Application under VSVA 2020 valid for pending appeals unless condonation of delay rejected on specified date

Application under VSVA 2020 valid for pending appeals unless condonation of delay rejected on specified date

ABCAUS Case Law Citation
ABCAUS 3474 (2021) (03) HC

In the instant case the petitioner was aggrieved by the fact that his application filed under the provisions of the Direct Tax Vivad Se Vishwas Act, 2020 (VSVA Act) was rejected.

The exemption claimed by the petitioner under Section 54 of the Income Tax Act, 1961 (the Act) had been disallowed in the reassessment proceedings.

The Petitioner had challenged the re-assessment order in appeal before the CIT(A) by filing the appeal in Form No. 35 along with the condonation of delay application.

During the pendency of the appeal, Vivad Se Vishwas Scheme was introduced to resolve the pending disputes concerning income-tax payable by the assessees. 

The petitioner received an intimation by the Income Tax Department whereby he was informed that he could avail of the benefits under the VSVA Act.

Subsequent to the Finance Bill receiving the assent of the President of India, the petitioner, in order to avail the Scheme filed Form Nos. 1 & 2 in accordance with the provisions of Section 3 read with Section 4(1) of the VSVA Act.

However, the Forms of the Petiitoner under VSVA Act was rejected stating that since the appeal was filed before the CIT(A) after the prescribed time, it could not be treated as valid appeal in absence of specific condonation of delay from CIT(A).

The High Court accepted the writ petition of the Petitioner. The Department conceded that though there is no such provision in the Act but the application had been rejected in view of FAQs issued.   

The Hon’ble High Court admitted the Petition and ordered that the application filed shall be deemed to have been filed on the date on which it was filed and be treated as within time.

The contention of the Petitioner was that appeal had been filed with the CIT(A) which included a prayer for condoning the delay in preferring the appeal shows that the petitioner fulfilled the necessary prerequisites required for processing his request under the provisions of VSVA Act.

It was stated that the Department’s reliance on FAQ 59, which is part of a clarificatory circular dated 04.12.2020 issued by CBDT was erroneous, as it took into account aspects which were beyond the scope of the provisions of the VSVA Act.

The Hon’ble High Court observed that Section 2(1)a(i) and Section 2(1)a(n) of the VSVA Act show that the request should have been made in the prescribed format, i.e., form 1   and 2 before the specified date, i.e., 31.01.2020 and that the appeal should be pending before the appellate forum.

The Hon’ble High Court observed the language of the said FAQ 59.

“Q 59. Whether the taxpayer in whose case the time limit for filing of appeal has expired before 31^st 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 31^st 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 31^st January, 2020.”

The Hon’ble High Court opined that in response to the above query, several facets had been alluded to, which were not found in the VSVA Act.

The Hon’ble High Court stated that under the VSVA Act, an appeal would be “pending” in the context of Section 2(1)(a) when is first filed till its disposal. Section 2(1)(a) does not stipulate that the appeal should be admitted   before the specified date, it only adverts to   its pendency.

The Hon’ble High Court stated that the stand of the Department would be valid only if the plea made for condonation of delay had been rejected by CIT(A) before the petitioner had filed Forms 1 and 2.

Accordingly, the Hon’ble held that the order of rejection was bad in law. The order was set aside and Department was directed to process the forms filed by the petitioner under VSVA Act.

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