Gujarat High Court
The Principal Commisioner Of ... vs Mrs. Swatiben Biharilal Parekh on 26 September, 2023
Bench: Bhargav D. Karia
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 641 of 2023
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THE PRINCIPAL COMMISSIONER OF INCOME TAX 1
Versus
MRS. SWATIBEN BIHARILAL PAREKH
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Appearance:
KARAN G SANGHANI, LD. SENIOR STANDING COUNSEL (7945) for the
Appellant(s) No. 1
for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 26/09/2023
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV)
1. This Tax Appeal challenges the order dated
18.04.2023 passed by the Income Tax Appellate
Tribunal, Rajkot, in ITA No.30/Rjt/2023 for
Assessment Year 2012-13.
2. Following substantial questions of law have been
raised:
"(A) Whether on the facts of the case as well
as in law, the Appellate Tribunal was
justified in quashing the order under
Section 263 of the Income Tax Act of Ld.
PCIT when Explanation 2 of Section 263 of
the Act expressly provides that it is final
opinion of the Ld. Pr. CIT to deem an order
prejudicial and erroneous to the interest of
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revenue?
(B) Whether on the facts of the case as well
as law, the Appellate Tribunal was justified
in quashing the order under Section 263 of
the Income Tax Act of Ld. PCIT especially
when the Assessment Order passed by the
AO is unsustainable in law?
(C) Whether on the facts of the case as well
as in law, the Appellate Tribunal was
justified in quashing the order u/s 263 of the
Income Tax Act of Ld. PCIT observing that
the assessing officer has failed to add ought
to have been made much more than what
was assessed and the Scheme does not
debar the assessing officer to make the
addition of the remaining correct amount?
(D) Whether on the facts of the case as well
as law, the Appellate Tribunal was justified
in quashing the order u/s. 263 of Act of Ld.
PCIT holding that the opting the VSV
Scheme and finalizing thereof is nothing but
the closure of disputes in respect of tax
arrears which cannot be subsequently
reopened by issuing notice u/s 263 of the
Act for revising the assessment order?
(E) Whether on the facts of the case as well
as law, the Appellate Tribunal was justified
in allowing the appeal of the assessee
against the order u/s. 263 of the Income Tax
Act of Ld. PCIT when there was gross
inadequacy in inquiry conducted as per
order of Apex Court in case of the
Commissioner of Income Tax Vs. M/s.
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Paville Projects Pvt. Ltd. (CA No. 6126 of
2021 (SC))?
3. Facts briefly narrated in the memo of appeal
read as under:
3.1 The brief facts are that the assessment was
completed u/s. 143(3) r.w.s. 147 of the Income
Tax Act, 1961 (the Act) on 27.12.2019 assessing
the total income at Rs. 12,49,770/-. The variation
between the returned income and assessed
income is attributable to the addition of
Rs.11,32,448/- made on account of estimation of
profit u/s 44AD of the Act @ 8% of transactions
of shares carried out during the year under
consideration by the assessee on NSE to the tune
of Rs.1,41,55,592/-. Subsequently, the Pr. CIT on
examination of Assessment records observed that
whole transactions of shares of Rs.1,41,55,592/-
was unexplained and the same was required to
be taxed u/s 68 of the Act as the assessee did not
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file any details thereof. Also the total transaction
value was beyond the threshold limit (Rs.60
lakhs) as prescribed u/s 44AD of the Act. The
Assessing officer has failed to consider this issue
while finalizing the assessment. The PCIT has
observed that non application of Section 68 has
rendered the order erroneous as well as
prejudicial to the interest of revenue. Therefore,
the assessment was prima-facie found to be
erroneous in so far as it is prejudicial to the
interest of revenue. Accordingly, the PCIT
passed an order u/s. 263 dated 31.01.2022
cancelling the assessment u/s. 143(3) r.w.s. 147
of the Act and a direction to make a fresh
assessment by conducting necessary inquiry and
verification.
3.2 Being aggrieved with the said order u/s. 263
of the Act, the assessee filed an appeal before the
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Appellate Tribunal. The Appellate Tribunal has
quashed the order of PCIT-1, Rajkot passed u/s.
263 of the Act.
4. The Tribunal while allowing the appeal of the
assessee held as under:
"7. We have carefully considered the facts of
the matter and the judgment relied upon by
the Ld. Counsel in the case of Gopala Krishnan
Rajkumar vs. PCIT (supra). We find that the
Hon'ble Court has been pleased to observe
opting the VSV Scheme and finalizing thereof
is nothing but the closure of disputes in
respect of tax arrears which cannot be
subsequently reopened by issuing notice
under Section 263 of the Act for revising the
assessment order. Needless to mention that
the view is squarely applicable in favour of the
assessee before us.
