Rakesh Garg Son Of Shri Kailash Chand Garg v. Principal Comissioner Of Income Tax, Ajmer, Having Itsoffice At New Central Revenue Building, Jaipur Road, Civillines, Ajmer.office At New Central Revenue Build

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR (1)D.B. Civil Writ Petition No. 4178/2021 Rakesh Garg Son Of Shri Kailash Chand Garg, Aged About 44Years, Having His Address At 2, Pragati Colony, Near St. StephenSchool, Madanganj, Kishangarh, Ajmer. ----Petitioner Versus 1. Principal Comissioner Of Income Tax, Ajmer, Having ItsOffice At New Central Revenue Building, Jaipur Road, CivilLines, Ajmer.Office At New Central Revenue Building, Jaipur Road, CivilLines, Ajmer. 2. Central Board Of Direct Taxes, New Delhi, Having ItsOffice At North Block, Central Secretariat, New Delhi -110001 Through Its Chairman. ----Respondents Connected with (2) D.B. Civil Writ Petition No. 4201/2021 Rakesh Garg Son Of Shri Kailash Chand Garg, Aged About 44Years, Having His Address At 2, Pragati Colony, Near St.Stephen School, Madanganj, Kishangarh, Ajmer. ----Petitioner Versus 1. Principal Commissioner Of Income Tax, Ajmer, HavingIts Office At New Central Revenue Building, Jaipur Road,Civil Lines, Ajmer.Its Office At New Central Revenue Building, Jaipur Road,Civil Lines, Ajmer. 2. Central Board Of Direct Taxes, New Delhi Having ItsOffice At North Block, Central Secretariat, New Delhi-110001 Through Its Chairman.Office At North Block, Central Secretariat, New Delhi-110001 Through Its Chairman. ----Respondents (3) D.B. Civil Writ Petition No. 4199/2021 Rakesh Garg Son Of Shri Kailash Chand Garg, Aged About 44Years, Having His Address At 2, Pragati Colony, Near St.Stephen School, Madanganj, Kishangarh, Ajmer ----Petitioner 1. Principal Comissioner Of Income Tax, Ajmer, Having ItsOffice At New Central Revenue Building, Jaipur Road,Civil Lines, Ajmer.Office At New Central Revenue Building, Jaipur Road,Civil Lines, Ajmer. 2. Central Board Of Direct Taxes, New Delhi, Having ItsOffice At North Block, Central Secretariat, New Delhi -110001 Through Its Chairman.Office At North Block, Central Secretariat, New Delhi -110001 Through Its Chairman. ----Respondents For Petitioner(s): Mr. Siddharth RankaFor Respondent(s): Ms. Parinitoo Jain through VC HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI HON'BLE MR. JUSTICE SUDESH BANSAL 17/02/2022 Judgment All these petitions arise out of a common background. Theyhave been heard together and would be disposed of by thiscommon judgment. Facts being substantially similar may berecorded from writ petition No.4178/2021. Petitioner is anindividual and is engaged in the business of manufacturing andtrading of textile articles and also in the business of share andderivative trading. For the assessment year 2014-15 the assesseehad filed the return of income on 30.11.2014 declaring totalincome of Rs.4,22,850/-.This included a short term capital gain ofRs.27,960/-. The revenue authorities were of the opinion thatpetitioner’s speculative and non-speculative transactions wererequired to be calculated separately and the turn over of theassessee was more than the threshold limit prescribed forcompulsory audit under Section 44AB of the Income Tax Act, 1961(for short ‘ the Act’) still the assessee had not filed the auditreport. With respect to the declared income the revenue had no dispute. However on account of above noted breach, proceedingsfor penalty under Section 271B under the Act were initiated. Thisculminated into a penalty order dated 26.06.2018 passed by theassessing officer imposing the penalty of Rs.1,50,000/-. Theassessee’s appeal was dismissed by the CIT (appeals) on07.05.2019. Against this order the assessee had filed the appealbefore Income Tax Appellate Tribunal on 09.12.2020. Along withthe appeal the assessee had also filed an application forcondonation of delay. The delay was condoned by the tribunal byan order dated 28.01.2021. dispute. However on account of above noted breach, proceedingsfor penalty under Section 271B under the Act were initiated. Thisculminated into a penalty order dated 26.06.2018 passed by theassessing officer imposing the penalty of Rs.1,50,000/-. Theassessee’s appeal was dismissed by the CIT (appeals) on07.05.2019. Against this order the assessee had filed the appealbefore Income Tax Appellate Tribunal on 09.12.2020. Along withthe appeal the assessee had also filed an application forcondonation of delay. The delay was condoned by the tribunal byan order dated 28.01.2021. In the meantime the legislature framed the direct tax Vivadse