The Division Bench of the Delhi High Court in the case of Medeor Hospital Limited vs Principal Commissioner of Income Tax-04 & Ors. consisting of Justices Manmohan and Manmeet Pritam Singh Arora held that admission of appeal before filing of declaration as a condition precedent for the appeal to be treated as pending and to be eligible for settlement under the Vivad Se Vishwas Scheme is contrary to law.
Facts
This petition was filed by the petitioner challenging the action of respondent No.1 in partially settling dispute relating to penalty for Assessment Year 2014-15 pending before the Income Tax Act Tribunal (‘ITAT’) under the Vivad Se Vishwas Scheme (‘VSV Scheme’) without settling the dispute relating to quantum appeal for Assessment Year 2014-15 pending before the Commissioner of Income Tax (Appeals) [‘CIT(A)’].
Procedural History
Petitioner: It was contended that the respondent No.1 erred in not appreciating that u/s 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 eligible to settle a dispute under the VSV Scheme was that the appeal should be “pending” before an appellate forum which includes CIT(A) and ITAT.
There was no requirement that the appeal should be filed in time or that the appeal should have been ‘admitted’ before the specified date. It was further contended 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 the VSV Scheme.
Respondent: It was contended that as the assessment order had been served upon the petitioner on 23rd June 2017, the limitation of 30 days prescribed in the Income Tax Act, 1961 (‘Act, 1961’) for filing an appeal u/s 246A of the Act, 1961, before the CIT(A) had expired on 22nd July, 2017. It was also contended that the petitioner had preferred an appeal before the CIT(A) challenging the penalty order, which was dismissed.
Thereafter, the petitioner preferred an appeal before the ITAT which was pending adjudication as on 31st January 2020. It was further contended that the petitioner filed an appeal against the assessment order before the CIT(A) after a delay of about two years from the date of expiry of limitation, along with an application seeking condonation of delay.
The petitioner opted for VSV Scheme and filed a declaration under VSV Act, 2020 to settle the pending disputes before the CIT(A) in quantum appeal and ITAT in penalty appeal. Though the designated authority, in view of the VSV Act, 2020 allowed the settlement of the penalty as the penalty appeal was pending on the prescribed date i.e. on 31st January, 2020, yet the designated authority, in view of FAQ-59 issued by CBDT, rejected the declaration of the petitioner qua the quantum appeal.
Observations by the Court
The Bench noted that the primary issue that arose for consideration in this proceeding was as to what was the meaning of the word ‘pending’ in Section 2(1)(a) of the VSV Act.
It relied on Raja Kulkarni v. The State of Bombay wherein it was held that whether an appeal is valid or competent is a question entirely for the appellate court before whom the appeal is filed to decide and this determination is possible only after the appeal is heard but there is nothing to prevent a party from filing an appeal which may ultimately be found to be incompetent, e.g. when it is held to be barred by limitation. From the mere fact 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.
Reliance was placed on Commissioner of Central Excise, Bolpur vs. Ratan Melting & Wire Industries wherein it was held that when the Supreme Court or High Court declare the law on a question arising for consideration, then the view expressed by the Supreme Court or the High Court has to be given effect to and not the circular issued by the CBDT. Consequently, the FAQ No.59 of Circular No.21/2020 issued by CBDT to the extent it contemplates admission of appeal before filing of declaration as a condition precedent in order for the appeal to be treated as pending and to be eligible for settlement under the VSV Act is contrary to law.
Judgment
The Bench directed that the FAQ No.59 issued by CBDT to the extent mentioned was quashed and respondent No.1 was directed to treat the appeal filed against the assessment order u/s 143(3) for assessment year 2014-15 before CIT(A) as pending. The respondents are also directed to issue revised Forms 3 by settling 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 of penalty pending before ITAT) in accordance with the provisions of VSV Act within eight weeks.
Case: Medeor Hospital Limited vs Principal Commissioner of Income Tax-04 & Ors.
Citation: W.P.(C) 12116/2021
Bench: Justice Manmohan, Justice Manmeet Pritam Singh Arora
Decided on: 28th October 2022
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