Bhupendra Harilal Mehta v. Principal Commissioner Of Income Tax, Mumbai 19,Mumbai

manjusha/ssp IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONWRIT PETITION NO.586 OF 2021 Bhupendra Harilal Mehta1/B, Rizvi Park,5-A, Altamount Road,Mumbai 400 026vs. ...Petitioner 1. Principal Commissioner of Income Tax,Mumbai 19,Mumbai 2. The Central Board of Direct Taxes,Through the Under Secretary,Department of Revenue,Government of India,North Block, New Delhi-110001 3. Union of India throughthe Secretary,Department of Revenue,Government of India,North Block, New Delhi ...Respondents Mr.Percy Pardiwalla, Senior Advocate a/w Mr.Sukhasagar Singh i/b Mint Confreres for the petitioner Mr.Sham Walve for the respondents CORAM : SUNIL P.DESHMUKH AND ABHAY AHUJA, JJ. DATE ON WHICH JUDGMENT IS RESERVED : APRIL 5, 2021. DATE ON WHICH JUDGMENT IS PRONOUNCED : APRIL 27, 2021 JUDGMENT : (Per Court) 1/36 1. Petitioner is stated to be an individual, his income being profitsfrom a partnership firm, income from house property, interest, dividendand income from dealing in shares and derivatives. 2. Petitioner filed his return of income for Assessment Year 2015-16 on 29[th] September 2015 declaring a total income of Rs.1,52,19,010/-.The case was picked up for scrutiny assessment and an order dated 27[th]December, 2017 was passed under Section 143(3) of the Income-tax Act,1961 (“Income Tax Act”) wherein an addition of Rs.84,25,075/- was madeunder Section 68 and an addition of Rs.11,75,901/- was made underSection 69C of the Income-tax Act. It appears that additions were made bythe Assessing Officer on the basis that petitioner had booked artificial longterm capital gains of Rs.5,73,23,123/- and claimed exemption underSection 10(38) of the Income-tax Act thereon by selling shares of M/s.Lifeline Drugs and Pharma Limited (“Lifeline Drugs”) for a totalconsideration of Rs.5,87,95,055/-. The case of the Assessing Officer wasthat the price of this share was artificially rigged by certain operators, thedetails of which were divulged in the course of a search under Section 132of the Income Tax Act carried out by the Kolkata Investigation wing of theIncome Tax department during which certain statements were recordedunder Section 132(4) and in the course of a survey action under Section 2/36 133A of the Income Tax Act on the premises of M/s. Gateway FinancialService Limited and Korp Securities Limited where also statements ofDirectors were recorded. By an Order dated 18[th] February 2019 underSection 154 of the Income-tax Act, the addition under Section 68 of theIncome-tax Act was revised to Rs.5,87,95,055/- .Aggrieved by both theaforesaid orders, petitioner filed appeals to the Commissioner of Income-tax (Appeals). 3. While the aforesaid appeals were pending, the Direct TaxVivad Se Vishwas Act,2020 (“DTVSV Act”) received the assent of thePresident of India on March 17, 2020, giving an option to the tax payers tosettle their income tax disputes by making a declaration to the designatedauthority and paying varying percentages of the disputed tax as specifiedunder Section 3 of the DTVSV Act. On 18[th] March 2020, the Direct TaxVivad se Vishwas Rules, 2020 (the “DTVSV Rules”) were notified underSection 12 of the DTVSV Act. On 22[nd] April 2020, respondent No.2 CentralBoard of Direct Taxes (“CBDT”) issued Circular No.9 of 2020 underSections 10 and 11 of the DTVSV Act clarifying certain aspects of theDTVSV Act in the form of answers to Frequently Asked Questions. On 4[th]December 2020, respondent No.2 issued another Circular being CircularNo.21 making further clarifications again in the form of Questions and 3/36 Answers. One such question being FAQ No.70 and its answer which is alsothe subject matter of challenge in this petition. While this petition waspending, CBDT has issued another circular No.4/2021 dated 23[rd] March2021 further clarifying the answer to Qus.No.70 on which we will dwelllittle later. 3/36 Answers. One such question being FAQ No.70 and its answer which is alsothe subject matter of challenge in this petition. While this petition waspending, CBDT has issued another circular No.4/2021 dated 23[rd] March2021 further clarifying the answer to Qus.No.70 on which we will dwelllittle later. 4.Petitioner filed declaration in Form No.1 under Section 4(1) ofthe DTVSV Act read with Rule 3(1) of the DTVSV Rules on 16[th] December2020. The disputed income was declared to be Rs.5,98,90,960/- and thedisputed tax thereon as Rs.2,02,69,581/-. Petitioner submitted that thegross amount payable by it was 100% of the disputed tax i.e.Rs.2,02,69,581/- out of which a sum of Rs.69,31,892/- was declared tohave been paid and the balance of Rs.1,33,37,689/- was declared to bepayable by Petitioner. 5.By Order dated 26[th] January 2021, Respondent No.1 being theDesignated Authority, passed an order in Form No.3 under Section 5(1) ofthe DTVSV Act read with Rule 4 of the DTVSV Rules, determining the taxpayable by petitioner to be Rs.2,57,67,714/- being 125% of the disputedtax as against Rs.2,02,69,581/- being 100% of the disputed tax declared byPetitioner. 4/36 6.Being aggrieved by the aforesaid order, petitioner is before usseeking the following reliefs :- “(a) that this Honourable Court may be pleasedto issue a Writ of Certiorari, or a Writ in the nature ofCertiorari, or any other appropriate Writ, order ordirection under Article 226 of the Constitution of India,quashing the impugned order passed by RespondentNo.1. (b) that this Honourable Court may be pleasedto issue a Writ of Mandamus or a Writ in the nature ofMandamus, or any other appropriate Writ, order ordirection under Article 226 of the Constitution of India,directing Respondent No.1 to pass an order in FormNo.3 determining tax payable by the Petitioner to bethe amount declared by it in Form No.1, i.e. onehundred percent of the disputed tax. (c) that this Honourable Court may be pleasedto issue a direction under Article 226 of theConstitution of India that question number 70 in theimpugned Circular No.21/2020 and the answer theretoare contrary to the provisions of the Act and aretherefore to be ignored.” 