Vishwas Scheme, 2020. It was brought into effect from17.03.2020. This act contains provisions for settlement of pendingdirect tax disputes. The term appellant has been defined underSection 2(1)(a) which reads as under:- “(a) “appellant” means— (i) a person in whose case an appeal or a writ petitionor special leave petition has been filed either by him orby the income-tax authority or by both, before anappellate forum and such appeal or petition is pendingas on the specified date; (ii) a person in whose case an order has been passedby the Assessing Officer, or an order has been passedby the Commissioner (Appeals) or the Income TaxAppellate Tribunal in an appeal, or by the High Court ina writ petition, on or before the specified date, and thetime for filing any appeal or special leave petitionagainst such order by that person has not expired ason that date; (iii) a person who has filed his objections before theDispute Resolution Panel under section 144C of theIncome-tax Act, 1961 and the Dispute Resolution Panelhas not issued any direction on or before the specifieddate; (iv) a person in whose case the Dispute ResolutionPanel has issued direction under sub-section (5) ofsection 144C of the Income-tax act and the AssessingOfficer has not passed any order under sub-section(13) of that section on or before the specified date; (v) a person who has filed an application for revisionunder section 264 of the Income-tax Act and suchapplication is pending as on the specified date;” The term “declarant” has been defined in Section 2(1)(c) of the Act as to mean a person who files declaration under Section 4. The term “disputed penalty” is defined under Section 2(1)(i) as tomean penalty determined in any case under the provisions of theIncome Tax Act, 1961 where— (i) such penalty is not levied or leviable in respect ofdisputed income of disputed tax, as the case may be;and (ii) an appeal has been filed by the appellant in respect of such penalty. The specified date means 31[st] day of January, 2020 as per Section 2(n). The term “tax arrear” has been defined in Section 2(1)(o) as to mean the aggregate amount of disputed tax, interestchargeable or charged on such disputed tax and penalty levied orleviable on such disputed tax or disputed interest or disputedpenalty or disputed fee as determined under the provisions ofIncome Tax Act. Section 3 of the Act provides that subject to the provisionsof the Act where a declarant has filed a declaration to thedesignated authority in accordance with the provisions of Section4 in respect of tax arrear, notwithstanding anything contained inthe Income Tax Act or any other law for the time being in forcethe amount payable by the declarant shall be as provided in thetable in the said Section. The declaration as referred to in Section 3 has to be madebefore the designated authority in prescribed format as provided to mean the aggregate amount of disputed tax, interestchargeable or charged on such disputed tax and penalty levied orleviable on such disputed tax or disputed interest or disputedpenalty or disputed fee as determined under the provisions ofIncome Tax Act. Section 3 of the Act provides that subject to the provisionsof the Act where a declarant has filed a declaration to thedesignated authority in accordance with the provisions of Section4 in respect of tax arrear, notwithstanding anything contained inthe Income Tax Act or any other law for the time being in forcethe amount payable by the declarant shall be as provided in thetable in the said Section. The declaration as referred to in Section 3 has to be madebefore the designated authority in prescribed format as provided in Section 4(1) of the Act. As per sub-section (2) of Section 4upon filing such declaration, any appeal pending before theIncome Tax Appellate Tribunal or Commissioner (Appeals) inrespect of disputed income or disputed interest or disputedpenalty or fee and tax arrear shall be deemed to have beenwithdrawn from the date on which certificate under Section 3 and4 has been issued by the designated authority. Section 5 of the Act pertains to time and manner ofpayment. Sub-section (1) of Section 5 provides that thedesignated authority shall within a period of 15 days from the dateof receipt of the declaration by an order determine amountpayable by the declarant. As per sub-section (2) of Section 5 thedeclarant has to pay the amount as determined under sub-section(1) within 15 days of the date of receipt of the certificate andintimate the details of such payments to the designated authority. Sub-section (1) of Section 10 provides that Central Board ofDirect Taxes made from time to time issue such directions ororders to the income tax authorities as it may deem fit. Sub-section (2) of Section 10 empowers the CBDT to issue generalorder or special order in respect of any class of cases setting forththe directions or instructions as to the guidelines, principles orprocedures to be followed in relation to the act. The petitioner was desirous of taking benefit of the saidsettlement scheme contained in the Act of 2020 and thereforeapplied before the designated authority on 09.09.2020. Thisapplication was rejected by an order dated 19.12.2020. After thedelay condonation application filed by the petitioner was allowedby the tribunal he again filed an application before the designated authority on 25.02.2021 which was rejected on 22.03.2021 infollowing terms:- “The assessee is not eligible to avail benefit under VSVSas there was no appeal pending as on 31.01.2020.Further the appeal filed by assessee before Honble ITATis not covered by the circular issued by CBDT dated04.12.2020 as the appeal in this case has been filedafter the issuance o fthis circular. Therefore assessee isnot eligible to avail benefit under VSVS. Assessee wasrequested to offer her comment vide this office letterno.ITBA/COM/F/17/2020-21/1031493613(1)DATED15.03.2021. The assessee was requested to submittedits reply by 17.03.2021. However no reply receivedfrom assessee. Hence the declaration filed by assesseein form-1&2 under VSVS is rejected.” It can thus be seen that the declaration of the petitioner wasrejected on the ground that the CBDT circular dated 04.12.2020does not cover his case. The entire controversy involved in thispetition revolves around the correctness of the stand of thedepartment. We may refer to the relevant portion of the circulardated 04.12.2020. This circular contains several clarifications inthe form of questions and answers. We are concerned with theclarification issued by the CBDT in relation to question No.59. This question and the related answer of the CBDT reads as under:- It can thus be seen that the declaration of the petitioner wasrejected on the ground that the CBDT circular dated 04.12.2020does not cover his case. The entire controversy involved in thispetition revolves around the correctness of the stand of thedepartment. We may refer to the relevant portion of the circulardated 04.12.2020. This circular contains several clarifications inthe form of questions and answers. We are concerned with theclarification issued by the CBDT in relation to question No.59. This question and the related answer of the CBDT reads as under:- “Q.No.59. Whether the taxpayer in whose case thetime limit for filing of appeal has expired before 31[st] Jan2020 but an application for condonation of delay hasbeen filed is eligible? Answer: If the time limit for filing appeal expiredduring the period from 1[st] April 2019 to 31[st] Jan, 2020(both dates included in the period), and the applicationfor condonation is filed before the date of issue of thiscircular, and appeal is admitted by the appellateauthority before the date of filing of the declaration,such appeal will be deemed to be pending as on 31[st]Jan 2020.” Perusal of the Act would show that as per Section 3 and 4 of the Act a declarant can file a declaration to the designated authority during the specified time upon which there would bereduction in the arrears of the tax, penalty, fee etc. as prescribedunder the Act. The term “appellant” as noted earlier means aperson in whose case an appeal or a writ petition or special leavepetition has been filed either by him or by the income taxauthority or by both, a person in whose case an order has beenpassed by the assessing officer or the CIT (Appeals) or Tribunal orby the High Court in a writ petition before a specified date andtime for filing any appeal has not lapsed or a person who has filedobjection before the dispute resolution panel under Section 144Cof the Act of 1961 and the assessing officer has not issued anydirection or a person in whose case the panel has issued adirection but the assessing officer has not passed an order or aperson who has filed an application for revision under Section 264of the Act of 1961 and such application is pending. It was in thiscontext that the CBDT had issued a clarification in the context ofquestion No.59 whether taxpayer in whose case the time limit forfiling of appeal has expired before 31[st] January 2020 but anapplication for condonation has been filed is eligible