Section 10 and 11 of the DTVSV Act is not to be independent of directions: Bombay High Court
When the circulars are issued exercising powers under sections 10 and 11 of DTVSV Act, directions are supposed to aid and smoothen bringing into operation provisions and execution of the actions based thereon. A division bench of SUNIL P. DESHMUKH &amp; ABHAY AHUJA, JJ., while adjudicating the matter in Chandrakant Narayan Patkar v. Union of India; [WRIT PETITION (L) NO.5956 OF 2021], dealt with the issue of Income Tax. The petitioner’s case is that it is a registered charitable trust. It had filed return of income for financial year 2009-10 – assessment year 2010-11, belatedly disclosing income to be ‘Nil’. Subsequently, an intimation/computation sheet purporting to be under section 143(1) of the Income Tax Act, 1961 ( IT Act ) had been received at its end on 22nd December, 2012, determining income of Rs.69,36,357/- and total tax liability to the tune of Rs.19,84,908/- with interest thereon totalling to Rs.31,83,240/-. It has been referred to by the petitioner that while preparing the return of income, audit report in Form No.10B was also prepared but the same remained to be filed along with the return of income. According to petitioner, there have been no reasons coming forth as to why the exemption under section 11 of the Act was disallowed or the adjustments could not have been made in the intimation under section 143(1)(a) of the IT Act. Against aforesaid intimation, the petitioner preferred an appeal with the Commissioner of Income Tax (Appeals)-1, Mumbai ( CIT-A ) in November, 2018. The appeal was dismissed on 31st January, 2020 on the ground of filing of the return belatedly. The learned counsel for the petitioner stated that the scheme of the DTVSV Act covers the Petitioner’s case and the Petitioner had accordingly applied pursuant to the provisions of the DTVSV Act and the rules and submitted Form No.1, giving requisite details referring to that time limit to file appeal before ITAT had not expired and also referring to amount payable under the scheme was Rs. 17,55,984/- and out of which, an amount of Rs. 16,79,770/- had already been paid and as such, net amount payable under the scheme of the DTVSV Act is Rs. 76,240/-. He emphasises that the scheme of the DTVSV Act does not make any distinction in adjustments under the clauses or sub clauses of section 143 of the IT Act. There is no such reference in the enactment.
 on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odtIN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITIONNO.5956 OF 2021Chandrakant Narayan Patkar .PetitionerCharitable Trust Through its Trustee Vikas Patkar having office at 1st floor Patkar TrustBuilding Narayan Patkar Road Dombivali1(2) Piramal Chambers Lower Parel Mumbai 400 013.Mr. Dharan V. Gandhi Advocate for PetitionerMr. Sham Walve Advocate for Respondents CORAM : SUNIL P. DESHMUKH &ABHAY AHUJA JJ. DATE : 22 JUNE 2021 on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odt JUDGMENT1.Rule. Rule is made returnable forthwith. Heard learnedCounsel appearing for the parties finally by consent.2.The petitioner trust aggrieved by the communication onthe website portal of the Income Tax Department rejecting declarationForm No.1 filed by the petitioner on 30 12 2020 under the Direct TaxVivad Se Vishwas Act 2020and the Direct Vivad Se Vishwas Rules is before us.3.The petitioner’s case is that it is a registered charitabletrust. It had filed return of income for financial year 2009 10 assessment year 2010 11 belatedly disclosing income to be ‘Nil’.Subsequently an intimation computation sheet purporting to be undersection 143(1) of the Income Tax Act 1961had beenreceived at its end on 22nd December 2012 determining income ofRs.69 36 357 and total tax liability to the tune of Rs.19 84 908 withinterest thereon totalling to Rs.31 83 240 . It has been referred to bythe petitioner that while preparing the return of income audit report inForm No.10B was also prepared but the same remained to be filed on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odtalong with the return of income. According to petitioner there havebeen no reasons coming forth as to why the exemption under section11 of the Act was disallowed or the adjustments could not have beenmade in the intimation under section 143(1)(a) of the IT Act.4.Against aforesaid intimation the petitioner preferred anappeal with the Commissioner of Income Tax1 Mumbai( CIT A ) in November 2018.5.The appeal was dismissed on 31st January 2020 on theground of filing of the return