7. Mr. Pardiwala, learned Senior Counsel for Petitioner, submitsthat in case of Petitioner for Assessment Year 2015-16, assessment has notbeen made on the basis of any search but the addition was made only onthe basis of certain information obtained in the course of a searchconducted on the premises of other entities. He submits that Petitioner hasnot directly been subjected to any search. Drawing attention of this Courtto Section 3 of the DTVSV Act, he submits that sub-clause (a) is applicable 5/36 to the case of petitioner as the tax arrear is the aggregate amount ofdisputed tax, interest chargeable or charged on such disputed tax andpenalty leviable or levied on such disputed tax and therefore, the amountpayable by the Petitioner would be the amount of the disputed tax. Hesubmits that only in a case as contained in sub-clause (b) of Section 3,where the tax arrears include tax, interest or penalty determined in anyassessment on the basis of search under Section 132 or Section 132A of theIncome-tax Act, only then the amount payable under the DTVSV Act wouldbe 125% of the disputed tax and in no other case. He refers to FAQ No.70of Circular No.21/2020 to draw distinction from the same with respect tothe case of petitioner. 5/36 to the case of petitioner as the tax arrear is the aggregate amount ofdisputed tax, interest chargeable or charged on such disputed tax andpenalty leviable or levied on such disputed tax and therefore, the amountpayable by the Petitioner would be the amount of the disputed tax. Hesubmits that only in a case as contained in sub-clause (b) of Section 3,where the tax arrears include tax, interest or penalty determined in anyassessment on the basis of search under Section 132 or Section 132A of theIncome-tax Act, only then the amount payable under the DTVSV Act wouldbe 125% of the disputed tax and in no other case. He refers to FAQ No.70of Circular No.21/2020 to draw distinction from the same with respect tothe case of petitioner. 8. He submits that it is only on the basis of answer to this questionNo.70 in Circular No.21/2020 that the non search case of petitioner hasbeen treated as a search case. He submits that respondent No.1determined a higher sum of tax as assessment in the case of petitioner wasframed on the basis of a search under Section 132 of the Income Tax Act.According to him, a plain reading of the DTVSV Act and the Rules nowhere suggests that an addition made on the basis of certain informationobtained in the course of search of another tax payer can lead to theassessee being considered as a search case. This is not contemplated within 6/36 the scheme of DTVSV Act nor the DTVSV Rules. 9. He submits that this Circular has been issued under section 10and 11 of the Act. Sub-section (1) of section 11 states that an order can bepassed by the Central Government to remove difficulties, however, thesame cannot be inconsistent with the provisions of the Act. Though Section3 of the DTVSV Act states in unequivocal terms that one hundred andtwenty five percent of the disputed tax is payable only to those cases wherean assessment is made on the basis of a search. Respondent No.1’s orderbased of the Circular would make it contrary to the provisions of theIncome Tax Act and also to several judgments of the Supreme Court and tothat extent, the Circular is liable to be quashed. In any event, ininterpreting the scope of a provision of a statute, the Courts are not boundby the Circulars issued by the CBDT. 10. He submits that the first category of cases, i.e. ‘search cases’,would be those where an assessment is made either under section 153Aread with section 143(3)/144 of the Income-tax Act in a case where asearch is conducted on the declarant itself, or those where an assessment ismade under section 153C read with section 143(3)/144 of the Income-tax 7/36 Act in a case where in the course of a search conducted on anotherassessee, any assets, documents or books of accounts belonging to thedeclarant are found and such assets, documents or books of accounts arehanded over to the AO of the declarant to assess the income in light of thesame. The case of the Petitioner does not fall under either of the above. 11.He submits that in row numbers 2 and 3 of the impugned order,Respondent No.1 himself holds that the case of Petitioner is not a searchcase but contradicts himself in determining the amount payable as if thecase of Petitioner was a search case and is resorting to approbating andreprobating at the same time, which cannot be permitted in law. He submits that in row numbers 2 and 3 of the impugned order, 7/36 Act in a case where in the course of a search conducted on anotherassessee, any assets, documents or books of accounts belonging to thedeclarant are found and such assets, documents or books of accounts arehanded over to the AO of the declarant to assess the income in light of thesame. The case of the Petitioner does not fall under either of the above. 