SUJEET ARYA (HINDU UNDIVIDED FAMILY) V. PRINCIPAL CHIEF COMMNR. OF IT, BBSR

WP(C)/11275/2022

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The case revolves around the rejection of a penalty waiver application by the Principal Commissioner of Income Tax, Bhubaneswar, under the DTVSV Act. The petitioner, a Hindu Undivided Family, had initially faced penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961, following an assessment for the assessment year 2014-15. After the DTVSV Act came into force, the petitioner sought to settle the tax arrears under this scheme, but their application was rejected on the grounds that waiver petitions were not considered 'appeals' under the Act. The court examined whether the rejection of the waiver application was a valid ground to deny the benefits under the DTVSV Act and concluded that it was not.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 725927 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 23-02-2023
• Assessment Year: misc
• Other Referred Cases: Kapri International Pvt. Ltd. v. Commissioner of Income Tax-IV, Sadruddin Tejani v. ITO
• Laws Referred To: Income Tax Act, 1961, Direct Tax Vivad Se Vishwas Act, 2020
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: R S CHIMANKA; AVINASH KEDIA
• Assessee Lawyers: S S PADHY; SUNIL MISHRA
• Keywords: Direct Tax Vivad Se Vishwas Act; Hindu Undivided Family; Income Tax; Penalty Waiver; Scrutiny assessment
• Section: 271(1)(c); 5; 273-A

Judgement Text

" Page 1 of 8 IN THE HIGH COURT OF ORISSA AT CUTTACK W.P.(C) No. 11275 of 2022 Sujeet Arya (Hindu Undivided Family) …. Petitioner Mr. S.S. Padhy, Advocate Mr. Sunil Mishra, Advocate -versus- Principal Chief Commissioner of Income Tax, Bhubaneswar and Others …. Opposite Parties Mr. R.S. Chimanka, Senior Standing Counsel Mr. Avinash Kedia, Junior Standing Counsel CORAM: THE CHIEF JUSTICE JUSTICE M.S. RAMAN Order No. ORDER 23.02.2023 Dr. S. Muralidhar, CJ. 02. 1. The challenge in the present petition is to an order/letter dated 20th January, 2021 issued by the Principal Commissioner of Income Tax, Bhubaneswar (PCIT) informing the Petitioner that the Petitioner’s application under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act) was not eligible since it was filed “against the rejection of penalty waiver petition”. It was stated that such waiver petitions were not ‘appeal’ within the meaning of DTVSV Act. 2. The background facts are that the Petitioner is a Hindu Undivided Family (HUF) and an income tax assessee. The Petitioner filed returns for the Assessment Year (AY) 2014-15 on 19th March, 2015 disclosing a total income of Rs.12,95,840/- and admitting a tax liability of Rs. 2,25,315/-. Long term capital gain on shares was Page 2 of 8 disclosed as Rs.37,35,321/-. However, the said income was claimed to be exempted under Section 10(38) of the Income Tax Act, 1961 (IT Act). 3. In the scrutiny assessment that followed, the Assessing Officer (AO) passed an assessment order dated 29th July, 2016 accepting the disclosure by the Petitioner and determining total tax and interest at Rs.18,40,073/-. The entire tax demanded was deposited on 9th August, 2016. 4. The AO however, initiated penalty proceedings under Section 271 (1) (c) of the IT Act and ultimately passed a penalty order in December, 2016 raising a penalty of Rs.11,59,091/-. The Petitioner then filed a petition under Section 273(A) of the IT Act seeking waiver of penalty. A supplementary petition was also filed for the same relief. 5. The PCIT, Bhubaneswar intimated the Petitioner by letter dated 30th May, 2017 that approval for waiver of penalty was not accorded. W.P. (C) No.13576 of 2017 was then filed in this Court questioning the levy of penalty and rejection of the Petitioner’s application for waiver. 6. While the said writ petition was pending, the DTVSV Act came into force on 17th March, 2020. The Petitioner made an application in Form I to the PCIT, Bhubaneswar on 2nd December, 2020 for full and final settlement of the arrears in respect of AY 2014-15. Page 3 of 8 7. In terms of Section 5 of the DTVSV Act, the PCIT, Bhubaneswar determined the amount payable by the Petitioner for such full and final settlement. The electronically generated certificate in Form 3 dated 14th December, 2020 was furnished to the Petitioner and in terms thereof, the Petitioner paid Rs.2,89,773/- on 23rd December, 2020. 