The Court rules that waivers and disputes concerning interest under the VSV Act can validly be treated as 'disputes', requiring the designated authority to address them despite the CIT's rejection on technical grounds.

JUDGMENT

Anish Dayal, J. By way of this writ petition, the petitioner (a Company in liquidation, represented through the liquidator) assails the rejection dated 5th January, 2021 of From I and II filed by petitioner on 20th March, 2020 for the assessment years (AY) 1984-85 and 1985-86 under the Direct Tax Vivad Se Vishwas Act, 2020 (the VSV Act) read with its Rules, 2020, by the Principal Commissioner of Income Tax-IV, Delhi (CIT).

Factual Background:

2. The petitioner is a company incorporated in India in the year 1972 for manufacture and export of readymade garments etc. On 1st May, 1995, a winding up order for the petitioner was passed by this Court in Company Petition No.59/1994. Prior to the winding up order in 1987, the petitioner was assessed for Income Tax AY 1984-85 at Rs.89,53,788/-. Accordingly, in 2006, the Department of Income Tax moved Company Application no.857/2006 under Rule 9 of the Companies (Court) "Rules, 1959 read with Section 178 of the Income Tax Act" before this Court praying for directions to attach rent received/receivable for adjusting towards the payment of Income Tax dues of the petitioner. However, this application was dismissed as not being pressed.

3. On 5th November 2015, the Liquidator requested the respondent-CIT to inform about the status of demand outstanding against the petitioner under Income Tax Act and Wealth Tax Act. On 27th November, 2015, ITO Ward-14(I) informed that the total demand for AYs 1984-85 to 1999-2000 amounted to Rs.19,06,496/- and the Wealth Tax to Rs.8,88,652/-, totalling as Rs.27,95,148/-. On 17th December, 2015, this Court directed the liquidator to release this amount in favour of the Department and granted liberty to the Liquidator to seek waiver of interest and penalty.

4. While the CIT accorded waiver of penalties on 28th March, 2016 under Section 273 (A) (4), as regards the waiver of interest, the petitioner filed an application under Section 220 (2A) before the CIT for the AY 1984-85 and 1985-86 in March 2017. This application for waiver of interest was rejected by the CIT on 26th February 2018. The petitioner then filed an application being Co. Appl. 577/2019 disputing this rejection under Section 220 (2A) on which this Court issued notice on 28th May, 2019. However, the matter is pending adjudication. In the meantime, on 17th March, 2020, the VSV Act was notified by the Union of India to provide for `resolution of disputed tax and for matters connected therewith or incidental thereto'. The Rules to be framed under the VSV Act were also notified immediately thereafter.

5. The petitioner chose to apply under the VSV Act providing details of the amount payable under the VSV Act viz. Rs.10,47,891/- for AY 1984-85 (against the disputed interest of Rs.41,91,567/-) and Rs.27,795/- for AY 1985-86 (against the disputed interest of Rs.1,11,180/-).

6. It is the case of the petitioner that on filing of the above declarations in prescribed forms in terms of Section 4 (1) of the VSV Act, the designated authority was required to issue certificate under Section 5 (1) intimating the particulars of tax arrears and the amount payable after such determination. Thereafter, the declarant would be required to withdraw the petition in the concerned court of law and intimate the payment to the designated authority under Section 5 (2) of the VSV Act.

7. However, the petitioner did not receive any response ever since filing on 20th March, 2020 and it was only on 5th January, 2021 that a message flashed on the portal of the department indicating that the declarations so furnished by the petitioner have been rejected. Since there was no reason indicated on portal for such rejection, the petitioner moved an application before the CIT for inspection of the files with a request to take out certified copies. This request was reiterated through an email dated 12th January, 2021 but no response was received. Yet another reminder was given by the petitioner on 18th January, 2021, how