11.He submits that in row numbers 2 and 3 of the impugned order,Respondent No.1 himself holds that the case of Petitioner is not a searchcase but contradicts himself in determining the amount payable as if thecase of Petitioner was a search case and is resorting to approbating andreprobating at the same time, which cannot be permitted in law. He submits that in row numbers 2 and 3 of the impugned order, 12.Mr.Pardiwala also submits that to interpret the assessmentorder, such that the case of the assessee would be search case even thoughneither any such search has been conducted on the assessee nor there hasbeen any direct reference of the assessee’s involvement in the findings ofthe investigation would lead to an absurd situation where everyshareholder or person involved in the transaction of M/s. Lifeline Drugswould have to be treated as search case which is not the intention of theDTVSV Act. The Assessing Officer has noted that there are 84 suchcompanies where allegedly, artificial capital gains have been booked. Hesubmits that since these are listed companies having thousands of 8/36 investors and if the interpretation of Respondent No.1 is accepted, it wouldmean that the assessment of all such hundreds of thousands of assesseeswould be deemed to be a search assessment, a proposition which is plainlyabsurd. Respondent No.1 has failed to appreciate that this question alsotalks of an assessment order being framed on the basis of a search, and notof an addition being made on the basis of a search. 13. He submits that in the assessment order passed under section143(3) of the Income Tax Act. 14. He purports to draw the attention to the object behind thepromulgation of the Act. He submits that the object is to settle tax disputesand reduce litigation. The DTVSV Act confers benefits on the taxpayers,who can put an end to tax litigation by paying specified percentages of taxand obtain immunity from penalty and prosecution and waiver of interest.Taking into consideration these objects, the DTVSV Act must be construedliberally so as to further its object. He refers to paragraphs 23 and 24 ofthe decision of this Court in the case of Macrotech Developers Ltd. v/s.Principal Commissioner of Income Tax and Ors. in W. P. No.79 of 2021dated 25[th] March 2021 to submit that the whole action on the part of therespondent designated authority would frustrate the objective and thepurpose for which the Act has been enacted. 9/36 9/36 15.He has also tendered across Circular No.4/2021 dated 23[rd]March 2021 with respect to the clarifications issued by CBDT withreference to FAQ No.70 of Circular No.21/2020. It appears to addressseveral representations that have been received seeking clarity with regardto the clarification of case as a “search case” for the purpose of DTVSVAct, 2020. He submits to remove any uncertainty it is clarified that a searchcase means an assessment or reassessment made under Section143(3)/144/147/153A/153C/158BC of the Income-tax Act in the case of aperson referred to in Section 153A or Section 153C or Section 158BC orSection 158BD on the basis of search initiated under Section 132, orrequisition made under Section 132A of the Income-tax Act modifying FAQNo.70 of Circular 21/2020 to that extent. He submits that petitioner is nota person referred to in Section 153A or in Section 153C. He also submitsthat since the case of the assessee is post the 31[st] May, 2003, the provisionsof Section 158BC or Section 158BD as contained in Chapter XIV-B do notapply to the case of Petitioner in view of Section 158BI which clearly statesthat the said Chapter shall not apply where a search is initiated after the31[st] day of May of 2003. He submits that firstly no search has beeninitiated in the case of Petitioner, secondly, the dates of the reports,statements with respect to the purported investigation referred to in the 10/36 Assessment Order are post May, 2003. He submits that therefore the saidprovisions do not apply to the Petitioner. 16.Learned senior counsel Mr.Pardiwala has also drawn ourattention to the assessment order dated 22[nd] December 2017 in support ofhis contentions. He submits that a plain reading of the assessment ordersuggests that the case of petitioner was selected for scrutiny under “CASS”selection and notice under section 143(2) of the Income Tax Act as well asfurther notice under section 129/142(1) of the Income Tax Act were issuedto petitioner. He submits that even the sections and sub sections underwhich the assessment is made refers only to section 143(3) of the IncomeTax Act. No where the assessment order suggests that the said assessmentorder is pursuant to or read with the provisions of the search and seizurecontained in Chapter XIV-B of the Income Tax Act where the specialprocedure for assessment of search case is prescribed. 17. Referring to paragraph 4 of the assessment order, he submitsthat the assessment proceedings are in respect of long term capital gain ofRs.5,73,23,123/- on sale of shares during the assessment year 2015-16 andthe said gains came to be exempted under section 10(38) of the IncomeTax Act. Long term capital gains was from the sale of M/s.Life Line Drugsand Pharma Limited was Rs.5,87,95,055/- which shares were through off 11/36 17. Referring to paragraph 4 of the assessment order, he submitsthat the assessment proceedings are in respect of long term capital gain ofRs.5,73,23,123/- on sale of shares during the assessment year 2015-16 andthe said gains came to be exempted under section 10(38) of the IncomeTax Act. Long term capital gains was from the sale of M/s.Life Line Drugsand Pharma Limited was Rs.5,87,95,055/- which shares were through off 11/36 market deal as set out in the said paragraph. He further