8. On 20th January, 2021 the impugned order was issued by PCIT, Bhubaneswar informing the Petitioner of the rejection of its application under the DTVSV Act on the ground that waiver petitions were not appeals within the meaning of the DTVSV Act and the Circular No.7 of 2020 dated 4th March, 2020. Aggrieved, the Petitioner filed the present petition in which notice was issued on 18th May, 2022. It was indicated that the payments made by the Petitioner pursuant to the DTVSV Act would be subject to outcome of the writ petition. 9. In response to the notice issued in this petition, a counter affidavit has been filed by the Department dated 15th June, 2022. Inter alia, it is contended that in terms of question No.13 of the circular No.7/2022 dated 4th March, 2020 “waiver applications are not appeals within the meaning of Vivad Se Vishwas” Scheme and, therefore, the Petitioner’s application under the DTVSV Act was rightly rejected. Reference is also made to Section 273-A(5) which states that every order made under that provision “shall be final and shall not be called into question by any Court or any other authority”. Page 4 of 8 10. This Court has heard the submissions of Mr. S.S. Padhy, learned counsel appearing for the Petitioner and Mr. Radhey Shyam Chimanka, learned Senior Standing Counsel appearing for the Department. 11. It is seen that under Rule 4 of the DTVSV Rules 2000, “the designated authority shall grant a certificate electronically referred to in sub Section 1 of Section 5 in Form-1.” Further, even Forms 1and 2 and Form 4 shall be furnished electronically under digital signature. In other words, once a certificate in terms of Rule 4 is generated, it should be taken to be conclusive. This is further made clear by Section 5 of the DTVSV Act which reads as under: “5.(1) The designated authority shall, within a period of fifteen days from the date of receipt of the declaration, by order, determine the amount payable by the declarant in accordance with the provisions of this Act and grant a certificate to the declarant containing particulars of the tax arrear and the amount payable after such determination, in such form as may be prescribed. (2) The declarant shall pay the amount determined under sub-section (1) within fifteen days of the date of receipt of the certificate and intimate the details of such payment to the designated authority in the prescribed form and thereupon the designated authority shall pass an order stating that the declarant has paid the amount. (3) Every order passed under sub-section (1), determining the amount payable under this Act, shall be conclusive as to the mattes stated therein and no matter covered by such order shall be reopened in any other proceeding under the Income Tax Act or under any other law for the time being in force or under any agreement, Page 5 of 8 whether for protection of investment or otherwise, entered into by India with any other country or territory outside India. Explanation.— For the removal of doubts, it is hereby clarified that making a declaration under this Act shall not amount to conceding the tax position and it shall not be lawful for the income- tax authority or the declarant being a party in appeal or writ petition or special leave petition to contend that the declarant or the income-tax authority, as the case may be, has acquiesed in the decision on the disputed issue by settling the dispute.” 12. When both Section 5 of the DTVSV Act as well as Rules 4 and 6 of the DTVSV Rules are read together, it is plain that for operationalizing the DTVSV Scheme, the Department has decided to adopt the electronic mode. In this mode, a certificate generated electronically would have the same probative value as a certificate issued manually. This explains why Section 5 itself accords impramatur to an electronically generated certificate. 13. The stand taken in the counter affidavit of the Department is simply that the certificate had been wrongly generated and that because it was not signed by the PCIT and also not issued to the Assessee, it should not be acted upon. In other words, it is not disputed that such certificate was in fact generated and the Petitioner has also made payment pursuant to the generation of such certificate. 