belatedly.6.Mr. Dharan Gandhi learned counsel for the Petitionerstates that in the meanwhile the Direct Tax Vivad Se Vishwas Act 2020 had been enactedandenforced for resolution of disputed tax and for the matters connectedtherewith or incidental thereto.7.The learned counsel for Petitioner submits that against theCIT(A) decision dated 31.01.2020 time limit to file appeal is 60 daysunder Section 253(1)(a) of the Income Tax Act 19615956 2021.odtthe Respondent No. 2 CBDT clarifying in answers to questions no.1 20 33 & 29 particularly that where an order has been passed by theCIT(A) and time limit to file appeal to the Income Tax AppellateTribunalhas not expired the Petitioner Appellant is eligibleto opt for DTVSV Scheme. He submits that time limit to file an appealbefore ITAT had not expired on the specified date under DTVSV Act viz 31.01.2020. The Petitioner as such was eligible to file a declaration asreferred to under DTVSV Act and have resolution and settlement of thematter.8.He submits as the scheme of the DTVSV Act covers thePetitioner’s case and the Petitioner had accordingly applied pursuant tothe provisions of the DTVSV Act and the rules and submitted FormNo.1 giving requisite details referring to that time limit to file appealbefore ITAT had not expired and also referring to amount payableunder the scheme was Rs. 17 55 984 and out of which an amount ofRs. 16 79 770 had already been paid and as such net amountpayable under the scheme of the DTVSV Act is Rs. 76 240 .9.The Petitioner became aware on 29.01.2021 that itsdeclaration in Form No. 1 under the DTVSV Act and the rules has beenrejected with following remarks which are re produced hereinbelow : on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odt“As per the CBDT circular no.21 2020 dated04 12 2020 clarification given vide questionno.71 it is seen that appeals filed againstintimation u s. 143(1) of the Act are eligibleunder Vivad Se Vishwas if adjustment has beenmade under sub clausestoof clause(a) of section 143(1) of the Act. In the case ofthe assessee the adjustment has been made byCPC under sub clauseof clauseofsection 143(1) read with explanationtosection 143(1). The application of the assesseetherefore is not eligible under the schemehence the application is rejected.” 10.Mr. Gandhi vehemently submits that rejection ofdeclaration for the reason adjustment has been made U s. 143(a)(ii) isabsolutely digressed from the intention and the purpose underlyingbringing in enactment DTVSV Act and its object. Learned counselparticularly emphasizes that scheme of the DTVSV Act does not makeany distinction in adjustments under the clauses or sub clauses ofsection 143 of the IT Act. There is no such reference in the enactment.However such a distinction is sought to be carved out under thecircular No. 220 dated 04.12.2020 issued with an answer givento a question which goes beyond the provisions of the DTVSV Act. Hesubmits that answer to question no.71 does not have any rationalemuch less any plausible basis. The answer to question No.71 under theclarification having regard to the provisions of the DTVSV Act as amatter of fact intercepts its underlying purpose and object andpurports to bring in classification in appeals which is not intended on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odtunder the enactment. He submits that the Petitioner’s case squarelyfalls within the four corners of the DTVSV scheme and the Petitioner iseligible to have its benefit. The learned counsel refers to affidavit in reply of the revenue and submits that none of the facts are in disputenor the provisions of the enactments. As a matter of fact it can be saidthat there is tacit endorsement to the Petitioner’s case.11.Learned counsel for the Respondents takes us throughprovisions of section 143andof the IT Act and submitsthat while clausestorelate to obvious errors in thereturns and for correction of such errors the scheme may not benecessary to be resorted to.12.Learned Counsel for respondents contends that CBDTcircular no.21 2020 dated 04 12 2020 is binding on respondent no.3.He submits that it is not the case that petitioner’s appeal meets with thecriterion referred to in the answer to question no.71 as petitioner’sappeal against intimation under Section 143(1)(a)(i) oris notcontemplated under the scheme. Thus as per answer to questionno.71 in the circular the petitioner would not be eligible to avail ofbenefit as DTVSV scheme would not apply. He contends that thecircular is issued in exercise of powers pursuant to Sections 10 and 11 on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odtof the DTVSV Act and thus it would not be said that the circular isultra vires the Act. The order rejecting form no.1 is legal and proper.He thus purports to oppose the petition. 