8. Furthermore, Section 5 of the VSV Act
prescribes as follows:
"5. (1) The designated authority shall, within
a period of fifteen days from the date of
receipt of the declaration, by order,
determine the amount payable by the
declarant in accordance with the provisions of
this Act and grant a certificate to the
declarant containing particulars of the tax
arrear and the amount payable after such
determination, in such form as may be
prescribed.
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(2) The declarant shall pay the amount
determined under sub-section (1) within
fifteen days of the date of receipt of the
certificate and intimate the details of such
payment to the designated authority in the
prescribed form and thereupon the
designated authority shall pass an order
stating that the declarant has paid the
amount.
(3) Every order passed under sub-section (1),
determining the amount payable under this
Act, shall be conclusive as to the matters
stated therein and no matter covered by such
order shall be reopened in any other
proceeding under the Income-tax Act or
under any other law for the time being in
force or under any agreement, whether for
protection of investment or otherwise,
entered into by India with any other country
or territory outside India.
Explanation.--For the removal of doubts, it is
hereby clarified that making a declaration
under this Act shall not amount to conceding
the tax position and it shall not be lawful for
the income-tax authority or the declarant
being a party in appeal or writ petition or
special leave petition to contend that the
declarant or the income-tax authority, as the
case may be, has acquiesced in the decision
on the disputed issue by settling the dispute."
9. A bare reading of the above Section,
particularly, sub-section (3) of Section 5
clearly rejects restriction in reopening in any
other proceeding under the Income Tax Act or
under any other law for the time being in force
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in any matter covered by such order which has
been passed under sub-section (1) determining
the amount payable under this Act which has
been said to be conclusive. In that view of the
matter, the impugned order passed by the Ld.
PCIT, is according to us, lacks jurisdiction and
the same is, therefore, not sustainable in the
eye of law. Thus, the impugned order is
quashed.
5. Having perused the order of the Tribunal, we
find that the Tribunal considered the decision of
the Madras High Court in the case of
Gopalakrishnan Commissioner of Income
Tax reported in [2022] 140 taxmann.com 394
(Madras) and the Division Bench of this Court
while considering the issue of the finality of the
benefit of the Vivad Scheme and Section 5
thereof and held as under:
"9. In the decision of the Madras High Court
in case of Gopalakrishnan (Supra) wherein
also in the facts akin to the present one, the
Madras High Court considered the
provisions of the Scheme and interpreting
Section 5 of the Act held as under :
"39. The question therefore that arises
for consideration is whether the
impugned proceedings initiated after the
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petitioners opted to settle the dispute
under the Direct Tax Vivad Se Vishwas
Act, 2020 are sustainable or not?
40. The expression disputed tax has been
denied in Section 27 of the Direct Tax
Vivad Se Vishwas Act, 2020 reads as
under: (j) "disputed tax", in relation to
an assessment year or financial year, as
the case may be, means the income-tax,
including surcharge and cess (hereafter
in this clause referred to as the amount
of tax) payable by the appellant under
the provisions of the Income-tax Act,
1961, as computed hereunder:--
(A) in a case where any appeal, writ
petition or special leave petition is
pending before the appellate forum as on
the specified date, the amount of tax that
is payable by the appellant if such appeal
or writ petition or special leave petition
was to be decided against him;
(B) in a case where an order in an appeal
or in writ petition has been passed by
the appellate forum on or before the
specified date, and the time for filing
appeal or special leave petition against
such order has not expired as on that
date, the amount of tax payable by the
appellant after giving effect to the order
so passed;
(C) in a case where the order has been
passed by the Assessing Officer on or
before the specified date, and the time
for filing appeal against such order has
not expired as on that date, the amount
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of tax payable by the appellant in
accordance with such order;
(D) in a case where objection filed by the
appellant is pending before the Dispute
Resolution Panel under section 144C of
the Income-tax Act as on the specified
date, the amount of tax payable by the
appellant if the Dispute Resolution Panel
was to confirm the variation proposed in
the draft order;
(E) in a case where Dispute Resolution
Panel has issued any direction under
sub-section (5) of section 144C of the
Income-tax Act and the Assessing Officer
has not passed the order under sub-
section (13) of that section on or before
the specified date, the amount of tax
payable by the appellant as per the
assessment order to be passed by the
Assessing Officer under sub-section (13)
thereof;
(F) in a case where an application for
revision under section 264 of the
Income-tax Act is pending as on the
specified date, the amount of tax payable
by the appellant if such application for
revision was not to be accepted:
Provided that in a case where
Commissioner (Appeals) has issued
notice of enhancement under section 251
of the Income-tax Act on or before the
specified date, the disputed tax shall be
increased by the amount of tax
pertaining to issues for which notice of
enhancement has been issued:
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Provided further that in a case where the
dispute in relation to an assessment year
relates to reduction of tax credit under
section 115JAA or section 115Dof the
Income-tax Act or any loss or
depreciation computed thereunder, the
appellant shall have an option either to
include the amount of tax related to such
tax credit or loss or depreciation in the
amount of disputed tax, or to carry
forward the reduced tax credit or loss or
depreciation, in such manner as may be
prescribed.