14. Therefore, the explanation offered that merely because the said certificate was not signed by the PCIT and not issued to the Petitioner, would not result in nullifying such certificate. Page 6 of 8 15. It also appears to the Court that the stand of the Department in its counter affidavit that waiver applications would not constitute ‘appeal’ for the purposes of the DTVSV Act is not also entirely correct. The relevant portion of the Circular No.7 of 2020 dated 4th March, 2020 which is relied upon by the Department in this regard reads as under: “Question No.13 With respect to interest under section 234A, 234B or 234C, there is no appeal but the assssee has filed waiver application before the competent authority which is pending as on 31 Jan 2020? Will such cases be covered under Vivad se Vishwas? Answer: No, such cases are not covered. Waiver applications are not appeal within the meaning of Vivad se Vishwas.” 16. As pointed out by Mr. Padhy, learned counsel for the Petitioner, the question itself talks of applications for waiver of interest and not for waiver of penalty. Secondly, as explained by the Delhi High Court in Kapri International Pvt. Ltd. v. Commissioner of Income Tax-IV (2022) 328 CTR 662 (Del) the waiver application referred to in the aforementioned Question No.13 should mean “a pending waiver application before the Department and not proceeding emanating out of a decision by the Department on a waiver application”. Further, it was explained by the Delhi High Court in Kapri International Pvt. Ltd. (supra), relying on the judgment of the High Court of Bombay in Sadruddin Tejani v. ITO (2021) 434 ITR 474 (Bom) that the DTVSV Act is a beneficial legislation for both the Revenue and the tax-payer and interpretation of the provisions of the DTVSV Act has to accordingly reflect the object and the purpose Page 7 of 8 of the statute. It was explained by the Delhi High Court that “any proceeding challenging a decision by the Department in respect of tax, interest, penalty, fee etc., would come within the purview of a ‘dispute’ which would enable a party to approach the Department for a resolution under the VSV Act”. Mr. Padhy states that to the best of his information, the above decision of the Delhi High Court in Kapri International Pvt. Ltd. (supra) has not further been questioned by the Department in appeal. 17. The Court is of the view that in the present case, the answer to FAQ No.13 forming part of Circular No.7 of 2020 of the Department does not enable the Department to reject the Petitioner’s application under the DTVSV Act only because the Petitioner had filed an application for waiver of penalty. None of the reasons put forth by the Department to reject the Petitioner’s application are valid or convincing. 18. Mr. Chimanka, learned Senior Standing Counsel for the Department, then pointed out that the relief granted in Kapri International Pvt. Ltd. (supra) was only for the matter to be sent back to the PCIT with directions to the CIT to re-examine/reassess the declaration filed by the Petitioner and decide the application on merits. He accordingly submitted that in this case also, a similar direction should be issued. 19. As pointed out by Mr. Padhy, in the present case, the Department had already accepted the application filed by the Petitioner and in proof of such acceptance, the system-generated certificate under Page 8 of 8 Rule 4 of the DTVSV Rules was issued to the Petitioner. It had the stamp of finality and conclusivity in terms of Section 5(3) of the DTVSV Act. In other words, the Department cannot possibly resile from such certificate on the ground that it was not printed out or not physically signed by the PCIT. It had the same effect as a certificate validly issued and which has already been acted upon by the Petitioner by paying the requisite amount. 20. Further, as already explained, the Department cannot deprive the Petitioner of the benefit of the DTVSV Act only because the Petitioner filed an application for waiver of penalty. Following the judgment of the Delhi High Court in Kapri International Pvt. Ltd. (supra) this Court holds that such an application for waiver of penalty cannot make the Petitioner ineligible within the meaning of the DTVSV Act. 21. For the aforementioned reasons, the impugned order/letter dated 20th January, 2021 of the PCIT, Bhubaneswar is hereby set aside. The result would be the Petitioner’s application under the DTVSV for the AY 2014-15 will be treated as accepted. The writ petition is disposed of in the above terms, but in the circumstances, with no order as to costs. (Dr. S. Muralidhar) Chief Justice (M.S. Raman) Judge S.K. Jena/Secy. "