Appeal By Assessee Prior To Declaration Under VSVS Act, Shall Revive On Failure To Pay the Tax Determined: ITAT

The bench of V. Durga Rao (Judicial Member) and G. Manjunatha (Accountant Member) held that the DTVSVS Act provides amnesty to both the revenue department as well as the assessee under Section 4(6). The Tribunal further observed that the sum determined by the designated authority, which is payable by the declarant under the DTVSVS Act, is final and that it cannot be challenged by the declarant before any appellate forum.

The assessee- M/s. Lifecell International Private Limited, filed an appeal before the ITAT, challenging the order passed by the revenue authorities regarding the assessee's tax liability.

Thereafter, the assessee filed a declaration under Section 4(1) of the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSVS Act), to resolve the disputed tax liability. Subsequently, the designated authority issued Form No. 3 under Section 5(1) of the DTVSVS Act and determined the amount payable by the assessee. Due to the non-consideration of certain issues by the designated authority, the assessee opted out of the VSVS Scheme.

The revenue department filed an application before the ITAT, challenging the maintainability of the appeal filed by the assessee prior to opting for the VSVS Scheme.

The revenue department submitted before ITAT that as per Section 4(2) of the DTVSVS Act, upon filing of a declaration under the DTVSVS Act, any appeal pending before the ITAT or the Commissioner of Income Tax (Appeals), in respect of the disputed income, shall be deemed to have been withdrawn from the date on which a certificate is issued by the designated authority.

The department averred that once the said appeal is deemed to have been withdrawn, it can no longer be pursued by the assessee. Thus, it contended that the ITAT cannot proceed to decide the appeal filed by the assessee.

The department added that in view of Section 4(7) of the DTVSVS Act, no appellate forum, arbitrator, conciliator or mediator can proceed to decide any issue relating to the tax arrears, as mentioned in the declaration filed under the DTVSVS Act, in respect of which an order has been passed by the designated authority.

The assessee- M/s. Lifecell International, submitted that under Section 4(6) of the DTVSVS Act, the declaration made under Section 4(1) shall be presumed to have never been made if the declarant violates any of the conditions referred to in the DTVSVS Act, including non-payment of tax. The assessee averred that since it had violated the conditions by not paying the tax determined by the designated authority under the DTVSVS Act, all the proceedings and claims which were withdrawn by it under Section 4, shall be deemed to have been revived.

The ITAT noted that as per Section 4(2), the moment the designated authority issues Form No. 3, any appeal pending before the appellate authorities shall be deemed to have been withdrawn from the date on which the form/certificate is issued by the designated authority under Section 5(1).

The Tribunal, however, ruled that the DTVSVS Act provides amnesty to both the revenue department as well as the assessee under Section 4(6). It added that under Section 4(6), a declaration made Section 4(1) shall be presumed to have never been made, if any material particulars furnished in the declaration is found to be false at any stage or if the declarant violated any of the conditions referred to in the DTVSVS Act.

The ITAT held that in such cases, the proceedings and claims which were withdrawn under Section 4 and all the consequences under the Income Tax Act, 1961 against the declarant, shall be deemed to have been revived.

Thus, the ITAT ruled that if the assessee does not make payment of taxes, as determined by the designated authority, the appeal filed by the assessee, which is dismissed or deemed to be dismissed, shall revive.

"That means, if assessee violates any of the conditions including tax determined by the designated authority in Form No. 3 is not paid within the specified period, then it is nothing but violation of conditions referred to in this Act. Therefore, if assessee does not make payment of taxes as determined by the designated authority, then, even if appeal filed by the assessee is dismissed or deemed dismissal of the appeal, then as per sub-section (6) of section 4 of the DTVSVS Act, 2020, all the proceedings and claims which were withdrawn u/s. 4 and all the consequences under the Income-tax Act, 1961 against the declarant shall be deemed to have been revived."

While holding that the assessee had violated the conditions prescribed under the DTVSVS Act, the Tribunal ruled that even if the appeal filed by the assessee was dismissed or deemed to be dismissed, the same would revive the moment the revenue department noticed any violation of the conditions prescribed under the DTVSVS Act.

The ITAT further observed that the sum determined by the designated authority, which is payable by the declarant under the DTVSVS Act, is final and that it cannot be challenged by the declarant before any appellate forum.

"In the present case, the declarant has violated the conditions of payment of tax as determined by the designated authority in Form no. 3. Therefore, appeal filed by the assessee is deemed to have been revived and thus, we are of the considered view, that since the appeal filed by the assessee is pending before the Tribunal for adjudication, the same needs to be decided on the issues challenged in said appeal and thus, we reject application filed by the Revenue on maintainability of appeal filed by the assessee."

The ITAT thus rejected the application filed by the revenue department, challenging the maintainability of the appeal filed by the assessee.

Case Title: ACIT versus M/s. Lifecell International Private Limited

Dated: 02.11.2022 (ITAT Chennai)

Representative for the Applicant/ Revenue Department: Clement Ramesh Kumar, CIT(DR)

Representative for the Respondent/Assessee: Ajit Kumar Choradia, CA

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