Personal penalty under Rule 26 and settlement under the voluntary disclosure scheme bar co-noticee appeals; relief granted to appellant

When the primary tax liability is resolved by settlement under the voluntary disclosure scheme, appeals by co-noticees challenging personal penalties under Rule 26 that arise from the same impugned order are unsustainable; the author concludes such collateral appeals must be dismissed and the appellant's challenge to the personal penalty is allowed. The note relies on tribunal precedent applying the principle that settlement of the main demand removes the foundation for separate co-noticee penalty appeals, producing an operative effect of permitting relief to appellants whose liabilities were settled under the scheme.

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Issues: Whether an appeal filed by a co-noticee challenging a personal penalty arising from an impugned order can be sustained where the main appeal in respect of the same impugned order has been settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS, 2019).

Analysis: The Tribunal examined prior decisions holding that settlement of the principal appeal under SVLDRS, 2019 effectively precludes continuation of related appeals filed by co-noticees that challenge personal penalties arising from the same impugned order. The Tribunal applied that reasoning to the present appeal and noted that the main appeal in the related matter had been settled under SVLDRS, 2019, following which co-noticee appeals were held not to be maintainable.

Conclusion: The appeal is allowed; the appeal by the co-noticee challenging the personal penalty cannot be sustained where the principal appeal has been settled under SVLDRS, 2019, and therefore the appellant's challenge to the personal penalty succeeds.

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