13.We deem it appropriate to refer to that the DTVSVenactment has been brought in to provide for resolution of disputedtax and the matters connected therewith and incidental thereto.(i)In aforesaid enactment the term “appellant” has been definedunder section 2(1)(a) as under : “(a) “appellant” means a person in whose case an appeal or a writpetition or special leave petition has been filedeither by him or by the income tax authorityor by both before an appellate forum andsuch appeal or petition is pending as on thespecified datea person in whose case an order has beenpassed by the Assessing Officer or an order hasbeen passed by the Commissionerorthe Income Tax Appellate Tribunal in anappeal or by the High Court in a writ petition on or before the specified date and the timefor filing any appeal or special leave petitionagainst such order by that person has notexpired as on that datea person who has filed his objectionsbefore the Dispute Resolution Panel undersection 144C of the Income tax Act 1961 andthe Dispute Resolution Panel has not issued anydirection on or before the specified datea person in whose case the DisputeResolution Panel has issued direction under on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odtsub sectionof section 144C of the Income tax Act and the Assessing Officer has notpassed any order under sub sectionof thatsection on or before the specified dateIt is also pertinent to refer to section 2(1)(j) defining the term“disputed tax” reading thus : “(j) “disputed tax” in relation to anassessment year or financial year as the casemay be means the income tax includingsurcharge and cesspayable bythe appellant under the provisions of theIncome tax Act 1961 as computedhereunder :in a case where any appeal writ petitionor special leave petition is pending before theappellate forum as on the specified date theamount of tax that is payable by the appellantif such appeal or writ petition or special leavepetition was to be decided against himin a case where an order in appeal or inwrit petition has been passed by the appellateforum on or before the specified date and thetime for filing appeal or special leave petitionagainst such order has not expired as on thatdate the amount of tax payable by theappellant after giving effect to the order sopassed5956 2021.odt(D)in a case where objection filed by theappellant is pending before the DisputedResolution Panel under section 144C of theIncome tax Act as on the specified date theamount of tax payable by the appellant if theDispute Resolution Panel was to confirm thevariation proposed in the draft orderof section 144C of the Income tax Act and the Assessing Officer has notpassed the order under sub sectionofthat section on or before the specified date the amount of tax payable by the appellantas per the assessment order to be passed bythe Assessing Officer under sub sectionSection 9 appears to be an exclusionary provision reading thus : “9. The provisions of this Act shall not applyin respect of tax arrearof section 143or section 144 or section 153A or section153C of the Income tax Act on the basis ofsearch initiated under section 132 or section132A of the Income tax Act if the amount ofdisputed tax exceeds five crorer rupees5956 2021.odt(iii)relating to any undisclosed incomefrom a source located outside India orundisclosed asset located outside India:(iv)relating to an assessment orreassessment made on the basis ofinformation received under an agreementreferred to in section 90 or section 90A of theIncome tax Act if it relates to any taxarrear (c) . .”14.There is no dispute on factual aspects and the reasons forrejection of Petitioner’s Form No. 1 are with reference to answer toquestion No.71. Question No.71 and answer thereto under CBDTcircular bearing no.21 2020 dated 04 12 2020 read thus :“Q.71 Vivad se Vishwas forms do not containa specific option to settle appeal filedagainst intimation u s. 143(1) of the Act.Accordingly please clarify how to settlesuch appeal which is pending as on 31stJan.2020of the Act is eligible under Vivadse Vishwas if adjustment has been madeunder sub clausestoof clauseofsection 143(1) of the Act.” 1 on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odt15.For ready reference the provisions of Section 143(a)(i) toof the IT Act are quoted below: “ Section 143.Where a return hasbeen made under