TaxTMI 
TaxTMI 
2023 (9) TMI 894
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubmitted by Assessing Officer and Range Head the assessee company is not eligible for VSV scheme, as prosecution has been launched on it and requested to reject the application of the assessee company. Accordingly, the application of VSV scheme of the assessee company is hereby rejected. The said rejection was pursuant to a clarification issued by respondent no. 2 vide Circular No. 21/2020 dated 4th December 2020. 3. Petitioner also seeks to challenge the legality and validity of the clarification issued by respondent no. 2 in its reply to question no. 73 in the said circular. It is petitioner's case that Section 9(a)(ii) of DTVSV Act dis-entitles a person to be eligible under the Act "in respect of tax arrear ...... relating to an assessment year in respect of which prosecution has been instituted .......". Thus, according to petitioner, the bar against applicability of DTVSV Act is when prosecution initiated relates to tax arrear. Whereas, respondent no. 2, in the said circular, has clarified that whether or not the prosecution relates to tax arrear (say for delay in filing of return, delay in deduction of TDS, etc.), the taxpayer is dis-entitled to apply for settlement of pen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld cease to be an assessee in default. The appeal was dismissed by CIT(A) and petitioner's appeal before the ITAT is still pending. 8. Alongwith the assessment orders dated 28th March 2016 for Assessment Years 2010-2011 and 2011-2012, the Assessing Officer also initiated proceedings for imposition of penalty under Section 271(1)(c) of the Act. In view of the pending appeal, the penalty proceedings were kept in abeyance. 9. Subsequently, respondent no. 1 issued show cause notices dated 7th December 2017 to petitioner alleging, inter alia, that there was a prima facie case made out against petitioner for willfully attempting to evade payment of taxes in respect of demand raised pursuant to the re-assessment orders dated 28th March 2016. Petitioner was also called upon to show cause why sanction should not be granted by respondent no. 2 to file a complaint with the appropriate Court for committing an offence punishable under Section 276C(2) read with Section 278B of the Act. Prosecution was subsequently commenced by the Revenue which filed complaint before the Additional Chief Metropolitan Magistrate, 38th Court at Ballard Pier. 10. In the meantime, DTVSV Act was notified and petit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....010-11 and 2011-12 (Ex. J-1' and 'J-2'). 12. At the outset, Mr. Sridharan submitted that : (a) prayer clauses - (a) and (b) are answered by a Division Bench of this Court in Macrotech Developers Ltd. V/s. Principal Commissioner of Income Tax (2021) 126 taxmann.com 1 (Bombay). Mr. Sridharan of course clarified that the Revenue has filed a Special Leave Petition in the Apex Court which is yet to be taken up for admission. Therefore, the law as laid down by Macrotech (Supra) holds the field; (b) Section 3 of the DTVSV Act provides for a schedule containing revised payment obligations for applicants. In essence, the DTVSV Act provided for a framework in which declarants would be given an opportunity to settle pending disputes through a cost-effective, timely and non-adversarial framework; (c) Section 9 of the DTVSV Act lists the cases whereby the DTVSV Act will not be applicable. Section 9(a)(ii) of the DTVSV Act provides that the provisions of the Act shall not apply in respect of "tax arrear" relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of declaration. This makes it apparent that the bar under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....here was a willful attempt to evade payment of tax, it would be covered under the definition of tax arrear; (c) the sanction letter dated 7th December 2017 clearly states the assessee has paid only Rs. 45 lakhs against the outstanding demand of Rs. 6.78 Crores for Assessment Year 2010-2011 and for Assessment Year 2011-2012 nothing has been paid against the outstanding demand of Rs. 7 lakhs. Mr. Sridharan responded that to get over the limitations on the time to pay under the DTVSV Act expiring, petitioner has, without prejudice to the rights and contentions, paid the entire tax component of the demands for Assessment Years 2010-2011 and 2011-2012. 14. Mr. Sharma clarified that acceptance of the declaration on the directions of this Court, which is again without prejudice to the pending SLP, will not put an end to the prosecution in view of Section 6 of the DTVSV Act. Mr. Sridharan states that that is a separate aspect which can be argued by the parties before the appropriate forum and that Court will decide the matter in accordance with law. Of course we also do not express any view or opinion on this point. 15. The moot question before us, therefore, is whether the provisio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uted 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 is made before the 31st day of March, 2020 and for the payments made after the 31st day of March, 2020 but on or before the date notified by Central Government, the amount payable shall be increased by 10 per cent. of disputed tax; (d) in appeals related to disputed penalty, disputed interest or disputed fee, the amount payable by the declarant shall be 25 per cent. of the disputed penalty, disputed interest or disputed fee, as the case may be, if the payment is made on or before the 31st day of March, 2020. If payment is made after the 31st day of March, 2020 but on or before the date notified by Central Government, the amount payable shall be increased to 30 per cent. of the disputed penalty, disputed interest or disputed fee, as the case may be. 4. The proposed Bill shall come into force on the date it receives the assent of the President and declaration may be made thereafter up to the date to be notified by the G....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. 19. In Macrotech (Supra) also the facts were that the prosecution had been initiated against petitioner therein under Section 276C(2)of the Act because of the delayed payment of the balance amount of the self assessment tax. The Court held that such delayed payment cannot be construed to be a tax arrear within the meaning of Section 2(1)(o) of the Act. Therefore, such a prosecution cannot be said to be in respect of tax arrear and hence, petitioner in that case was declared to be entitled to file a declaration under the DTVSV Act. Paragraphs 27.2, 29.1 to 34 read as under : 27.2. Therefore, from a careful and conjoint reading of the various sub- clauses comprised in section 9(a), we find that the thrust of the said provision is in respect of tax arrear which appears to be the common thread running through all the subclauses. Extricating clause (ii) from the above, we find that the exclusion referred to in section 9(a)(ii) is in respect of tax arrear relating t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the form of question and answer upto question No.55. Question No. 22 and the answer given thereto is relevant, which is extracted hereunder :- 22. In the case of an assessee prosecution has been instituted and is pending in court. Is assessee eligible for the Vivad se Vishwas? Further, where the prosecution has not been instituted but the notice has been issued, whether the assessee is eligible for Vivad se Vishwas? Ans: Where only notice for initiation of prosecution has been issued 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... eligible to file declaration for the said assessment year even on issues not relating to prosecution would not only be illogical and irrational but would be in complete deviation from section 9(a)(ii). Such an interpretation would do violence to the plain language of the statute and, therefore, cannot be accepted. We have already discussed in detail section 9(a)(ii) and we have no hesitation to hold that either on a literal interpretation or by adopting a purposive interpretation, the only exclusion visualized under the said provision is pendency of a prosecution in respect of tax arrear relatable to an assessment year as on the date of filing of declaration and not pendency of a prosecution in respect of an assessment year on any issue. The debarment must be in respect of the tax arrear as defined under section 2(1)(o) of the Vivad se Vishwas Act. To hold that an assessee would not be eligible to file a declaration because there is a pending prosecution for the assessment year in question on an issue unrelated to tax arrear would defeat the very purport and object of the Vivad se Vishwas Act. Such an interpretation which abridges the scope of settlement as contemplated under the ....