To reduce direct tax litigation after the success of 'Sabka Vishwas Scheme’, Lok Sabha on 4th March passed 'Direct Tax Vivad se Vishwas Bill, 2020'. Also, the CBDT on 5th March, 2020 released 55 FAQ clarifying technical interpretations on the Scope / illegibility, Calculation, Procedure, and on Consequences.

In the Taxsutra Database Insight series on Amnesty Scheme (Vivad se Vishwas) sent so far, we have covered rulings which explain the concepts of Appeal ‘admitted’ and ‘pending’, Effect of pendency of Assessee’s and Departmental appeals, Disputed tax, and Tax arrears, whether revision filed to be treated as pending, Power to revoke certificate granted by designated authorities, Whether condonation of delay can be considered, credit of advance-tax, self-assessment tax...etc!

In continuation of our Taxsutra Database Insight series on Amnesty Scheme (Vivad se Vishwas), we bring to you Taxsutra Database Insight: Revised avatar of  ‘Vivad se Vishwas’ – Part 3, comprising of 10 rulings on certain key principles borrowed from precedents delivered under KVSS, VDIS which examine “the distinction between eligible taxpayers and non-eligible taxpayers for the benefit of ‘Amnesty Scheme’ (the Scheme)” / Benefits to partnership firm under KVSS on the amount disclosed by the partner/ Revenue’s ‘assurance’ to file rectification of mistake u/s 154 to avail of the benefit of the Scheme / Reopening of assessment to decide the question of eligibility of claim after declaration filed under the Scheme...and lots more!  

Taxsutra Database Insight: Revised avatar of  ‘Vivad se Vishwas’ – Part 3

1) [TS-5530-ITAT-2007(Pune)-O] - Kar Vivad Samadhan Scheme (KVSS) – ITAT Third Member – Application for rectification of mistake u/s 154 agreeing to disallow depreciation to avail of the benefit of KVSS in respect of all items connected with the assessment in “one go” not maintainable - ITAT notes, that Assessee by filing the rectification application, was trying to pre-empt the Revenue from proceeding any further u/s 147 / 148; In the instant case, notice u/s 148 was issued much later and assessee’s rectification petition was even later; ITAT rejects Assessee`s argument that, it moved application u/s  154 on the basis of the assurance given by the Revenue authorities cannot be accepted; ITAT holds, “Revenue cannot give any assurance against the statute and even if there was temptation to end the dispute by settlement, that does not lead to a conclusion that there was an apparent mistake in the order”; States that even if the Revenue had given an assurance, the order passed by the AO, cannot be held, on the basis of this assurance a mistaken order;

2) [TS-5185-HC-2007(Madras)-O] - Reopening of assessment - Kar Vivad Samadhan Scheme (KVSS) – HC : Assessment of an assessee availing KVSS could be reopened u/s 147 to decide the question of eligibility for deduction u/s 80HH – HC dismisses Assessee’s writ against reopening of assessment, holds that while availing the benefit of the “KVSS”, the assessee had not made any declaration as to its eligibility to claim deduction u/s 80HH; Therefore, the declaration has to be presumed as if it was never made and consequently, the assessee cannot claim that the matter should not be reopened, as it is a case falling under the provisos to s. 90(1) of the Finance (No. 2) Act, 1998; Relies on Killick Nixon Ltd SC ruling

3) [TS-18-SC-2002-O] – Reopening of assessment by a notice u/s 143 - SC: AO not authorized to reopen assessment once tax arrears determined, paid and acknowledged under Kar Vivad Samadhan Scheme [“KVSS”] - SC holds that the order to be made by the designated authority under the “KVSS”under section 90 of the Finance (No.2) Act, 1998 is a considered order which is intended to be conclusive in respect of tax arrears and sums payable after such determination towards full and final settlement of tax arrears; Also points out that “once the declarant makes payment of the amount so determined under section 90, the immunity u/s 91 springs into effect”; Clarifies that “Upon such declaration being made, tax arrears being determined, paid and certificate issued under the “KVSS”, there is no jurisdiction for the AO to reopen the assessment by a notice u/s 143 of the Act, except where the case falls under the proviso (2) to sub-s. (1) of s. 90 as it is found that any material particular furnished in the declaration is found to be false."

4) [TS-5016-SC-2007-O] - Partnership Firm vis-a-vis Individual Partners - Voluntary Disclosure of Income, 1997 (VDIS) – SC: Amount disclosed by a partner, benefit under VDIS for the same amount cannot be allowed in the hand of partnership firms – SC dismisses Assessee’s appeal, holds CIT was justified in revoking the certificate as null and void u/s 64(2); SC notes that “a firm is the conglomeration of its partners, and is not a juristic person”, and during the search conducted at  the premises of the firm on the basis of search warrant issued in the name of a partner which revealed undisclosed income, the partner made disclosure thereof; Observes that “The purported disclosure made under VDIS by the firm relates to the same amount which has been disclosed by the partner. Even the source of income was found to be the same and the income of a firm vis-a-vis its partners have a direct co-relation”; In view the object which the scheme seeks to achieve, we are of the opinion that in the place of literal interpretation, the rule of purposive construction should be applied;