to make adeclaration or not? The clarification issued by the CBDT was that ifthe time limit for filing appeal expired during the period from 1[st]April 2019 to 31[st] January 2020 both dates included and theapplication for condonation of delay is filed before the date ofissuance of this circular and the appeal is admitted by theappellate authority before the date of filing of declaration, suchappeal shall be deemed to be pending as on 31[st] January 2020. What hurts the petitioner is the portion of the clarificationcontained in the CBDT circular which provides that the application for condonation of delay must have been filed before the date ofissuance of circular. The petitioner fulfills all other conditionsnamely the time for filing appeal has expired during the periodfrom 1[st] April 2019 to 31[st] Jan 2020, that he had filed anapplication for condonation of delay which was pending. He hadalso filed an appeal before the date of filing of the declaration. Weare informed that there is no stage of formal admission of theappeal or condonation application before the tribunal andtherefore the reference to this term of admission of appeal in thecircular is superfluous. In this context the question arises whether the specificationof the filing of the application for condonation before the date ofcircular is sacrosanct as to destroy the right of assessee to applyfor settlement if even though all other conditions are specified. In this context the question arises whether the specificationof the filing of the application for condonation before the date ofcircular is sacrosanct as to destroy the right of assessee to applyfor settlement if even though all other conditions are specified. This question has been examined by several High Courts.The lead case is that of the Telangana High Court in case ofBoddu Ramesh v. Designated Authority reported in 2021(6) TMI 1054 decided on 28.06.2021. The Division Bench of theHigh Court has dealt with an identical situation and in a detailedjudgment come to the following conclusions:- “30. It is to be noted that the date for filing ofdeclaration under the Act of 2020 opting to avail thebenefit of Scheme was originally notified as30.03.2020, which was extended from time to time,including up to 31.12.2020. 31. Subsequently the time for filing declarationsunder the Act of 2020 was finally extended byNotification No.9/2021 dt.26.02.2021 up to31.03.2021. So petitioners application filed on08.02.2021, was with in time. 32. However, while providing answer to Q.No.59, inCircular No.21/2020 issued on 04.12.2020, the lastdate for filing declaration under the Act of 2020 was considered as 31.12.2020, as notified by theGovernment at the relevant point in time. 33. It is only on 31.12.2020, the time for filingdeclarations under the Act of 2020 was extended forfurther period. 34. In the answer provided to Q.No. 59 in circular No21/2020, it is stated that even "if the limitation forfiling appeal has expired before 31.01.2020, i.e., the'specified date', if an application for condonation ofdelay is filed on or before the date of issue ofCircular, and the delay is condoned, the appealshould be deemed to be pending as on 31.01.2020". 35. This would have to be considered, in our opinion,as applicable even in relation to further extension oftime granted for filing declarations till 31.03.2021,and cannot be restricted either up to the date ofissue of circular (ie. 04.12.2020) or even the date forfiling declaration mentioned therein ((ie.)31.12.2020, as there cannot be any differentiation indelay as it stands on the same footing be it of a dayor more. 36. If Board circular is construed in such a restrictivemanner, as is contended by respondents, the samewould run contrary to the scheme of the Act of 2020and the powers exercised by Board under Section 10and 11 to issue directions or orders in public interestor to remove difficulties. 37. Therefore, we are unable to persuade ourselvesto confine the benefit of "deemed pendency ofappeal" only if an application for condonation is filedon or before 04.12.2020, as in our view nosignificance can be attached to the said date of issueof the circular, since, what is required to beconsidered is the pendency of the appeal with anapplication for condonation and the admission of theappeal as on the date of filing of declaration. 