Delhi High Court Clarifies: 'Delay in Filing Appeal Does Not Preclude Benefits Under Vivad Se Vishwas Act'"

Delhi High Court rules that taxpayers can still qualify for DTVSV scheme despite delayed appeal dismissal, provided the appeal window is open. In a significant judgment dated May 16, 2024, the Delhi High Court allowed a writ petition by PT Bukaka Teknik Utama, clarifying that taxpayers can avail the benefits of the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act), even if their appeal was dismissed due to a delay, provided the window to file an appeal had not expired on the specified date. The court emphasized a liberal interpretation of the remedial statute to ensure it serves its intended purpose of resolving tax disputes.

PT Bukaka Teknik Utama, an Indonesian entity, filed its Income Tax Return for AY 2010-11 declaring a total income of ₹6,27,250. After scrutiny, the Assessing Officer passed a final assessment order on May 24, 2013, assessing the income at ₹1,69,68,210. The assessee’s appeal to the Commissioner of Income Tax (Appeals) [CIT(A)] was dismissed on January 1, 2020, due to a four-year delay. Following the introduction of the DTVSV Act, the assessee sought to settle the dispute under the scheme but faced rejection from the Revenue Department on grounds of ineligibility as no appeal was pending on the specified date.

The court highlighted the need for a liberal interpretation of remedial statutes like the DTVSV Act, which aims to resolve tax disputes and ensure timely tax collection. "Such statutes shall be read in a way to effectuate the intended objectives that the legislature envisaged while drafting the statute and to justifiably secure that the relief contemplated by the statute is not denied to the class intended to be relieved"​​.

The court noted that as per the DTVSV Act, either an appeal should be pending or the time limit for filing an appeal should not have expired as on the specified date (January 31, 2020). In PT Bukaka's case, the time limit to file an appeal against the CIT(A) order was still open on the specified date, making the assessee eligible to apply under the scheme. "It is not doubted by the Revenue that the time limit for filing the appeal against the CIT(A) order before the ITAT had not expired as on the specified date"​​.

The court clarified that the dismissal of an appeal by CIT(A) on the grounds of delay does not negate the existence of disputed tax arrears. "Once the CIT(A) has rejected the appeal of the assessee on the ground of being barred by limitation, the resultant effect of such an order would be confirmation of the assessment order so passed"​​. Thus, the assessee remains eligible under the DTVSV Act since the disputed tax arrears continue to exist.

The court emphasized the importance of adhering to the legislative intent behind the DTVSV Act, which seeks to resolve longstanding tax disputes and ensure efficient tax collection. It underscored that qualifications related to the pending status of appeals should not obstruct the remedial objectives of the Act. "It is of no significance whether the pending appeal merits consideration or is filed against an order, whereby, the dismissal was on the ground of being barred by limitation"​​.

Justice Purushaindra Kumar Kaurav stated, "The DTVSV Act aspires to finally free the tax arrears locked in litigation combat for ages and ultimately ensures timely collection of tax"​​.

This judgment reaffirms the judiciary's commitment to upholding the beneficial objectives of the DTVSV Act, providing clarity on the eligibility criteria for taxpayers seeking to resolve disputes under the scheme. The decision is expected to aid many taxpayers in similar situations, ensuring that procedural delays do not hinder the resolution of substantive tax disputes.

Date of Decision: 16th May 2024