5) [TS-5004-SC-2002-O] – Kar Vivad Samadhan Scheme - Rectification of certificate - SC : Order issued under Kar Vivad Samadhan Scheme (KVSS) cannot be rectified – SC notes that a certificate issued u/s 90(1) of the KVSS making a determination as to the sum payable under the KVSS, is conclusive as to the matters stated therein and cannot be reopened in any proceedings under any law for the time being in force, except on the ground of false declaration by any declarant; Notes that the whole basis of the notice is only that adjustments already made had not been taken note of, and states that “If this is the basis of the issuance of the notice and not the false declaration and that information was available with the Department even at the time of the finalisation of the proceedings u/s 90 of the KVSS, We fail to understand as to how the matter could be reopened at this stage”; Holds that “Even assuming the powers of rectification available to IT authorities, the error cannot be said to be an inadvertent error of clerical or arithmetical nature so as to be rectified”; SC sets aside the order of HC and quash the notice issued by the Department calling upon the Assessee to explain as to why the order issued earlier under s. 90(1) of the KVSS be not amended.

6) [TS-5539-HC-2017(Madras)-O] - Waiver from penalty and interest - Kar Vivad Samadhan Scheme (KVSS) – HC: Board’s circular under the KVSS which covers the penalty and interest determined at a later point in time, binding on the Department - HC allows Assessee’s Writ, quashes the notice for demand and penalty order and the consequential order of interest. HC notes that, according to section 91 of the Finance (No. 2) Act, 1998, “a designated authority was empowered to grant waiver from the imposition of penalty and interest in respect of the income, which was the subject matter of the declaration under the KVSS”

7) [TS-5024-SC-2003-O] - SC: Criminal liability stood compounded on settlement with respect of the civil issues, the FIR was erroneous and unwarranted – SC allowing assessee’s appeal, sets aside HC order and quashes the FIR filed against the appellants u/s 420 r.w.s 120B of the IPC, holds the continuation of the proceedings would tantamount to double jeopardy; SC notes that, “Collector of Customs had exonerated the applicant and further granted amnesty under the KVSS, in our opinion, the present case does not warrant subjecting fresh investigation and prosecution on an incident or fact situation giving rise to offence under both the Customs Act and the IPC when the matter has already been settled”; SC holds, “once the said Scheme is availed and all the formalities complied with including the payment of the duty, the immunity granted under the provisions of the Customs Act, 1962, also extends to such offences that may prima facie be made out on identical allegations i.e., of evasion of customs duty and violation of any Notification issued under the said Act”. 

8) [TS-5599-HC-2019(Delhi)-O] - HC: Declarations under IDS void sans complete and truthful disclosure - Delhi HC dismisses writ petitions filed against order holding declarations made under IDS scheme as 'void'; Assessee-petitioner availing benefits of IDS (Income Declaration Scheme), filed declarations wherein income w.r.t investments in shares was disclosed and requisite tax along with surcharge & penalty was paid, Subsequently Jurisdictional PCIT held the declarations were made by 'suppression & misrepresentation' of facts and hence void; HC remarks that ”in Section 193……. declaration……made by misrepresentation or suppression of facts 'such declaration shall be void' and shall be deemed never to have been made under the scheme”

9) [TS-5164-HC-2014(Andhra Pradesh)-O] - Kar Vivad Samadhan Scheme (KVSS) - HC: Appeal filed before wrong competent authority, cannot be said that there was no appeal pending before the Department - HC allows Assessee Writ, directs IT Department to process the declaration filed u/s 88 and 89 the KVSS. HC notes that, the affidavit filed on behalf of Department wherein there is no denial of the fact of receipt of the appeal addressed to the Dy CIT (A-II); On behalf of Revenue, it was contended that the appeal was not filed before the competent authority in the eye of law and the appeal addressed to Deputy Commissioner can never be treated as an appeal; HC holds, “on technical ground it is not open for the Department to turn round and say that the appeal was not filed before the competent authority”; HC clarifies that nothing prevented the Department from intimating the assessee to return the papers to enable them to file the same before the appropriate authority or in the alternative making over the appeal papers to the competent authority;

10) [TS-5015-SC-2011-O] – The distinction between eligible Taxpayers and non-eligible Taxpayers for the benefit of KVSS cannot be said to be arbitrary or illogical which has no nexus with the purpose of legislation – SC holds provisions of sec 87(m)(ii)(b) of Finance (No. 2) Act, 1998 extending the benefit of the Kar Vivad Samadhan Scheme, 1998 (KVSS) only to those assessees whose tax arrears were outstanding as on 31st March, 1998, or who were issued demand or show-cause notice on or before the said date and denying the benefit to those assessees whose duty dues were quantified but who were not issued demand or show-cause notice as on 31st March, 1998; SC sets aside HC order, declared Sec.  87(m)(ii)(b) of the Finance (No. 2) Act, 1998 as ultra vires of the Constitution of India and in particular, Art. 14 of the Constitution on the ground that the said expression prescribes a cut-off date which arbitrarily excludes certain category of persons from availing the benefits under the Scheme.

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Click here to Read - Taxsutra Database Insight: Amnesty Scheme - Interpretation of the word "Admitted and Pending" - Part 1

Click here to Read - Taxsutra Database Insight: Amnesty Scheme - Effect of pendency of Assessee and Departmental appeal - Disputed tax and Tax arrears - Part 2

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