section 139 or inresponse to a notice under sub section(1) of section 142 such return shall beprocessed in the following manner namely:—(a) the total income or loss shall becomputed after making the followingadjustments namely:—any arithmetical error in the returnan incorrect claim if such incorrectclaim is apparent from any information inthe returndisallowance of loss claimed ifreturn of the previous year for which setoff of loss is claimed was furnishedbeyond the due date specified under sub sectionof section 139disallowance of expenditureindicated in the audit report but nottaken into account in computing the totalincome in the returndisallowance of deduction claimedunder sections 10AA 80 IA 80 IAB 80 IB 80 IC 80 ID or section 80 IE if thereturn is furnished beyond the due datespecified under sub sectionof section139 or(vi) addition of income appearing inForm 26AS or Form 16A or Form 16 1 on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odtwhich has not been included incomputing the total income in thereturn:Provided that no such adjustments shall be made unless anintimation is given to the assessee of such adjustments eitherin writing or in electronic mode:Provided further that the response received from theassessee if any shall be considered before making anyadjustment and in a case where no response is receivedwithin thirty days of the issue of such intimation suchadjustments shall be made:][Provided also that noadjustment shall be made under sub clausein relation toa return furnished for the assessment year commencing on orafter the 1st day of April 2018 ](b) ….(c) ….(d) ….(e) ….Provided ….Provided further ….Explanation ….(a) ….(b) ….Plain reading of the aforesaid provisions of Section 143(1)to(vi) would clearly show that total income or loss is to be computed 1 on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odtafter making the adjustments referred to thereunder. Theseadjustments in computing total income appear to be clericaladjustments hardly calling for judicial adjudication of real sort albeitthe proviso does require adherence to the principles of natural justice.The sub clauses refer toarithmetical error in the return anincorrect claim apparent from return disallowance of loss claimedbeyond the due date disallowance of expenditure or increase inincome not taken into account in the computation disallowance ofdeduction(s) claimed if return is furnished beyond the due date and(vi) addition of income appearing in Form 26AS or Form 16A or Form16 which has not been included in the computation.16.During the course of hearing learned Counsel forpetitioner has referred to and relied on a decision of this court in thecase of Macrotech Developers Ltd. Vs. Principal Commisioner ofIncome Tax reported in126 taxmann.com 1wherein it has been observed to the effect that clarifications answersgiven by CBDT in response to certain questions not aligning with thelegislative intent and doing violence to plain language of the statuteand cannot be accepted. He has further relied on the Supreme Courtjudgment in the case of Keshavji Ravji & Co. Etc. Etc. Vs. Commissionerof Income Tax reported in 1990CTR 0123 wherein it has been 1 on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odtconsidered that the Tribunals and Courts are not supposed to interpretlaw in the light of circular. The Supreme Court in the case of UcoBank Vs. Commissioner of Income Tax reported in154 CTR0088 has observed that CBDT circulars may tone down the rigour ofthe law and ensure a fair enforcement of its provisions however thosecannot be adverse to the assessee. The power is for just proper andefficient management of the work and are meant to mitigate the rigourapplication of provisions.17.It may have to be referred to that circulars cannot beissued adverse to the interest of assessee nor those can be issuedcontradicting and nullifying the provisions of the enactment.18.It would be pertinent to refer to that underneath theanswer to question no.71 the circular No. 220 purports tosegregate and classify the appeals against the orders passed underSection 143(1)(a)(i) oras a separate category from the appealsfrom Clausestoof 143(1)(a) of the IT Act.19.The DTVSV enactment does not provide for classificationin appeals with reference to the orders passed by the authority underdifferent provisions. The preamble of the enactment refers to that it 1 on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odtproposes to provide for resolution of disputed tax and the mattersconnected therewith and incidental thereto and defines the