refers toparagraph 5.1 of the assessment order to submit that the long term capitalgains from the sale of shares has been examined from various availabletools including ITD data, BSE data, money control website, Taxman, Courtrulings, internet as well as investigation wing report and the findings ofSEBI. He submits that this is the basis of the assessment and not search.Referring to paragraph 5.2 to 5.7 of the assessment order which refers tothe findings of the investigation wing, he submits that no where the nameof the petitioner appears. Even the findings in the case of assessee inparagraph 5.8 only refer to data verification and analysis as per sharemarket fundamentals and the return of income to allege that the petitionerlong term capital gain shown in the return of income was pre arranged inconnivance with operator. He submits that these are are statements bereftof any specific statement and cannot be meant to say that the assessment isbased on the search conducted. Even in the conclusion in paragraph 6.6,he submits that there is only reference to the method of share trading ingeneral but no where it mentions the name of petitioner or that he wasinvolved in any share price manipulation. Referring to the statement ofShri Pawan Kayan recorded under section 132(4) recorded on 30.03.2015as referred to in paragraph 7 (A) of the assessment order, learned seniorcounsel submits that neither in the questions put by the investigation wing 12/36 nor in the answers, name of petitioner figures. Referring to paragraph 7(B), he submits that there is a clear mention of survey action under section133A and not search and that too in the premises of M/s.Korp SecuritiesLimited, Kolkata in which, statement of Anupkumar Maheshwari, Directorof Lexus Shares and Stock Brokers Private Limited, Eastern India Pvt. Ltd.and Anuj Realtors Private Limited is referred to. Even here petitioner’sname is not there. The same goes with paragraph 7(C) which refers tosurvey action and not search conducted in the premises of M/s.GatewayFinancial Services Limited in which the statement of Praveen Kr AgarwalDirector has been recorded. Even here there is no mention of petitioner.The same is with paragraph 7(D) where the survey action and not searchwas conducted under section 133 in the premises of Korp SecuritiesLimited and in which the statement of Anuj Agarwal is recorded. Evenhere the name of petitioner does not figure. Learned senior counsel refersto paragraphs 7.4 and 7.5 to submit that the department has notconducted its own investigation and statedly only on the basis ofcircumstantial evidences of survey findings on all the brokers/agents, SEBIand NSE findings and purportedly on applying the test of humanprobabilities has stated that the price hike in the shares of Lifeline Drugs isa pre planned activity. He submits that the entire assessment order is onthe basis of study and analysis of financials of Lifeline Drugs and Pharma 13/36 Limited, share trading pattern of the petitioners, investments, deductionson the basis of SEBI orders, analysis and circumstantial evidence, surveyfindings. 18. He submits that the impugned order passed by respondent No.1is contrary to the provisions of the DTVSV Act and ought to be quashedand respondent No.1 be directed to pass fresh order in Form No.1determining tax payable by Petitioner to be the amount declared in theForm No.1 i.e. 100% of the disputed tax. 13/36 Limited, share trading pattern of the petitioners, investments, deductionson the basis of SEBI orders, analysis and circumstantial evidence, surveyfindings. 18. He submits that the impugned order passed by respondent No.1is contrary to the provisions of the DTVSV Act and ought to be quashedand respondent No.1 be directed to pass fresh order in Form No.1determining tax payable by Petitioner to be the amount declared in theForm No.1 i.e. 100% of the disputed tax. 19.On the other hand, Shri Sham Walve, learned counsel for therespondents seeks to rely on the Affidavit in Reply of the respondentsdated 25[th] March 2021 to counter the submissions made on behalf ofpetitioner. He submits that since the assessment order was framed basedon search/survey enquiries conducted by the Directorate of Income Tax(Investigation), Kolkatta on 02.07.2013, the designated authority hasrightly computed petitioner’s liability under Vivad se Vishwas Act atRs.2,57,67,714/- by adopting a rate of 125% of disputed tax applicable tosearch case in accordance with section 3 of the DTVSV Act. He wouldsubmit that the assessment order was framed based on the informationshared by the investigation regarding manipulation of market price of 14/36 shares of certain companies listed on BSE in order to provide entry ofbogus long term gains to the beneficiaries including petitioner. Theassessment order passed under section 143(3) of the Income Tax Act is onthe basis of the search and seizure action and the statement recordedunder section 132 (4) of the Income Tax Act coupled with post searchenquiries and as the petitioner had failed to demonstrate the genuinenessof the transactions, addition was made. 20. He submits that section 3(b) and section 9(a) (i) of the DTVSVAct refer to an assessment, where the tax arrear has been determined onthe basis of search under section 132/132A of the Income Tax Act andtherefore provisions of section 3(b) and section 9(a)(i) of the DTVSV Actapply to every assessment for which the basis is a `search’ conducted underthe Act. When search is conducted in case of an assessee, assessmentpertaining to six assessment years preceding the assessment year of searchand