38. Thus, in our view, even after 04.12.2020, if anappeal is filed with an application for condonation ofdelay and the appeal is admitted by the appellateauthority before the date of filing of the declaration,the benefit is to be extended, as otherwise, it wouldlead to creation of separate class of persons amongthe declarants, without any reasonable basis,resulting in discrimination thereby violating Article 14of the Constitution of India. 39. In the present case, the petitioner having filed anappeal before Tribunal along with an application forcondonation and the Tribunal, having heard thematter on 05.02.2021 by condoning the delay, it is tobe construed as 'pending' appeal as on the date offiling of declaration on 08.02.2021. As a matter offact, the Tribunal by order dt.15.02.2021, allowed the appeal of the petitioner remitted the matter back byrestoring the appeal on the file of CIT, for freshadjudication. 39. In the present case, the petitioner having filed anappeal before Tribunal along with an application forcondonation and the Tribunal, having heard thematter on 05.02.2021 by condoning the delay, it is tobe construed as 'pending' appeal as on the date offiling of declaration on 08.02.2021. As a matter offact, the Tribunal by order dt.15.02.2021, allowed the appeal of the petitioner remitted the matter back byrestoring the appeal on the file of CIT, for freshadjudication. 40. The natural corollary of the Tribunal accepting theapplication for condonation is to the effect that theappeal before the Tribunal as having been filed intime, since, such condonation would relate back tothe date by which time, the appeal against the orderof CIT ought to have been filed by the petitioner.Once it is considered that the appeal before theTribunal is deemed as having been filed in time, thesame would have to be construed as having beenfiled before the "specified date", and thus, an appealcan be stated to be pending before the appellateforum and the petitioner would have to be consideredas an 'appellant' as defined in Section 2(1)(a)(i) ofthe Act of 2020, and the tax as assessed would haveto be considered as 'disputed tax', as defined underSection 2(1)(i)(B) of the Act of 2020. 41. Alternatively, it is to be noted that since, the lastdate for filing declaration had been extended up to31.03.2021 and the Tribunal, having found cogentreasons to condone the delay and allowing the appealfiled by the petitioner and remitting the matter backto the CIT by its order dt.15.02.2021, wouldautomatically revive and restore the appeal, whichwas dismissed by the CIT by his order dt.18.09.2019.Thus, by order of the Tribunal dt.15.02.2021, theappeal of the petitioner before of the CIT filed on19.02.2019 would stand revived, and such restoringof appeal relates back the original date of filing,which is within the "specified date" as per Act of2020. 42. Thus, considered from any angle, thedeclaration/application submitted by the petitioner on08.02.2021 or the revised declaration/applicationsubmitted in Form 1 and 2 on 31.03.2021 cannot beconsidered as 'invalid' and liable for 'rejection'.” This judgment of the Telangana High Court in case of Boddu Ramesh (supra) was followed by the Division Bench of Gujarat High Court in case of Maheshbhai Shantilal Patel V.PCITdated 23.09.2021reported in 2021 (9) TMI 1237. Thefollowing observations may be noted:- “35 Therefore, when the Circular has been issued bythe CBDT on 04.12.2020 answering to one of theFrequently Asked Questions, it is not expected of theRevenue to contend contrary to the said guidelines in the answer given in the Circular. Obviously, theCircular cannot override the express provisions of theAct and they are to be considered clarificatory innature. They are basically meant to guide the officersand those, who execute the law in the field. Theymay not also bind the Court while it interpretsstatutory provisions. 36 However, the Court when regards and takes intoconsideration the fundamental principles along withthe provision of Limitation Act, particularly Section 5of the Limitation Act seeking condonation of delay inpreferring any petition, appeal or litigation orproceedings, it is meant for exercise of discretion bythe adjudicatory authority, which, if is satisfied withthe sufficiency of cause, is expected to condone thedelay. And, once the application for condonation ofdelay in any such matter is preferred and the same isallowed, it would be construed as if there is no delayand the appeal is preferred well within time. 36 However, the Court when regards and takes intoconsideration the fundamental principles along withthe provision of Limitation Act, particularly Section 5of the Limitation Act seeking condonation of delay inpreferring any petition, appeal or litigation