Medeor Hospital Limited v. Principal Commissioner Of

$~ IN THE HIGH COURT OF DELHI AT NEW DELHI +W.P.(C) 12116/2021 MEDEOR HOSPITAL LIMITED ..... PetitionerThrough :Mr. Ved Jain & Mr. Nishchay Kantoor,Advocates versus PRINCIPAL COMMISSIONER OF INCOME TAX-04 & ORS. ..... Respondents Through :Mr. Abhishek Maratha, Senior Standingcounsel for the Revenue. % Reserved On: 17[th]October, 2022Date of Decision: 28[th]October, 2022 CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMOHAN, J: 1.Present writ petition has been filed by the petitioner challenging the actionof respondent No.1 in partially settling dispute relating to penalty for AssessmentYear 2014-15 pending before the Income Tax Act Tribunal (for short ‘ITAT’)under the Vivad Se Vishwas Scheme (for short ‘VSV Scheme’) without settlingthe dispute relating to quantum appeal for Assessment Year 2014-15 pendingbefore the Commissioner of Income Tax (Appeals) [(for short ‘CIT(A)’]. ARGUMENTS ON BEHALF OF THE PETITIONER 2.Learned counsel for the petitioner stated that respondent No.1 erred inholding that petitioner was ineligible to settle the quantum appeal for AssessmentYear 2014-15 pending before CIT(A) on the grounds that (i) appeal had beenfiled before CIT(A) after limitation period for filing the appeal had expired, (ii)FAQ-59 did not cover the case of the petitioner and (iii) an order under Section249(3) condoning delay was necessary for eligibility under VSV Act.Therelevant portion of the impugned order dated 23[rd]January, 2021 is reproducedhereinbelow:- “CREDIT IN FORM 3 HAS BEEN GIVEN PROVISIONALLY ON THEBASIS OF OLTAS DATA. AO SHOULD ENSURE CONSUMPTIOINOF ALL CHALLAS AGAINST CORRECT DEMANDS IMMEDIATELY.In this case penalty u/s 271(1)(c) of Rs.74290830/- was imposed whichwas confirmed by CIT(A) and appeal against the same is pending inITAT. In respect of quantum, the AO passed order on 22.12.2016, asper Form-35.It was served on 23.06.2017 and appeal was filed on24.05.2019, which is late appeal. FAQ 59 does not cover assesssee’scase. Therefore, only penalty appeal is being settled on payment of25% of penalty amount. Form 3 has been issued accordingly.” 3.Learned counsel for the petitioner submitted that the respondent No.1 erredin not appreciating that in terms of the Section 2(1)(a)(i) read with Section 2(1)(b)read with Section 2(1)(n) of the VSV Act, the only requirement for being eligibleto settle a dispute under the VSV Scheme was that the appeal should be“pending” before an appellate forum which includes CIT(A) and ITAT. Hepointed out that there was no requirement that the appeal should be filed in timeor that the appeal should have been ‘admitted’ before the specified date. Hefurther submitted that there was no requirement that there had to be a formal order of condonation of delay before the assessee could avail the benefit of theVSV Scheme. 4.In support of his submission, learned counsel for the petitioner relied on thejudgment of this Court in the case of Shyam Sunder Sethi vs. PCIT in W.P.(C)2291/2021 dated 3[rd]March 2021, wherein it has been held that “An appeal wouldbe “pending” in the context of Section 2(1)(a) of the 2020 Act when it is first filedtill its disposal. Section 2(1)(a) of the 2020 Act does not stipulate that the appealshould be admitted before the specified date, it only adverts to its pendency”. order of condonation of delay before the assessee could avail the benefit of theVSV Scheme. 4.In support of his submission, learned counsel for the petitioner relied on thejudgment of this Court in the case of Shyam Sunder Sethi vs. PCIT in W.P.(C)2291/2021 dated 3[rd]March 2021, wherein it has been held that “An appeal wouldbe “pending” in the context of Section 2(1)(a) of the 2020 Act when it is first filedtill its disposal. Section 2(1)(a) of the 2020 Act does not stipulate that the appealshould be admitted before the specified date, it only adverts to its pendency”. 