Validity of Pending Appeal Cannot Be Ground for Rejecting Vivad Se Vishwas Scheme Declaration: Gujarat High Court

The Gujarat High Court has delivered a significant ruling concerning the Direct Tax Vivad Se Vishwas (DTVSV) Scheme, 2024 , clarifying that tax authorities cannot reject a declaration simply because they deem the underlying appeal to be "invalid" or technically flawed. The bench, comprised of Honourable Mr. Justice Bhargav D. Karia and Honourable Mr. Justice Pranav Trivedi, emphasized that the primary criterion for eligibility is the pendency of an appeal as of the specified date, July 22, 2024.

The Backdrop: A Technical Stand-off

The case involved petitioner Tejal Mayur Rao, an NRI who had filed an Income Tax appeal manually in 2020. Due to the lack of an Aadhar-PAN link—which prevented her from filing electronically under Rule 45 of the Income Tax Rules—the manual filing was challenged by the Revenue.

When the petitioner sought to settle her tax dispute under the DTVSV Scheme, 2024, the department rejected her Form No. 1. The authorities argued that because the appeal failed to meet the online filing requirements of Rule 45, it was effectively "invalid" and therefore could not be considered "pending" for the purposes of the settlement scheme.

Arguments from Both Sides

The petitioner’s counsel, Hiren J. Trivedi, argued that the scheme’s intent was to reduce litigation, not to adjudicate the technical validity of active appeals. He contended that as long as the appeal was physically pending before the Commissioner of Income Tax (Appeals) on the specified date of July 22, 2024, the assessee should be eligible for the scheme.

In contrast, the Senior Standing Counsel for the respondents argued that the scheme requires valid, regular appeals. By not following the mandatory online filing process, the petitioner had allegedly failed to maintain a maintainable appeal, thereby disqualifying her from the scheme’s benefits.

Judicial Interpretation: Pendency Prevails

The Court rejected the Revenue’s narrow interpretation, leaning heavily on the legislative intent of the Finance (No. 2) Act, 2024 . The bench pointed to FAQ No. 36 of the CBDT’s Guidance Note No. 2/2024, which confirms that even if an appeal is disposed of or dismissed on merits, the case remains eligible if the appeal was pending on the specified date.

Citing established precedents such as Tushar Agro Chemicals v. Principal Commissioner of Income-Tax and the recent decision in Neelaben Ghanshyambhai Parmar , the Court reiterated that an appeal does not lose its "pending" status just because it is later found to be irregular or incompetent by the appellate authority.

Key Observations

The judgment underscores that the responsibility of the tax authority under the Scheme is limited to verifying the status of the proceedings. As noted by the Court:

> "The respondent-authority was not justified in rejecting the declaration in Form No. 1 filed by the petitioner under the DTVSV Scheme, 2024 on the ground that appeal filed by the petitioner was an invalid appeal as the same was not filed as per Rule 45 of the Rules."

The Court further clarified the legal standard for pendency:

> "Whether an appeal is valid or competent is a question entirely for the appellate court before whom the appeal is filed to decide... 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."

Final Decision

The Gujarat High Court quashed the communication rejecting the petitioner's declaration. The Revenue authorities have been directed to process the petitioner's Form No. 1 under the DTVSV Scheme, 2024 within 12 weeks.

This ruling provides much-needed relief to taxpayers struggling with legacy technical issues, reinforcing the government’s stated goal of providing "peace of mind, certainty, and savings on account of time and resources" through the Vivad Se Vishwas framework. The judgment serves as a clear directive that the tax department should prioritize the resolution of disputes over the procedural gatekeeping of legacy filings.