CBDT Circular Allowing Benefit Only To Cases Where Appeals Are ‘Dismissed In Limine’ Is Arbitrary: Bombay High Court

The Bombay High Court has quashed FAQ 61 of the circular 21/2020 dated December 4, 2020, issued by the CBDT to the extent that it restricts appeals to those dismissed in limine’ on the ground that it was not only adverse to the interest of the assessee but also contrary to the object and reasons of the Direct Tax Vivad Se Viswas Act, 2020 (DTVSV-A).

The bench of Justice Dhiraj Singh Thakur and Justice Kamal Khata has observed that the additional qualification, viz. "in limine," added to the word appeal, is adverse to the assessee, against the mandate of DTVSV-A, and thus contrary to law.

The petitioner filed an e-return of income, in which it declared a total income of Rs. 16,27,70,190. The petitioner revised its ITR to declare an income of Rs. 16,15,96,380.

The revised ITR was processed, resulting in a refund of Rs. 1,50,46,150. Its assessment was selected for scrutiny under Computer-Assisted Scrutiny Selection (CASS), and notices were issued, which were responded to by the Petitioner.

An assessment was passed by the DCIT assessing the petitioner’s income on account of disallowing deductions claimed by the Petitioner. A show cause notice was issued, and interest was charged.

An appeal was preferred against the order passed by the DCIT. The appeal was dismissed, and an appeal was preferred before the Income Tax Appellate Tribunal (ITAT). The ITAT dismissed the appeal.

On March 17th, 2020, the DTVSV-A was introduced. The Petitioner made an application to avail herself of the benefit. The application was rejected by an order on the basis of FAQ No. 61 of Circular No. 21 of 2020, which states that the case is not eligible under DTVSV-A.

The petitioner contended that the rejection was against the object of the DTVSV-A as provided in Circular No. 21 of 2020. The Petitioner ought not to be deprived of DTVSV-A as beneficial legislation inasmuch as the Petitioner was admittedly in litigation prior to the specified date as envisaged by it.

The department contended that the appeal was dismissed on merits, and in law, the MA-2 as filed was not permissible and, though pending, was liable to be rejected. FAQ No. 61 was applicable for Appeals dismissed in limine only. The classification was not disadvantageous to other classes of taxpayers, and there is no unjust or arbitrary discrimination. The circular has a rational nexus and did not want the beneficial legislation to be misused by those whose appeals were adjudicated. The case of the Petitioner was beyond the purview of the DTVSV-A.

The court noted that the objective of the DTVSV is to reduce litigation. Circular No. 21/2020 was issued under sections 10 and 11 of the DTVSV-A to remove the difficulty.

"With regard to the condition in answer to FAQ 61, viz., appeal dismissed in limine’ we are of the view that the qualifying words ‘in limine’ which apparently restrict the eligible assessees from availing settlement under the DTVSV, are contrary to its object and reasons," the court said.

Case Title: Oerlikon Balzers Coating India Versus Union of India

Case No.: Writ Petition No. 6228 Of 2021

Date: 27/06/2023

Counsel For Petitioner: Sanket Bora

Counsel For Respondent: Suresh Kumar

Click Here To Read The Order