Assessee Can Confine Settlement Under Direct Tax Vivad Se Vishwas Act To Disputes Which Were Subject Matter Of Its Appeal: Delhi HC

It thus allowed a real estate company's plea against the certificate issued by Commissioner of Income Tax, whereby the declaration furnished by the Assessee under Section 3 of the DTVSV Act was modified to include settlement of certain disputes that were not the subject matter of appeal preferred by the Assessee.

A division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma cited MUFG Bank Ltd. v. Commissioner of Income Tax 2 & Anr. (2022) whereby the Delhi High Court had held that “Even assuming that the DTVSV Act is a taxing statute, there is no restriction on an assessee to choose an appeal to be settled under the DTVSV Act as Section 2(1)(j) uses the words “any appeal” which even on a literal interpretation would mean any one or more appeals.”

In the case at hand, the Assessee had filed its declaration with respect to disallowance of ₹50,12,337/- on account of loss suffered in trading. The dispute was subject matter of an appeal before the ITAT, which had remanded the matter to the Assessing Officer to carry out the necessary enquiry.

The Assessee's declaration dated 08/03/2021 did not mention Revenue's appeal (which was dismissed by the ITAT) with respect to certain unexplained cash credit to Assessee's account.

According to the Revenue, the Assessee was required to settle all disputes pertaining to an assessment year and could not confine the settlement of disputes to only some issues that had arisen in the assessment year, while leaving the others.

The Income Tax Commissioner also took a similar view, when it issued a certificate under Section 5 of the Act, enabling the Assessee to file its declaration, with a modification including the subject matter of Revenue's appeal.

Findings

The High Court observed that the issues involved in Revenue's appeal were different and did not concern Assessee's appeal.

“The dispute, which is subject matter of ITA No.5958/Del/2014 and ITA No.5411/Del/2014 (filed by Revenue) is confined to deletion of addition of ₹3,50,00,000/- under Section 68 of the Act. The Assessee's declaration does not concern the said dispute as it was confined to the order passed by the ITAT in respect of its appeal (ITA No.5958/Del/2014).”

It therefore directed the designated authority to confine its certificate to the declaration made by the Assessee.

In doing so, the High Court referred to the expression “disputed tax” as defined in Section 2(1)(j)(A) of the DTVSV Act.

It said that the provision makes it clear that the quantum of disputed tax is required to be determined by ascertaining the amount of tax which would be payable by the Assessee if its appeal, writ petition or special leave petition is decided against him.

Accordingly, Assessee's plea was allowed.

Unit of settlement is an appeal and includes a prospective appeal.

Relevant to note that both the appeals, of the Assessee as well as the Revenue, were decided by the ITAT on 9/12/2019, i.e., prior to the specified date under the Act, i.e. 31.01.2020.

Revenue submitted that even though no appeal with respect to unexplained cash credit was pending on the specified date, the ambit of disputes covered by the Act must be construed on the basis of an appeal filed by the Revenue subsequently.

The High Court agreed with this submission, reasoning that “the DTVSV Act also contains provisions to address the question of disputes when an order has been passed by the AO, CIT(A), or the learned ITAT and the time for filing the appeal against the said order has not expired. In such cases, the person in whose case such an order has been passed would also fall within the meaning of the term “appellant” as defined under Section 2(1)(a) of the DTVSV Act. In such cases, the disputed tax would amount to the tax payable by the appellant after giving effect to the order so passed…the principle that the unit of settlement is an appeal and includes a prospective appeal.”

It referred to Section 2(1)(a)(i) which defines the expression “appellant” to include a person in whose case an appeal has been filed either by him or by the income tax authority or by both.

“A reading of Section 2(1)(j)(A) in conjunction with Section 2(1)(a)(i) of the DTVSV Act makes it clear that the disputed tax, which would be a subject matter of settlement as tax arrears, is required to be determined on the basis of subject matter of the appeal (whether filed by the Assessee or by the Revenue) before the appellate forum,” the Court noted.

It also referred to Section 4(1) of the Act which provides that filing of a declaration (under Section 3) would result in any appeal in respect of the disputed income being withdrawn from the date on which the certificate under Section 5(1) is issued by the designated authority.

“This also clearly establishes that a declarant as referred to in Section 3 of the DTVSV Act is in respect of disputes pending in an appeal, which on the declaration being made shall be deemed to be withdrawn. It is clear from the express language of the provisions of DTVSV Act that the unit of settlement is the subject matter of disputes pending before an appellate forum.”

Appearance: Advocates Sumit Lalchandani and Tarun Chanana for Petitioner; SSC Indruj Singh Rai with Advocates Sanjeev Menon, Rahul Singh and Anmol Jagga for Department

Case title: Rose Wood Buildwell Private Limited v. Pr. Commissioner Of Income Tax-7 & Ors

Case no.: W.P.(C) 6097/2021