5.He further submitted that in any event in the present case the delay infiling the appeal had been condoned by CIT(A), NFAC vide letter dated 20[th]July,2021 and the appeal had been admitted. According to him, in such circumstances,appeal against assessment order dated 22[nd]December, 2016 ought to beconsidered to have been has been filed on time i.e. by 21[st]January, 2017 (beforespecified date 31[st]January, 2020) as it is settled law that condonation of delaywhenever is accepted by the appellate authority, the same would relate back to theoriginal date of filing of the appeal, as if the appeal had been filed within the timeprescribed under the Statute. ARGUMENTS ON BEHALF OF THE RESPONDENTS 6.Per contra, learned counsel for the respondents stated that as theassessment order dated 22[nd]December, 2016 had been served upon the petitioneron 23[rd]June, 2017, the limitation of thirty days prescribed in the Income Tax Act,1961 (for short ‘Act, 1961’) for filing an appeal under Section 246A of the Act,1961, before the CIT(A) had expired on 22[nd]July, 2017. 7.He further stated that the petitioner had preferred an appeal under Section246A of the Act, 1961 before the CIT(A) challenging the penalty order, which was dismissed. Thereafter, the petitioner preferred an appeal under Section 253of the Act, 1961, before the ITAT which was pending adjudication as on 31[st]January, 2020. 8.He also stated that the petitioner filed an appeal against the assessmentorder dated 22[nd]December, 2016 before the CIT(A) on 24[th]May, 2019 i.e. after adelay of about two years from the date of expiry of limitation on 22[nd]July, 2017,along with an application seeking condonation of delay in filing the said appeal. 9.He stated that the petitioner opted for VSV Scheme and filed a declarationunder VSV Act, 2020 on 18[th]December, 2020, to settle the pending disputesbefore the CIT(A) in quantum appeal and ITAT in penalty appeal. 10.He contended that though the designated authority, in view of the VSVAct, 2020 allowed the settlement of the penalty as the penalty appeal was pendingon the prescribed date i.e. on 31[st]January, 2020, yet the designated authority, inviewofFAQ-59issuedbyCBDTvideCircularNo.21/2020namelyF.NO.IT(A)/1/2020-TPL dated 4[th]December, 2020, rejected the declaration ofthe petitioner qua the quantum appeal. The FAQ-59 in CBDT CircularNo.21/2020 dated 4[th]December, 2020 is reproduced hereinbelow:- “Q-59. Whether the taxpayer in whose case the time limit for filing ofappeal has expired before 31 Jan 2020 but an application forcondonation of delay has been filed is eligible? Ans.If the time limit for filing appeal expired during the period from1[st]April 2019 to 31 at Jan. 2020 (both dates included in the period),and the application for condonation is filed before the date of issue ofthis circular, and appeal is admitted by the appellate authority beforethe date of filing of the declaration, such appeal will be deemed to bepending as on 31[st]Jan 2020.” 11.Learned counsel for the respondents stated that according to the designatedauthority the claim of the petitioner with regard to the quantum appeal did notfulfil the condition prescribed by the FAQ-59 in the following manner:- “If conditions stated below are cumulatively satisfied, such appeal isdeemed to be pending as on Specified Date and is eligible to opt forDTVSV Scheme: i)Time limit to file appeal expired between 1 April 2019 to 31January 2020: andJanuary 2020: and 11.Learned counsel for the respondents stated that according to the designatedauthority the claim of the petitioner with regard to the quantum appeal did notfulfil the condition prescribed by the FAQ-59 in the following manner:- “If conditions stated below are cumulatively satisfied, such appeal isdeemed to be pending as on Specified Date and is eligible to opt forDTVSV Scheme: i)Time limit to file appeal expired between 1 April 2019 to 31January 2020: andJanuary 2020: and ii)Application for condonation of delay is filed before 4 December,2020: and2020: and iii)Appeal is admitted by appellate forum before the date ofdeclaration”declaration” REJOINDER ARGUMENTS 12.In rejoinder, learned counsel for the petitioner submitted that FAQ-59 ofCircular issued by CBDT to extent it contemplated ‘admission’ of appeal beforefiling of declaration as a condition precedent for appeal to be treated ‘pending’and to be eligible for settlement under the VSV Act was contrary to provision ofVSV Act. COURT’S REASONING IT IS SETTLED LAW THAT WHEN A SECTION CONTEMPLATES PENDENCYOF AN APPEAL THERE IS NO NEED TO INTRODUCE THE QUALIFICATIONTHAT IT SHOULD BE VALID OR COMPETENT. 