relevant assessment years are assessed under section 153A of the Act.If the search was conducted in case of any other person but money,bullion, jewellery, assets, books, documents belonging or pertaining toassessee are seized or information contained therein relate to the assessee,the assessment pertaining to six assessment years preceding the assessmentyear of search (i.e the year in which such seized asset/ books/ documents 15/36 15/36 etc. are handed over to the AO of assessee) and relevant assessment yearsis framed under section 153C read with section 153A of the Act. In anyother case, the assessment is framed either under section 143(3) or section147 of the Act depending on the time elapsed from the end of the relevantassessment year. Thus, the phrase `on the basis of search’ used in theDTVSV Act has a broad connotation and covers all assessment orders. Theprinciple of equity demands that similarly placed cases should be treated ina similar manner. It cannot be argued that a person whose assessment isframed under section 153C of the Income Tax Act on the basis ofinformation contained in seized assets pertaining to him should be treateddifferently from a person in whose case information emanates from searchbut he is not covered by the provisions of section 153C of the Act. Inpetitioner’s case, the basis for assessment was information emanating froma search conducted by the Directorate of Income Tax (Investigation),Kolkata. Had the assessment not been based on information emanatingfrom a search, the question of clarification would not have arisen.However, in petitioner’s case there is no doubt that the assessment wasbased on information emanating from a search and hence is required to betreated as a search case. Hence, designated authority has correctly appliedthe relevant rate of 125% of disputed tax to determine amount of taxpayable as per the DTVSV Act. Further, the row no.2 and 3 in Form No.3 16/36 issued by designated authority contains details as filled by the petitioner inthe Form 1 and 2. Since petitioner had filed declaration and undertakingunder DTVSV Act stating that his case is not a search case the same isreflected in row 2 and 3. The designated authority had correctlymentioned in the remarks that in the case of petitioner the assessmentorder was framed on the basis of search conducted by investigation wingand hence amount payable under Act is 125% of the disputed tax.Therefore, it is clear that there is no contradiction in the certificate issuedby designated authority. 21.He submits that the market price of shares of M/s.Life LineDrugs and Pharma Limited being pennystock company was manipulated byoperators to obtain bogus long term capital gain as has been revealedpursuant to statements under section 132(4) and post search enquiry. Hadthe search not happened, assessing Officer during assessment proceedingswould not have conducted further analysis and recorded statement of theassessee regarding pennystock. 22.He submits that FAQ 70 and its answer in circular No.21of 2020was to clarify that the provisions of DTVSV Act apply uniformly to all caseswhere assessment is based on search. He submits that the assessment 17/36 order describes modus operandi followed by the racket of accommodationof entry providers which was unearthed during the search proceedings. Hestresses on the words “on the basis of search” to emphasis this point. 23. He also takes us through paragraph 11 of the assessment order in support of his contentions which reads thus: 22.He submits that FAQ 70 and its answer in circular No.21of 2020was to clarify that the provisions of DTVSV Act apply uniformly to all caseswhere assessment is based on search. He submits that the assessment 17/36 order describes modus operandi followed by the racket of accommodationof entry providers which was unearthed during the search proceedings. Hestresses on the words “on the basis of search” to emphasis this point. 23. He also takes us through paragraph 11 of the assessment order in support of his contentions which reads thus: “11. Thus, considering the findings of the search/survey,inquiriesconducted in the case of brokers, operators, entryproviders and exit providers and on the basis of the SEBI andNSE findings, the nature of transaction entered into by theassessee for receiving LTCG in respect of shares of Lifeline Drugand the exemption claimed u/s.10(38) of the I.T. Act,1961 arenot allowed. Since, these transactions are not treated asgenuine and not resulting in a genuine capital gains, hence, hesale proceeds received by the assessee of Rs.5.87,95,055/- onshares of Lifeline Drug is treated as unexplained taxable incomeearned during the year and accordingly, added under section 68of the I.T.Act,1961 to the total income of the assessee during therelevant year under consideration. Further, an amount ofRs.11,75,901/- i.e 2% of Rs.5,87,95,055/- (commission paid tothe entry provider/operator) is being added to the total incomeof the assessee u/s 69C of IT Act,1961 on account ofunexplained expenditure. Penalty proceeding u/s.271(1)(c) areseparately initiated for furnishing inaccurate particulars ofincome leading to evasion of tax.” 24.With reference to circular No.4 of 2021, revenue has tendered a note submitting as under : “A further clarification dated 23.3.2021 was issued by CBDTvide Circular No.4/20-21. Vide paragraph 4 of the circular, theCBDT has clarified that a `search case’ means an assessment orreassessment made under sections 143(3)/ 144/ 147/ 153A/ 18/36 158BC of the Income Tax Act in the case of a person referred toin section 153A or section 153C