TaxTMI 
TaxTMI 
2021 (3) TMI 1089
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....se Vishwas Rules, 2020. Therefore, petitioner seeks quashing of the said clarification and further seeks a direction to respondent No.1 to accept the declaration filed by the petitioner on 23.09.2020 under the Direct Tax Vivad se Vishwas Act, 2020. 3. Case of the petitioner as pleaded in the writ petition is that it is a public limited company incorporated under the Companies Act, 1956 having its registered office at Mahalaxmi, Mumbai. It is engaged in the business of land development and construction of real estate properties. 4. Initially, Shreeniwas Cotton Mills Private Limited ('Cotton Mills' for short) was a subsidiary of the petitioner. Subsequently it was merged with the petitioner on the strength of the amalgamation scheme sanctioned vide order dated 07.06.2019 passed by the National Company Law Tribunal, Mumbai Bench. The merger had taken place with effect from 01.04.2018. However, the pending tax demand against the cotton mills under the Income Tax Act, 1961 (briefly 'the Act' hereinafter) continued in the name of the cotton mills since migration of the permanent account number of the cotton mills to the permanent account number of the petitioner has....
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....(2) of the Act. 8. Similar notices as issued to the petitioner were issued by respondent No.1 to the directors of the cotton mills in their individual capacity to which the respective directors replied by denying the allegations. 9. In the meanwhile, on 17.12.2017, the assessing officer passed the assessment order for the assessment year 2015-16 under section 143(3) of the Act. In the assessment order, assessing officer disallowed certain expenses claimed by the petitioner towards workmen's compensation and other related expenses. After disallowing such claim, assessing officer computed the tax liability of the petitioner at Rs. 61.75 crores which was inclusive of interest. 10. When the aforesaid assessment order dated 17.12.2017 was challenged by the petitioner in appeal, the appellate authority i.e., Commissioner of Income Tax (Appeals) dismissed the appeal and upheld the assessment order vide order dated 27.12.2018. 11. Aggrieved by the order of Commissioner of Income Tax (Appeals) dated 27.12.2018, petitioner preferred further appeal before the Income Tax Appellate Tribunal (briefly 'the Tribunal' hereinafter) which was registered as ITA No.1538/Mum/2019....
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.... for the said assessment year and in respect of which prosecution has not been launched? The answer given to this is that ineligibility to file declaration relates to an assessment year in respect of which prosecution has been instituted on or before the date of declaration. Since for the assessment year 2012-13 prosecution has already been instituted, the tax payer would not be eligible to file declaration for the said assessment year even on issues not relating to prosecution. 17. It is the grievance of the petitioner that on the basis of the answer given to question No.73 as alluded to hereinabove its declaration would be rejected since the declaration pertains to the assessment year 2015-16 and prosecution has been launched against the petitioner for delayed payment of self-assessment tax for the assessment year 2015-16. 18. It is in this context that the present writ petition has been filed seeking the reliefs as indicated above. 19. Respondents have filed a common affidavit through Mr. Abhay Damle, Principal Commissioner of Income Tax, Central-4, Mumbai. Referring to section 9(a)(ii) of the Vivad se Vishwas Act, it is submitted that the same is an exclusionary clause....
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....en to question No.73 of circular No.21/2020 is reasonable and rational having nexus to the object sought to be achieved by the Vivad se Vishwas Act. In the circumstances, respondents seek dismissal of the writ petition. 20. Mr. Sridharan, learned senior counsel for the petitioner has referred to the statement of objects and reasons while introducing the Vivad se Vishwas Bill in the Parliament as well as the statement made by the Hon'ble Finance Minister in her Budget speech on 01.02.2020 and submits that the scheme introduced by way of the Vivad se Vishwas Act is to reduce litigation in direct taxes. A huge amount of disputed tax arrears is locked up in appeals at various stages and the amount of disputed direct tax arrears as on 30.11.2019 was Rs. 9.32 lakh crores which is roughly almost one year of direct tax collections; besides, tax disputes consume enormous amount of time, energy and resources of both the tax payers and of the government. Therefore, resolution of pending tax disputes is the need of the hour. This will not only benefit the government by generating timely revenue but also the tax payers who will be able to deploy the time, energy and resources saved by op....
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....son who is accused of infringing provisions of the related statutes. In (b), the provisions are of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974; in (c), it is Unlawful Activities (Prevention) Act, 1967, the Narcotic Drugs and Psychotropic Substances Act, 1985, Prevention of Corruption Act, 1988, Prevention of Money Laundering Act, 2002 and Prohibition of Benami Property Transactions Act, 1988; in (d), prosecution should be initiated by an income tax authority for any offence punishable under the provisions of the Indian Penal Code; and under (e), Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992. He, therefore, submits that there is a fundamental distinction between the exclusionary provision of section 9(a) on the one hand and sections 9(b), (c), (d) and (e) on the other hand. While in the case of the former the exclusion is in respect of tax arrear relating to an assessment year, in the case of the later the exclusion pertains to a person who has suffered disability or prosecution under the mentioned statutes. If this is the position then the answer given to question No.73 contained in the circular No.21/2020 w....