term‘appellant’ as aforesaid which embraces the Petitioner and covers thecase the case under clauseinter alia ‘disputed tax’ where an orderin appeal has been passed by the appellate forum and the time limit tofile further appeal writ petition for filing has not expired as referredto under clauseof section 2(1)(j). Further it would be pertinent torefer to that it is not the case of respondents that petitioner’s case fallsin the excluded categories referred to under the provisions of section 9viz clausestonor such a case has been made out in theaffidavit or during submissions. It is also not the case of therespondents that the rules refer to or create classification andcategories in the appeals based on the orders passed with reference tosub clauses under provisions of 143(1)(a) of the IT Act.20.All the adjustments referred to under sub clausestoof Section 143(1) are indication of forming one categoryand as such are grouped under sub clauseof Section 141(1).Classifying the adjustments intoof Clause(a) of Section143(1) to be eligible under the DTVSV Scheme and excluding theadjustments referred to inandunder the circular No. 220without substantiating the same with any rationale or plausible basis or 1 on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odtmaterial therefor would be arbitrary unreasonable and discriminatory.The same would be in breach of Article 14 of Constitution of India andbe liable to be set aside as such. Such a classification sought to bemade would not be fitting into the requirements of intelligibledifferentia having nexus to the object to be achieved. Despite a queryfrom the Court as to the purpose of this classification there was noanswer forthcoming from the Revenue. There does not appear to beany object to be achieved by such an unreasonable and arbitraryclassification leading to discrimination among tax payers whose casesare falling in Clausesoron one hand and those whose cases fallunder Clausestoof Section 143(1)(a) of the IT Act. 21.It is queer on which basis circular purports to excludeappeals arising from the orders passed under section 143(1)(a)(i) or(ii). Neither there is reference to any basis for the same in the circularnor there is any provided in the affidavit in reply. Having regard to theprovisions of the enactments and the rules thereunder in the absenceof any material we are not in a position to appreciate that there isexclusion of appeals arising from orders passed under section 143(1)(a)(i) orof the IT Act. It is not the case that there is any particularobject sought to be achieved by such exclusion of the appeals arisingfrom the orders passed under section143(1)(a)(i) or5956 2021.odt22.In the scenario when the circulars are issued exercisingpowers under sections 10 and 11 of DTVSV Act directions aresupposed to aid and smoothen bringing into operation provisions andexecution of the actions based thereon. The directions circulars wouldnot be issued under such provisions digressing or deviating from theobject and purpose under the scheme of the enactment.23.The situation thus emerges that answer to question No. 71in the circular No. 220 tends overreach the purpose andintendment underlying the provisions of the Act and the Rules andpurports to exclude an otherwise eligible assessee on a ground andreason neither contained in nor reflected from the scheme. Thecircular is manifestly divorced from the object and purpose of DTVSVscheme.24.The answer to question no.71 purporting to excludeappeals against the orders under section 143(1)(a)(i) orisunsustainable and unacceptable. In the circumstances emergingexclusion from the answer to question No. 71 of the circular No. 21 of2020 dated 04.12.2020 is untenable and deserves to be set aside. We therefore set aside Answer to Question No. 71 of Circular No. 2 of 18 on 02 07 2021 on 22 03 19. WP(L) 5956 2021.odt2020 dated 04.12.2020. In view of the same the Petition is allowed interms of prayer clausesandwhich read thus : “(i)That this Hon’ble Court may bepleased to issue a Writ of Certiorari or aWrit in the nature of Certiorari or Writ ofMandamus or a Writ in the nature ofMandamus or any other appropriate Writ Order or direction calling for the records ofthe Petitioner’s case and after going into thelegality and propriety thereof to quash andset aside the action order of the RespondentNo. 3 in rejecting the Application of thePetitioner in Form No. 1 and 2 of the VSVAct and direct the Respondent No. 3 to issueForm No. 3 accepting the said application ofthe Petitioner under the said Act and Rulesthereunder(SUNIL P. DESHMUKH J.) 1 