or section 158BC or section158BD of the Income Tax Act. On the basis of search initiatedunder section 132, or requisition made under section 132A ofthe Income Tax Act. 2It is emphasized that circular dated 23.03.2021 has onlymodified or rather has enlarged the scope of FAQ 70 where,initially, only section 143(3)/ 144 was mentioned. It is also pertinent to highlight section 153C(1)(b) which readsas under: “Any books of accounts or documents, seized or requisitionedpertains or pertain to, or any information contained thereinrelates to a person other than the person referred to in section153A….” Vide this scheme it is very clear that if search is conducted in thecase of some person and transaction pertaining to other personshave been found, other person’s case shall be treated as searchcase. In other words, as per DTVSV Act 2020, it is not materialthat a `search case’ essentially should be a case wherein warrantis executed u/s.132 of the Income Tax Act. To emphasize FAQNo.70 is identical to section 153C of the Income Tax Actwherein the cases are considered as `search case’ even thoughwarrant is not executed on him but transaction or informationare found from the person subjected to search action u/s 132 ofthe Act.” 25. He submits that it is, therefore clear from the new circular that if search is conducted in the case of some persons and transactionspertaining to other persons have been found, then the other persons’ caseshall be treated as a search case. And would not be material that warrantunder section 132 of the Income Tax is not executed, for a case to betreated as search case. 19/36 26.He, therefore, submits that there is no merit in the contentionsof petitioner and the petition ought to be dismissed with costs andpetitioner be directed to make payment of Rs.2,57,67,714/- being 125% ofthe disputed tax to the revenue. 25. He submits that it is, therefore clear from the new circular that if search is conducted in the case of some persons and transactionspertaining to other persons have been found, then the other persons’ caseshall be treated as a search case. And would not be material that warrantunder section 132 of the Income Tax is not executed, for a case to betreated as search case. 19/36 26.He, therefore, submits that there is no merit in the contentionsof petitioner and the petition ought to be dismissed with costs andpetitioner be directed to make payment of Rs.2,57,67,714/- being 125% ofthe disputed tax to the revenue. 27.We have heard learned counsel for the parties and with theirable assistance, we have perused the papers and proceedings in the matter. 28.It would firstly be appropriate to dwell on certain relevantprovisions of the DTVSV act and the rules, its statement of object andreasons, as well as the circulars issued thereunder as are referred to aboveas also certain provisions of the income tax act. 29.The statement of objects and reasons of the DTVSV act are set out as under: “Over the years, the pendency of appeals filed bytaxpayers as well as Government has increased due tothe fact that the number of appeals that are filed ismuch higher than the number of appeals that aredisposed. As a result, a huge amount of disputed tax arrears is locked-up in these appeals. As on the 30[th]November, 2019, the amount of disputed direct taxarrears is Rs.9.32 lakh crores. Considering that theactual direct tax collection in the financial year 2018-19 was Rs.11.37 lakh crores, the disputed tax arrearsconstitute nearly one year direct tax collection. 20/36 2Tax disputes consume copious amount oftime, energy and resources both on the part of theGovernment as well as taxpayers. Moreover, they alsodeprive the Government of the timely collection ofrevenue. Therefore, there is an urgent need to providefor resolution of pending tax disputes. This will notonly benefit the Government by generating timelyrevenue but also the taxpayers who will be able todeploy the time, energy and resources saved by opting for such dispute resolution towards theirbusiness activities. 3It is, therefore, proposed to introduce theDirect Tax Vivad se Vishwas Bill, 2020, for disputeresolution related to direct taxes, which, inter alia,provides for the following namely:- (a)the provisions of the Bill shall be applicableto appeals filed by tax payers or the Government,which are pending with the Commissioner (Appeals),Income Tax Appellate Tribunal, High Court or SupremeCourt as on the 31[st] day of January, 2020 irrespectiveof whether demand in such cases is pending or hasbeen paid; (b)the pending appeal may be againstdisputed tax, interest or penalty in relation to anassessment or reassessment order or against disputedinterest, disputed fees where there is no disputed tax.Further, the appeal may also be against the taxdetermined on defaults in respect of tax deducted atsource or tax collected at source. (c)in appeals related to disputed tax, thedeclarant shall not pay the whole of the disputed tax ifthe payment is made before the 31[st] day of March,2020 and for the payments made after the 31[st] day ofMarch, 2020 but on or before the date notified byCentral Government, the amount payable shall beincreased by 10 per cent of disputed tax. (d)in appeals related to disputed penalty,disputed interest or disputed fee, the amount payableby the declarant shall be 25 per cent of the disputedpenalty, disputed interest or disputed fee, as the casemay be if the payment is made on or before the 31[st]day of March, 2020. If payment is made after 31[st] day 21/36 of March, 2020 but on or before the date notified byCentral Government, the amount payable shall beincreased to 30 per cent of the disputed penalty,disputed interest or disputed fee, as the case may be. (d)in appeals related to disputed penalty,disputed interest or disputed fee, the amount payableby the declarant shall be 25 per cent of the disputedpenalty, disputed interest or disputed fee, as the casemay be if the payment is made on or before the 31[st]day of March, 2020. If payment is made after 31[st] day 21/36 of March, 2020 but on or before the date notified byCentral Government, the amount payable shall beincreased to 30 per cent of the disputed penalty,disputed interest or disputed fee, as the case may be. 4The proposed Bill shall come into force onthe date it receives the assent of the President anddeclaration may be made thereafter up to the date tobe notified by the Government.” 