The Delhi High Court has decided that the Central Board of Direct Taxes (CBDT) FAQ no. 59 of circular no. 21/2020 dated December 4, 2020, which provides for the acceptance of a complaint prior to the filing of an affidavit as a condition precedent to the complaint being considered pending and eligible for settlement under the Vivad Se Vishwas scheme (VSV Act) is contrary to law.
Division bench Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that Section 10 of the VSV Act empowers the CBDT to issue directions but Section 10 is similar to Section 119 of the Act, 1961. Consequently CBDT cannot issue circulars prejudicial to the assessee under Section 10 of the VSV Act.
The petitioner/assessee challenged the action of the respondent/department in partially settling the dispute relating to penalty for assessment year 2014-15 pending before the ITAT under the VSV scheme without resolving the dispute relating to the quantum appeal for assessment year 2014-15 15. 15 pending before the Commissioner of Income Tax (Appeals).
The petitioner submitted that the respondent erred in holding that the petitioner was not entitled to settle the quantum appeal for the assessment year 2014-15 pending before the CIT(A).
The Division held that the appeal was filed before the CIT(A) after the expiry of the period of limitation for filing the appeal. FAQ-59 did not cover the petitioner’s case. An order under Article 249(3) condoning the delay was necessary for eligibility under the VSV Act.
The petitioner contended that in terms of Section 2(1)(a)(i) read with Section 2(1)(b) and Section 2(1)(n) of the VSV Act, the only requirement for eligibility till resolution of the dispute under the VSV scheme was that the appeal must be “pending” before the appellate forum comprising the CIT(A) and the ITAT. There was no requirement that the appeal be timely filed or that the appeal be “accepted” before a certain date. There was no requirement that there should be a formal order granting delay before the assessee could avail the benefits of the VSV scheme.
The petitioner contended that whenever the appellate authority grants condonation of delay, it refers back to the original date of filing of the appeal as if the appeal had been filed within the period prescribed by statute.
The department stated that the assessment order dated 22nd December, 2016 was served on the petitioner on 23rd June, 2017. Limitation of 30 days prescribed under the Income Tax Act, 1961 for filing an appeal before the CIT(A) under Section 246A of the 1961 Act expired on 22 July 2017.
The department contended that the appointed authority had allowed settlement of the penalty in terms of the 2020 SPC Act as the appeal against the penalty was pending on the prescribed date. However, the Designated Authority as per FAQ-59 issued by CBDT vide circular no. 21/2020 of December 4, 2020, rejected the statement of the petitioner regarding the quantitative complaint.
According to FAQ-59, if the deadline for filing an appeal expires between April 1, 2019 and January 31, 2020 and the application for donation is made before December 4, 2020 and the appeal is accepted by the appellate authority before the date of filing the statement, the appeal will be considered outstanding as of January 31, 2020.
The Court held that when the department contemplates that an appeal is pending, it is required that the appeal be pending and in such a case no qualification need be introduced that it should be valid or competent.
The court overruled FAQ no. 59 of circular no. 21/2020 dated 4th December 2020 issued by CBDT.
The bench directed the department to treat the appeal filed against the assessment order under section 143(3) for the assessment year 2014-15 before the CIT(A) on 24 May 2019 as pending till 31 January 2020.
Case Title: Medeor Hospital Ltd. against PCIT
Citation: WP(C) 12116/2021
Advocate for Petitioner: Advocate Ved Jain, Nishchay Kantoor
Counsel for the Respondent: Senior Standing Counsel Abhishek Maratha
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