of DTVSV is to conclude pending litigation by reference to status on the specified date. An appeal filed and pending on 22.07.2024 satisfies the eligibility requirement even if later held non-maintainable or the delay is not condoned. Determination of competence or validity is a matter for the appellate forum, not for the Designated Authority at the declaration stage. CBDT FAQ No.36 reinforces that eligibility is assessed on whether the appeal was pending on the specified date and that disputed tax is to be computed as if the appeal were still pending.

Ratio vs. Obiter: Ratio - An appeal filed and pending on the specified date qualifies the taxpayer to file a declaration under the DTVSV Scheme, 2024; the subsequent determination of validity/competence does not negate this pendency for scheme eligibility. Obiter - Explanatory remarks on the policy rationale (reduction of litigation, certainty and revenue) provide context but are not dispositive legal propositions beyond interpretive support.

Conclusions: The Court concluded that the petitioner was eligible to file the declaration as the appeal was pending on 22.07.2024 notwithstanding later findings relating to condonation or competence; the Designated Authority erred in rejecting the declaration on the ground that the appeal was not valid or competent.

Issue 2 - Power of the Designated Authority to adjudicate validity/competence of appeal for eligibility

Legal framework: Scheme provisions read with sectional definitions; procedural role of the Designated Authority is to process declarations under the Scheme and compute tax payable as per scheme rules and notified timelines.

Precedent treatment: The Court relied on authority holding that scheme authorities cannot re-open or decide the competence of appeals where the statutory test is pendent status on a specified date (illustrated by decisions treating incompetent/irregular appeals as still "pending"). High Court precedents applied this principle to analogous settlement schemes.

Interpretation and reasoning: Determination of whether an appeal is maintainable or whether delay should be condoned is the remit of the appellate forum; the Designated Authority's jurisdiction under the Scheme is not to adjudicate those questions when eligibility hinges on pendency as of the specified date. Administrative guidance (FAQ No.36) supports this functional separation by treating subsequent disposal as irrelevant to eligibility if pendency existed on the specified date.

Ratio vs. Obiter: Ratio - The Designated Authority cannot reject a declaration solely because the appeal, though pending on the specified date, was later held invalid, incompetent, or time-barred; such contentions are for the appellate authority. Obiter - Observations on boundaries of processing obligations and possible subsequent interplay between scheme settlement and litigation outcomes (e.g., final adjudication) are illustrative.

Conclusions: The impugned rejection for alleged invalidity or non-condonation of delay was not a permissible basis for denial of eligibility; the Designated Authority was required to process the declaration in accordance with the Scheme.

Issue 3 - Effect and legal weight of CBDT Guidance Note/FAQ No.36 on eligibility and computation

Legal framework: Section 97 empowers the CBDT to issue clarificatory guidance under the Scheme; the Guidance Notes/Circulars (FAQs) were issued to explain scheme application, including FAQ No.36 replacing FAQ No.8 clarifying eligibility where appeals pending on specified date are subsequently disposed.

Precedent treatment: The Court gave persuasive weight to the CBDT's contemporaneous interpretation (FAQ No.36), aligning it with judicial principles that concentrate on the pendency test rather than later competence inquiries. Prior judicial pronouncements treating administrative clarifications as relevant interpretive aids in scheme contexts were applied.

Interpretation and reasoning: FAQ No.36 explicitly states that taxpayers whose appeals were pending on 22.07.2024 remain eligible even if their appeals were later disposed or dismissed; disputed tax is to be calculated as if the appeal were yet to be disposed. Given the Scheme's object and statutory language, this administrative guidance is consistent with statutory intent and judicially recognised principles regarding pendency.

Ratio vs. Obiter: Ratio - The Guidance Note/FAQ No.36 is a valid interpretive aid supporting eligibility where an appeal was pending on the specified date; it reinforces that post-specified date disposal does not deprive eligibility. Obiter - Remarks on administrative policy goals and benefits of settlement serve to contextualize the guidance.

Conclusions: The CBDT Guidance Note/Circular (FAQ No.36) correctly interprets the Scheme and supports the conclusion that the petitioner was eligible; the Designated Authority must process declarations consistent with that guidance and with the statutory test of pendency on the specified date.

Relief and direction

Given the foregoing analyses, the Court quashed the communication rejecting the declaration and directed the Designated Authority to process the declaration in Form-1 under the DTVSV Scheme, 2024 in accordance with the Scheme and applicable guidance, thereby allowing the petition(s) and disposing them without any order as to costs.

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