(k) "Income-tax Act" means the Income
tax Act, 1961;
(l) "last date" means such date as may be
notified by the Central Government in
the Official Gazette;
(m) "prescribed" means prescribed by
rules made under this Act;
(n) "specified date" means the 31st day
of January, 2020;
(o) "tax arrear" means,--
(i) the aggregate amount of disputed tax,
interest chargeable or charged on such
disputed tax, and penalty leviable or
levied on such disputed tax; or
(ii) disputed interest; or
(iii) disputed penalty; or
(iv) disputed fee, as determined under
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the provisions of the Income- tax Act.
41. As per Section 3 of the the Direct Tax
Vivad Se Vishwas Act, 2020,
notwithstanding anything contained in
the Income Tax Act or any other law for
the time inforce the amount payable by a
declarant shall be as specified in the
table to the said section.
42. As per Section 4(6) of the Direct Tax
Vivad Se Vishwas Act, 2020, the
declarations filed under Section(1) shall
be presumed to have never been made
if : -
"a) Any material particular furnished in
the declaration is found to be false at any
stage;
b) The declarant violates any of the
conditions referred to in this Act;
c) The declarant acts in any manner
which is not in accordance with the
undertaking given by him under
subsection (5) And in such cases, all the
proceedings and claims which were
withdrawn under Section 4 and all the
consequences under the Income-Tax Act
against the declarant shall be deemed to
have been revived.".
43. Section 6 of the Direct Tax Vivad Se
Vishwas Act, 2020, makes it very clear
that once there is a compliance with the
timeliness specified under Section (5),
the designated authority shall not
institute any proceedings in respect of
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an offence or aims or levy any penalty or
charge any interest under the Income
Tax in respect of the tax arrears.
44. Section 5 of the Direct Tax Vivad Se
Vishwas Act, 2020, also makes it clear
that save as otherwise expressly
provided in sub-section(3) of Section 5 or
Section 6, noting contained in this Act
shall be construed as conferring any
benefit, concession or immunity on the
declarant in any proceedings other than
those in relation to which the declaration
has been made.
45. The intention of the parliament
enacting the of the Direct Tax Vivad Se
Vishwas Act, 2020, is to bring a closure
of disputes in respect of tax arrears.
Whether the petitioner had correctly or
wrongly availed the benefit of Section
57(F) of the Income Tax Act or not
cannot be re-opened once again under
Section 263 of the Income Tax Act, 1961.
46. Once the petitioners had opted to
settle the dispute under the Direct Tax
Vivad Se Vishwas Act, 2020, the
proceedings initiated under Section 263
have to go. If on the other hand the
respective petitioners had not filed Form
1 and 2 or not accepted with the issue of
Form 3, the Impugned Notice seeking to
re-open the assessment under Section
263 of the Income Tax Act, 1961 could
be justified."
10. In light of the facts and the decision of
the Madras High Court, it was not open for
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the authorities to initiate proceedings under
Section 263 of the Act, especially when they
were clearly so barred. We are also
conscious of the fact that even if the appeal
memo which is placed on record is seen, the
matter in issue before the CIT (Appeals)
which was sought to be brought to rest by
opting for the benefit of the Scheme was in
context of the same issue which the
Revenue sought to invoke by issuing notice
under Section 263 of the Act.
6. The Tribunal therefore cannot be faulted for
allowing the appeal of the assessee as it was not
open for the authorities to initiate proceedings
under Section 263 of the Act, when they were
barred.
7. Therefore the appeal does not involve any
substantial question of law and hence is
accordingly dismissed.
(BIREN VAISHNAV, J)
(BHARGAV D. KARIA, J)
ANKIT SHAH
