Direct Tax Vivad se Vishwas Act, 2020 – Scope of – Act deals with disputed tax – Application for revision u/s 264 relating to tax demand – Applicant eligible to make declaration under Direct Tax Vivad se Vishwas Act

Direct Tax Vivad se Vishwas Act, 2020 – Scope of – Act deals with disputed tax – Application for revision u/s 264 relating to tax demand – Applicant eligible to make declaration under Direct Tax Vivad se Vishwas Act

The petitioner was engaged in the business of retail footwear. He had filed declarations in Form 1 and undertaking in Form 2 in respect of each of the A.Ys. 1988-89 to 1997-98, u/s 4(1) of the Direct Tax Vivad se Vishwas Act, 2020 on 18th November, 2020. However, the same was rejected on 30th January, 2021.

Being aggrieved, the petitioner filed a writ petition and challenged the order of rejection. The Bombay High Court allowed the writ petition and held as under:

‘i) The Direct Tax Vivad se Vishwas Act, 2020 is aimed not only to benefit the Government by generating timely revenue but also to benefit the taxpayers by providing them with peace of mind, certainty and saving time and resources rather than spending the same otherwise. The Preamble clearly provides that this is an Act to provide for resolution of disputed tax and for matters connected therewith or incidental thereto. The emphasis is on disputed tax and not on disputed income.

ii) For a declarant to file a valid declaration there should be disputed tax in the case of such declarant. The definition of “tax arrears” clearly refers to an aggregate of the amount of disputed tax, interest chargeable or charged on such disputed tax, etc., determined under the provisions of the Income-tax Act, 1961. From a plain reading of the provisions of the 2020 Act and the Rules, it emerges that the designated authority would have to issue Form 3 as referred to in section 5(1) specifying the amount payable in accordance with section 3 of the 2020 Act in the case of a declarant who is an eligible appellant not falling u/s 4(6) nor within the exceptions in section 9 of the 2020 Act.

iii) The assessee had filed an application u/s 264 for adjustment or credit of Rs. 12,43,000 paid in respect of the tax demands of the A.Ys. 1988-89 to 1998-99 as according to him this amount had been adjusted only against the demand for the A.Y. 1987-88. While this application was pending, the Direct Tax Vivad se Vishwas Act, 2020 was enacted, followed by the Direct Tax Vivad se Vishwas Rules, 2020. The assessee filed applications under the 2020 Act and Rules. The assessee having filed a revision application u/s 264 for the A.Ys. 1988-89 to 1998-99 for adjustment of Rs.12,43,000 which application was pending before the Commissioner, admittedly being an eligible appellant, squarely satisfied the definition of “disputed tax” as contained in section 2(1)(j)(F) of the 2020 Act. This was because if the revision application u/s 264 were rejected, the assessee would purportedly be liable to pay a demand of Rs. 88,90,180 including income tax and interest. The assessee as eligible appellant had filed a declaration u/s 4 with the designated authority under the provisions of section 4 of the 2020 Act in respect of tax arrears, which included the disputed tax which would become payable as may be determined. This was not only a case where there was a disputed tax but also tax arrears as referred to in section 3 of the 2020 Act.

iv) The designated authority had not raised any objection under any provision of the 2020 Act or Rules with respect to the declarations or undertakings furnished by the assessee, nor passed any order let alone a reasoned or speaking order rejecting the declarations. The designated authority had summarily rejected the declarations without there being any such provision in the 2020 Act or the Rules. There was also no fetter on the designated authority to determine the disputed tax at an amount other than that declared by the assessee. The designated authority under the 2020 Act was not justified in rejecting the declarations filed by the assessee.

v) Accordingly, we set aside the rejections. We direct respondent No. 2 to consider the applications made by the petitioner by way of declarations dated 18th November, 2020 in Form 1 as per law and proceed with them according to the scheme of the Direct Tax Vivad se Vishwas Act and Rules in the light of the above discussion within a period of two weeks from the date of this order. The petition is allowed in the above terms.’