13.Having heard learned counsel for the parties, this Court is of the view thatthe primary issue that arises for consideration in the present proceeding is as towhat is the meaning of the word ‘pending’ in Section 2(1)(a) of the VSV Act. 14.Section 2(1)(a) and Section 2(1)(n) of the VSV Act are reproducedhereinbelow:- “2(1) In this Act, unless the context otherwise requires— —(a) “appellant” means (i) a person in whose case an appeal or a writ petition or specialleave petition has been filed either by him or by the income-taxauthority or by both, before an appellate forum and such appeal orpetition is pendingas on the specified date…. xxxxxxxxx (n)“specified date” means the 31[st]day of January, 2020; (emphasis supplied) 15.In the opinion of this Court, when a section contemplates pendency of anappeal, what is required is that an appeal should be pending and in such a casethere is no need to introduce the qualification that it should be valid or competent.In Raja Kulkarni v. The State of Bombay reported in AIR 1954 SC 73, theSupreme Court has held that “whether an appeal is valid or competent is aquestion entirely for the appellate court before whom the appeal is filed to decideand this determination is possible only after the appeal is heard but there isnothing to prevent a party from filing an appeal which may ultimately be found tobe incompetent, e.g. when it is held to be barred by limitation. From the merefact that such an appeal is held to be unmaintainable on any ground whatsoever,it does not follow that there was no appeal pending before the Court”. 16.To the same effect is the law laid down by the judgments of the SupremeCourt in the cases of Tirupati Balaji Developers (P) Ltd. v. State of Bihar & Ors.reported in(2004) 5 SCC 1 andCommr. of Income Tax, Rajkot VersusShatrusailya Digvijaysingh Jadeja, (2005) 7 SCC 294. In the said cases, it has Signature Not Verified been held that an appeal does not cease to be an appeal though irregular andincompetent. 17.The Gujarat High Court in Tushar Agro Chemicals vs. The PrincipalCommissioner of Income Tax-1, 2021 (7) TMI 1267 has also held as under:- “11. In view of the aforestated legal position, there remains noshadow of doubt that appeal could be said to be pending, even if thedelay occurred in filing the same was not condoned and even if it wasallegedly irregular or incompetent. In the instant case therefore also,the Respondent could not have rejected the Declaration Form of thePetitioner filed under the said Act merely on the ground that the appealwas not valid or competent, as the delay occurred in filing the Appealwas not condoned by the Appellate Authority…..” Signature Not Verified been held that an appeal does not cease to be an appeal though irregular andincompetent. 17.The Gujarat High Court in Tushar Agro Chemicals vs. The PrincipalCommissioner of Income Tax-1, 2021 (7) TMI 1267 has also held as under:- “11. In view of the aforestated legal position, there remains noshadow of doubt that appeal could be said to be pending, even if thedelay occurred in filing the same was not condoned and even if it wasallegedly irregular or incompetent. In the instant case therefore also,the Respondent could not have rejected the Declaration Form of thePetitioner filed under the said Act merely on the ground that the appealwas not valid or competent, as the delay occurred in filing the Appealwas not condoned by the Appellate Authority…..” CBDT CANNOT ISSUE CIRCULARS ADVERSE TO THE ASSESSEE. THE FAQNO.59 TO THE EXTENT IT CONTEMPLATES ADMISSION OF APPEAL AS ACONDITION PRECEDENT IN ORDER TO BE ELIGIBLE FOR SETTLEMENTUNDER THE VSV ACT IS CONTRARY TO LAW. 18.Though Section 10 of the VSV Act gives power to the CBDT to issuedirections, yet this Court is of the view that the said Section is similar to Section119 of the Act, 1961. Consequently, the CBDT under Section 10 of VSV Actcannot issue circulars adverse to the assessee. 