30. The DTVSV Act is an Act to provide a resolution for pending tax disputes which have been locked up in litigation. Taxpayers can put an endto tax litigation by opting for the scheme and also obtain immunity frompenalty and prosecution by paying percentages of tax as specified therein.This would bring peace of mind, certainty, saving of time and resources forthe taxpayers and also generate timely revenue for the Government. 31. In the context of this discussion, section 3 of the DTVSV Actassumes significance. For the sake of convenience, section 3 Of theDTVSV Act is quoted as under : “3:-Amount payable by declarant:-Subject to theprovisions of this Act, where a declarant files under theprovisions of this Act on or before the last date, a declaration tothe designated authority in accordance with the provisions ofsection 4 in respect of tax arrear, then, notwithstanding anythingcontained in the Income-tax Act or any other law for the timebeing in force, the amount payable by the declarant under thisAct shall be as under, namely:- Sl.Nature of tax arrearNo. AmountpayableAmount payable underunder this Act on orthis Act on or after the 1stbefore 31st day ofday of April, 2020 but onMarch, 2020or before the last date. 22/36 “3:-Amount payable by declarant:-Subject to theprovisions of this Act, where a declarant files under theprovisions of this Act on or before the last date, a declaration tothe designated authority in accordance with the provisions ofsection 4 in respect of tax arrear, then, notwithstanding anythingcontained in the Income-tax Act or any other law for the timebeing in force, the amount payable by the declarant under thisAct shall be as under, namely:- Sl.Nature of tax arrearNo. AmountpayableAmount payable underunder this Act on orthis Act on or after the 1stbefore 31st day ofday of April, 2020 but onMarch, 2020or before the last date. 22/36 (a)Where the tax arrearis theAmount of theThe aggregate of theaggregate amount of disputeddisputed taxamount of disputed taxtax, interest chargeable orand ten per cent ofcharged on such disputed taxdisputed tax; providedand penalty leviable or leviedthat where the ten per centon such disputed tax.of disputed tax exceedsthe aggregate amount ofinterest chargeable orcharged on such disputedtax and penalty leviable orlevied on such disputedtax, the excess shall beignored for the purpose ofcomputation of amountpayable under this Act.aggregate amount of disputeddisputed taxamount of disputed taxtax, interest chargeable orand ten per cent ofcharged on such disputed taxdisputed tax; providedand penalty leviable or leviedthat where the ten per centon such disputed tax.of disputed tax exceedsthe aggregate amount ofinterest chargeable orcharged on such disputedtax and penalty leviable orlevied on such disputedtax, the excess shall beignored for the purpose ofcomputation of amountpayable under this Act.(b)Where the tax arrear includesThe aggregate of theThe aggregate of thethe tax, interest or penaltyamount of disputedamount of disputed taxdetermined in any assessmenttax, and twenty fiveand thirty-five percent ofon the basis of search underper cent of thedisputed tax; providedsection 132 or section 132Adisputed tax; providedthat where the thirty-fiveof the Income Tax Act,that where the twenty-per cent of disputed taxfive per cent ofexceeds the aggregatedisputed tax exceedsamountofinterestthe aggregate amountchargeable or charged onof interest chargeablesuch disputed tax andor charged on suchpenalty leviable or levieddisputed tax andon such disputed tax, thepenalty leviable orexcess shall be ignoredlevied on suchfor the purpose ofdisputed tax, thecomputation of amountexcess shall bepayable.ignored for thepurposeofcomputationofamount payable underthis Act.the tax, interest or penaltyamount of disputedamount of disputed taxdetermined in any assessmenttax, and twenty fiveand thirty-five percent ofon the basis of search underper cent of thedisputed tax; providedsection 132 or section 132Adisputed tax; providedthat where the thirty-fiveof the Income Tax Act,that where the twenty-per cent of disputed taxfive per cent ofexceeds the aggregatedisputed tax exceedsamountofinterestthe aggregate amountchargeable or charged onof interest chargeablesuch disputed tax andor charged on suchpenalty leviable or levieddisputed tax andon such disputed tax, thepenalty leviable orexcess shall be ignoredlevied on suchfor the purpose ofdisputed tax, thecomputation of amountexcess shall bepayable.ignored for thepurposeofcomputationofamount payable underthis Act.