Vivad Se Vishwas – Pending appeal – Application for condonation of delay pending before CIT(A) – Notice of hearing issued – Application under VSV rejected by Pr. CIT on the ground that appeal was not admitted – Held not justified

Vivad Se Vishwas – Pending appeal – Application for condonation of delay pending before CIT(A) – Notice of hearing issued – Application under VSV rejected by Pr. CIT on the ground that appeal was not admitted – Held not justified

The petitioner challenged the order of rejection passed by the Pr. CIT under the provisions of the Direct Tax Vivad Se Vishwas Act, 2020 (‘VSV’ Act).

The petitioner had filed its original return of income tax for A.Y. 2017-18 on 30th October, 2017 declaring total income at loss of Rs. 23,92,61,385. The case was selected for scrutiny and respondent No. 1 passed an assessment order dated 19th December, 2019 u/s 144. Aggrieved by this, the petitioner filed an appeal before respondent No. 3 u/s 246A on 6th February, 2020. The time limit for filing the appeal u/s 246A expired on 18th January, 2020 but the appeal was filed on 6th February, 2020 along with an application for condonation of delay. The delay was of 19 days. On 24th January, 2020 the petitioner had paid the filing fees for the appeal.

On 20th January, 2021, the petitioner received a communication from the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, inquiring with it whether it would wish to opt for the Vivad Se Vishwas Scheme, 2020, or would like to contest the appeal. The petitioner was told to furnish the ground-wise written submission in support of the grounds of appeal along with supporting documents and evidences if it was not opting for the VSV Scheme, 2020.

The Court observed that since this communication has come from the Commissioner of Income Tax (Appeals) and the Commissioner of Income Tax (Appeals) is asking the petitioner to furnish a ground-wise written submission on the grounds of appeal, it would mean that the condonation of delay application had been allowed by the Commissioner of Income Tax (Appeals). Therefore, for respondent No. 2 to say that there is no order condoning the delay and, hence, the application / declaration of the petitioner under the VSV Act is rejected, is incorrect.

Moreover, section 2(1)(a)(i) of the VSV Act provides for a person in whose case an appeal or a writ petition or special leave petition has been filed either by himself or by the Income Tax Authority, or by both, before an appellate forum and such appeal or petition is pending as on the specified date, is entitled to make a declaration under the Act. The petitioner has admittedly made its declaration in Form 1 on 21st January, 2021, i.e., within the prescribed period.

The Central Board of Direct Taxes issued a Circular dated 4th December, 2020 in which question 59 and the answer thereto reads as under:

‘Q.59. Whether the taxpayer in whose case the time limit for filing of appeal has expired before 31st January, 2020 but an application for condonation of delay has been filed is eligible?

Answer: If the time limit for filing appeal expired during the period from 1st April, 2019 to 31st January, 2020 (both dates included in the period), and the application for condonation is filed before the date of issue of this Circular, and appeal is admitted by the appellate authority before the date of filing of the declaration, such appeal will be deemed to be pending as on 31st January, 2020.’

Therefore, where the time limit for filing of appeal has expired before 31st January, 2020 but an appeal with an application for condonation is filed before the date of the Circular, i.e., 4th December, 2020, such appeal will be deemed to be pending as on 31st January, 2020. In the answer to question 59 the expression used is ‘an appeal is admitted by the appellate authority before the date of filing of the declaration’. This has been dealt with by a Division Bench of Delhi High Court in the case of Shyam Sunder Sethi vs. Pr. Commissioner of Income Tax-10 and Ors. in Writ Petition (C) 2291/2021 and CM APPL. 6677/2021 dated 3rd March, 2021 wherein it is held that an appeal would be ‘pending’ in the context of section 2(1)(a) of the VSV Act when it is first filed till its disposal and the Act does not stipulate that the appeal should be admitted before the specified date, it only adverts to its pendency. The Court opined that the respondent could not have wrongly equated admission of the appeal with pendency. The Court, therefore, held that the appeal would be pending as soon as it is filed and until such time that it is adjudicated upon and a decision is taken qua the same. The Court agreed with the view expressed by the Division Bench in Shyam Sunder Sethi (Supra).

The Court held that the Commissioner of Income Tax (Appeals) himself has addressed a letter dated 20th January, 2021 asking the petitioner to furnish ground-wise submissions on the grounds of appeal if he was not opting for the VSV Scheme, 2020. This itself would also mean that the delay has been condoned. The order of rejection dated 26th February, 2021 is bad in law and is accordingly set aside. The respondent is directed to process the forms filed by the petitioner under the provisions of the VSV Act.