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.... is crossed, the benefits available to a declarant is to be construed liberally. Adverting to the facts of the present case, he submits that provisions of section 9(a)(ii) has to be construed strictly. Viewed in that context, the departmental interpretation given as answer to question No.73 reflects the correct position. He, therefore, seeks dismissal of the writ petition. 22. Submissions made by learned counsel for the parties have been duly considered. 23. Before adverting to the Vivad se Vishwas Act, we may usefully extract the relevant portion of the budget speech of the Hon'ble Finance Minister made on 01.02.2020 which reads thus:- " Sir, in the past our government has taken several measures to reduce tax litigations. In the last budget, Sabka Vishwas Scheme was brought in to reduce litigation in indirect taxes. It resulted in settling over 1,89,000 cases. Currently, there are 4,83,000 direct tax cases pending in various appellate forums i.e. Commissioner (Appeals), ITAT, High Court and Supreme Court. This year, I propose to bring a scheme similar to the indirect tax Sabka Vishwas for reducing litigations even in the direct taxes. Under the proposed....
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.... the Government by generating timely revenue but also the taxpayers who will be able to deploy the time, energy and resources saved by opting for such dispute resolution towards their business activities. 3. It is, therefore, proposed to introduce the Direct Tax Vivad se Vishwas Bill, 2020 for dispute resolution related to direct taxes, which, inter alia, provides for the following, namely:- (a) the provisions of the Bill shall be applicable to appeals filed by taxpayers or the Government, which are pending with the Commissioner (Appeals), Income tax Appellate Tribunal, High Court or Supreme Court as on the 31st day of January, 2020 irrespective of whether demand in such cases is pending or has been paid; (b) the pending appeal may be against disputed tax, interest or penalty in relation to an assessment or reassessment order or against disputed interest, disputed fees where there is no disputed tax. Further, the appeal may also be against the tax determined on defaults in respect of tax deducted at source or tax collected at source; (c) in appeals related to disputed tax, the declarant shall only pay the whole of the disputed tax if the payment ....
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.... Vishwas Act. As per section 2(1)(g), 'disputed income' in relation to an assessment year has been defined to mean the whole or so much of the total income as is relatable to the disputed tax. 'Disputed tax' is defined in section 2(1)(j) to mean income tax including surcharge and cess in relation to an assessment year or financial year as the case may be payable by the appellant under the provisions of the Act in the manner computed under the said provision. Similarly, 'disputed fee', 'disputed interest' and 'disputed penalty' have also been defined under sections 2(f), 2(h) and 2(i). Under section 2(1)(h), 'disputed interest' has been defined to mean the interest determined in any case under the provisions of the Act where such interest is not charged or chargeable on disputed tax; and an appeal has been filed by the appellant in respect of such interest. Finally, 'tax arrear' has been defined in section 2(1)(o) in the following manner:- "(o) 'tax arrear' means,- (i) the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax, and penalty leviable or levied on such disputed tax; or (ii) disputed inter....
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....osition of penalty or levy of interest in respect of tax arrear once section 5 comes into play. 27. Section 9 is relevant. This section provides for instances where Vivad se Vishwas Act would not apply. Section 9(a) mentions four instances where provisions of the Vivad se Vishwas Act would not be applicable. Section 9(a) reads as under:- "9. The provisions of this Act shall not apply- (a) in respect of tax arrear,-- (i) relating to an assessment year in respect of which an assessment has been made under sub-section (3) of section 143 or section 144 or section 153A or section 153C of the Income-tax Act on the basis of search initiated under section 132 or section 132A of the Income-tax Act, if the amount of disputed tax exceeds five crore rupees; (ii) relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of declaration; (iii) relating to any undisclosed income from a source located outside India or undisclosed asset located outside India; (iv) relating to an assessment or reassessment made on the basis of information received under an agreement referred to in section....
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.... case a prosecution has been instituted in respect of tax arrear relating to an assessment year on or before the date of filing of declaration. The prosecution has to be in respect of tax arrear which naturally is relatable to an assessment year. 27.3. If we look at clauses (b) to (e) of section (9), we find that there is a clear demarcation in section 9 in as much as the exclusions provided under clause (a) is in respect of tax arrear whereas in clauses (b) to (e), the thrust is on the person who is either in detention or facing prosecution under the special enactments mentioned therein. Therefore, if we read clauses (b) to (e) of section 9, it would be apparent that such categories of persons would not be eligible to file declaration under the Vivad se Vishwas Act in view of their exclusion in terms of section 9(b) to (e). 28. While section 10 empowers respondent No.2 to issue directions or orders to the income tax authorities from time to time, section 12 is the rule making provision. 29. In exercise of the powers conferred by sub-section (2) of section 12 read with sub-sections (1) and (5) of section 4 and sub-sections (1) and (2) of section 5 of the Vivad se Vishwas A....
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....ued without prosecution being instituted, the assessee is eligible to file declaration under Vivad se Vishwas. However, where the prosecution has been instituted with respect to an assessment year, the assessee is not eligible to file declaration for that assessment year under Vivad se Vishwas, unless the prosecution is compounded before filing the declaration." 30.1. From the above, what is discernible is that where only notice for initiation of prosecution has been issued, assessee would be eligible to file declaration. However, once prosecution is instituted with respect to an assessment year, the assessee would not be eligible to file declaration for that assessment year unless the prosecution is compounded before filing the declaration. 31. In the circular No.20 / 2020 dated 04.12.2020, respondent No.2 issued further clarifications in respect of Vivad se Vishwas Act. In the circular dated 22.04.2020, the clarifications were upto question No.55. In the circular dated 04.12.2020 further clarifications have been given from question No.56 onwards upto question No.89. Question No.73 and the answer given thereto has been impugned by the petitioner by contending that on the bas....