19.In fact, the Supreme Court in UCO Bank, Calcutta vs. Commissioner ofIncome Tax, W.B., (1999) 4 SCC 599 while interpreting Section 119 of the Act,1961 has held as under:- “9.xxxxxxxxx Under sub-section (2) of Section 119, without prejudice to thegenerality of the Board's power set out in sub-section (1), a specificpower is given to the Board for the purpose of proper and efficientmanagement of the work of assessment and collection of revenue toissue from time to time general or special orders in respect of any classof incomes or class of cases setting forth directions or instructions, notbeing prejudicial to assessees, as the guidelines, principles or Signature Not Verified procedures to be followed in the work relating to assessment. Suchinstructions may be by way of relaxation of any of the provisions of thesections specified there or otherwise. The Board thus has power, interalia, to tone down the rigour of the law and ensure a fair enforcementof its provisions, by issuing circulars in exercise of its statutory powersunder Section 119 of the Income Tax Act which are binding on theauthorities in the administration of the Act. Under Section 119(2)(a),however, the circulars as contemplated therein cannot be adverse tothe assessee. Thus, the authority which wields the power for its ownadvantage under the Act is given the right to forego the advantagewhen required to wield it in a manner it considers just by relaxing therigour of the law or in other permissible manner as laid down inSection 119. The power is given for the purpose of just, proper andefficient management of the work of assessment and in public interest.It is a beneficial power given to the Board for proper administration offiscal law so that undue hardship may not be caused to the assesseeand the fiscal laws may be correctly applied. Hard cases which can beproperly categorised as belonging to a class, can thus be given thebenefit of relaxation of law by issuing circulars binding on the taxingauthorities.” (emphasis supplied) 20.It is also settled law that when the Supreme Court or High Court declarethe law on a question arising for consideration, then the view expressed by theSupreme Court or the High Court has to be given effect to and not the circularissued by the CBDT. The Supreme Court in Commissioner of Central Excise,Bolpur vs. Ratan Melting & Wire Industries, (2008) 13 SCC 1 has held asunder:- (emphasis supplied) 20.It is also settled law that when the Supreme Court or High Court declarethe law on a question arising for consideration, then the view expressed by theSupreme Court or the High Court has to be given effect to and not the circularissued by the CBDT. The Supreme Court in Commissioner of Central Excise,Bolpur vs. Ratan Melting & Wire Industries, (2008) 13 SCC 1 has held asunder:- “7. Circulars and instructions issued by the Board are no doubtbinding in law on the authorities under the respective statutes, butwhen the Supreme Court or the High Court declares the law on thequestion arising for consideration, it would not be appropriate for thecourt to direct that the circular should be given effect to and not theview expressed in a decision of this Court or the High Court. So far asthe clarifications/circulars issued by the Central Government and ofthe State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding uponthe court. It is for the court to declare what the particular provision ofstatute says and it is not for the executive. Looked at from anotherangle, a circular which is contrary to the statutory provisions hasreally no existence in law.” (emphasis supplied) 21.Consequently, the FAQ No.59 of Circular No.21/2020 dated 4[th]December,2020 issued by CBDT to the extent it contemplates admission of appeal beforefiling of declaration as a condition precedent in order for the appeal to be treatedas pending and to be eligible for settlement under the VSV Act is contrary to law. RELIEF 22.Keeping in view the aforesaid, the Forms 3 dated 23[rd]January, 2021 and12[th]February, 2021 attached as Annexures P-16 and P-21 as well as the FAQNo.59 of Circular No.21/2020 dated 4[th]December, 2020 issued by CBDT to theextent mentioned hereinabove are quashed and respondent No.1 is directed totreat the appeal filed against the assessment order under Section 143(3) forassessment year 2014-15 before CIT(A) on 24[th]May, 2019 as pending as on 31[st]January, 2020. The respondents are also directed to issue revised Forms 3 bysettling both the appeals against the assessment order for assessment year 2014-15 (i.e. quantum appeal pending before CIT(A) and the appeal against levy ofpenalty pending before ITAT) in accordance with the provisions of VSV Actwithin eight weeks. MANMOHAN, J OCTOBER 28, 2022 js/TS Signature Not Verified MANMEET PRITAM SINGH ARORA, J