(c)Where the tax arrear relates toTwenty-five per centThirty-five per cent ofdisputed interest or disputedof disputed interest ordisputed interest orpenalty or disputed feedisputed penalty ordisputed penalty ordisputed fee.disputed fee.disputed interest or disputedof disputed interest ordisputed interest orpenalty or disputed feedisputed penalty ordisputed penalty ordisputed fee.disputed fee. Provided that in a case where an appeal or writ petition or specialleave petition is filed by the income-tax authority on any issue before theappellate forum, the amount payable shall be one-half of the amount inthe table above calculated on such issue, in such manner as may beprescribed: 23/36 Provided further that in a case where an appeal is filedbefore the Commissioner (Appeals) or objections is filed beforethe Dispute Resolution Panel by the appellant on any issue onwhich he has already got a decision in his favour from theIncome-tax Appellate Tribunal (where the decision on suchissue is not reversed by the High Court or the Supreme Court)or the High Court (where the decision on such issue is notreversed by the Supreme Court), the amount payable shall beone-half of the amount in the table above calculated on suchissue, in such manner as may be prescribed: Provided also that in a case where an appeal is filed by theappellant on any issue before the Income-tax Appellate Tribunalon which he has already got a decisions in his favour from the High Court (where the decision on such issue is not reversed by the Supreme Court), the amount payable shall be one-half of the amount in the table above calculated on such issue, in such manner as may be prescribed.” According to the said section, where a declarant files a declaration to thedesignated authority in accordance with section 4 in respect of tax arrear,then, the amount payable by the declarant under the DTVSV Act shall beamount of the disputed tax where the tax arrear is the aggregate amountof disputed tax, interest and penalty on such disputed tax. In other wordsin such a case the amount payable would be 100% percent of the disputedtax declared. And in case, where tax arrear includes tax interest or penaltydetermined in any assessment on the basis of search under section 132 orsection 132 A of the Income Tax Act, the amount payable would be theaggregate of the amount of disputed tax and 25% of the disputed tax. Thismeans that where the assessment is on the basis of a search the amountpayable would be 125% of the disputed tax declared by petitioner. 24/36 It would also be relevant at this stage to refer to FAQ No. 70 of circular No. 21 /2020 along with its answer as under: 33.The answer to question 70 suggests that even if there has beenno search in the case of an assessee or taxpayer and the assessment orderhas been framed under section 143 (3)/144 of the Income Tax Act basedon search executed in some other taxpayer’s case, then the case of the 1[st]assessee would be considered as a search case. 34.With reference to the aforesaid question No. 70 and its answer in circular No. 21, a further circular No. 4/2021 dated 23 March 2021 has been issued which is also quoted as under: 25/36 “With the objective to inter alia reduce pendingincome tax litigation, generate timely revenue for theGovernment and benefit taxpayers by providing thempeace of mind, certainty and savings on account oftime and resources that would otherwise be spent onthe long-drawn and vexatious litigation process, theDirect Tax Vivad Se Vishwas Act, 2020 (hereinafterreferred to as “Vivad se Vishwas’) was enacted on 17[th]March, 2020.2. Sections 10 and 11 of Vivad Se Vishwasempower the Central Government / Central Board ofDirect Taxes to issue directions or orders in publicinterest or to remove difficulties. In order to facilitatethe taxpayers, clarifications under the said sections inform of answers in frequently asked questions (FAQs)were issued vide circular no.9/2020 dated 22[nd] April,2020 (covering FAQ 1-55) and circular no.21/2020dated 4[th] December, 2020 (covering FAQ no.56-89).3. FAQ no.70 of circular 21/2020 clarifiedeligibility the search case under Vivad se Vishwas. Itwas clarified that if the assessment order has beenframed in the case of a taxpayer under section143(3)/144 of the income-tax Act based on the searchexecuted in some other taxpayer’s case, it is to beconsidered as a ‘search case’ under Vivad Se Vishwas. 4. Several representations have beenreceived seeking further clarity with regard to theclassification of a case as a ‘search case’ for thepurposes of Vivad Se Vishwas. The matter has beenexamined. In order to remove any uncertainty in thisregard, and in exercise of powers under section 10and 11 of Vivad se Vishwas, it is hereby clarified thata ‘search case’ means an assessment or reassessmentmade under sections 143(3) / 144 / 147 / 153A /153C/ 158BC of the Income-tax Act in the case of aperson referred to in section 153A or section 153C orsection 158BC or section 158BD of the Income-tax Acton the basis of search initiated under section 132, or-requisition made under section 132A of the Incometax Act. The FAQ no.70 of circular 21/2020 standsmodified to this extent.” 26/36 It is to be noted that the aforesaid clarification with respect to FAQ No. 70has been issued after the petition had been filed. It clarifies that a “searchcase” meansan assessment or reassessment made under Section143(3)/144/147/153A/153C/158BC of the Income-tax Act in the case of aperson referred to in Section 153A or Section 153C or Section 158BC orSection 158BD on the basis of search initiated under Section 132, orrequisition made under Section 132A of the Income-tax Act. Answer toFAQ No.70 of Circular 21/2020 has been replaced by the above meaning.To be considered a search case, the assessment/re-assessment should be: (i)under 143(3)/144/147/153A/153C/