orproceedings, it is meant for exercise of discretion bythe adjudicatory authority, which, if is satisfied withthe sufficiency of cause, is expected to condone thedelay. And, once the application for condonation ofdelay in any such matter is preferred and the same isallowed, it would be construed as if there is no delayand the appeal is preferred well within time. 37 In such eventuality to say that order ofcondonation of delay though is already made by thecompetent forum, that cannot be construed aspendency of appeal, would also amount to arguingagainst the well established principle of law. Evenwithout delving much into the provisions of VsV Act, ifother laws holding the field for decades and theprinciples carved out during this journey, areconsidered, the simple answer to the delay condonedby the appellate authority is that there was no delayat all in preferring the appeal and the appeal, whichhas been preferred by the petitioner would relateback to the original date of filing of appeal, whichwould in other words mean that under the VsV Act,the petitioner would fall into the bracket of thedefinition of appellant in whose case, the appealpreferred before the ITAT was pending as on thespecified date i.e. 31.01.2020. It is also necessary toknow that the last date for declaration was finalisedas 31.03.2021 and in the case of the presentpetitioner, his declaration has been filed once delaywas condoned before the was over. Had it been thecase of the date of declaration having expired, priorto the delay having been condoned, answer possiblycould be otherwise and not so simple, but, here theassessee's timely allowance of condonation of delayby ITAT on dated 23.02.2020 would not in anymanner hamper his path of his case being consideredunder the VsV Act as an Appellant. 38 Resultantly, the petition is allowed, quashing andsetting aside the order of rejection by the respondentauthority on dated 30.03.2021. Consequently, thepetitioner is entitled to the participation in the processunder the VsV Scheme. 39 Let the declaration of the petitioner be accepted bythe respondent within three (3) days from the receiptof the copy of this order and the petitioner shall followthe requirement of payment of tax as the last date is30.09.2021. All consequential procedural actions shallbe permitted by the respondent in accordance withlaw, to enable the petitioner to be considered underthe VsV Act.” Quite apart from these two well considered judgments of the Division Bench of two High Courts, independently also we are ofthe view that the stand taken by the department is notsustainable. To begin with the act was framed for resolution of thedisputed taxes and the matters connected therewith and thereto. The resolution of disputed taxes is thus prime purpose ofenactment of the act. We would therefore adopt an interpretationwhich would furtherthis intention instead of restricting its scope.More importantly what the CBDT had done under its circular dated04.12.2020 was to issue a clarification. A clarification by its verynature is declaratory. If for applicability of such clarification a cutoff date is introduced it would run counter to the very concept of aclarification. If the CBDT circular is not read-down as to removethe rigors of the cut off date by holding that the same is notsacrosanct the same may suffer from vice of arbitrariness. We are informed that the scheme for settlement wasextended from time to time and finally the last extension ended on31.03.2021. The interpretation that we have adopted thereforedoes not make a right of a person to seek settlement open ended.It has a terminal point of 31.03.2021 in any case. We are informed that the scheme for settlement wasextended from time to time and finally the last extension ended on31.03.2021. The interpretation that we have adopted thereforedoes not make a right of a person to seek settlement open ended.It has a terminal point of 31.03.2021 in any case. In the result the petitions are allowed. Impugned ordersdated 22.03.2021 are set aside. The declarations of the petitioners shall be accepted. The same would be thereafter dealt with asprovided under the Act. It is pointed out to us that in the declarations which thepetitioner has filed, he has referred to the pendency of appealsbefore CIT (Appeals) whereas undisputedly such appeals werepending before the ITAT. The designated authority shall notdismiss the declarations only on this ground and if so neededrequire the petitioner to correct the same. (SUDESH BANSAL),J (AKIL KURESHI),CJ NAVAL KISHOR /221,222 and 224