VSV Eligibility Depends on Appeal’s Factual Pendency, Not Its Legal Maintainability.
Issue
Whether a declaration filed under the Direct Tax Vivad Se Vishwas (VSV) Scheme, 2024, can be rejected by the Designated Authority on the grounds that the assessee’s appeal—which was factually pending on the specified cut-off date—was “not maintainable” or “invalid” because it was filed manually instead of online.
Facts
The assessee, a Non-Resident Indian (NRI), was unable to file an income tax appeal online as required by Rule 45, because they did not have an Aadhaar number linked to their PAN.
Consequently, the assessee filed a manual appeal before the Commissioner (Appeals).
Subsequently, the assessee filed a declaration under the Direct Tax Vivad Se Vishwas Scheme, 2024, stating that this appeal was pending as of the specified date (22-7-2024).
The Designated Authority rejected the VSV declaration. The reason given was that the manually filed appeal was “not maintainable” and therefore “invalid,” meaning the assessee was not eligible for the scheme.
The assessee cited FAQ No. 36 (Guidance Note No. 2/ 2024) issued by the CBDT, which clarified that an assessee is eligible if their appeal was pending on the specified date, even if it was “disposed of on merits or otherwise” (i.e., dismissed on technical grounds) at a later date.
Decision
The High Court (implied) ruled decisively in favour of the assessee and set aside the impugned communication that rejected the declaration.
It held that the appeal was factually pending on the specified date of 22-7-2024.
The Designated Authority was not justified in rejecting the declaration on the ground that the appeal was “invalid.” The authority’s role is to determine the pendency of the appeal, not to adjudicate its maintainability (which is the job of the appellate authority).
The court found that the rejection was contrary to the scheme’s intent and the CBDT’s own clarification.
The assessee was allowed to avail the benefits of the VSV Scheme.
Key Takeaways
Pendency vs. Maintainability: This is the crucial distinction. For the purpose of VSV Scheme eligibility, the operative test is the factual pendency of an appeal on the specified date, not its legal maintainability or its ultimate success.
Amnesty Schemes to be Construed Liberally: The judgment reinforces the principle that settlement schemes should be interpreted liberally to promote their objective (reducing litigation) and should not be defeated by hyper-technical procedural interpretations.
Designated Authority Cannot Pre-Judge: The Designated Authority under the VSV scheme cannot step into the shoes of the Commissioner (Appeals) to pre-judge whether a pending appeal is “invalid” or “not maintainable.”
CBDT’s Own FAQs are Binding: The department’s rejection was contrary to its own published guidance (FAQ No. 36), which clearly stated that the subsequent disposal of an appeal (even for technical reasons) does not affect eligibility as long as it was pending on the cut-off date.
| Sr. No. | Issue | Comments |
| Eligibility of cases | ||
| 36 | Suppose a taxpayer is eligible to apply is pending as on 22.07.2024. But subsequently, before the taxpayer could file declaration under the DTVSV Scheme 2024, his appeal has been disposed of on merits or dismissed as withdrawn for the purposes of the Scheme. Can such a taxpayer still file declaration under the Scheme? | Yes, such cases are eligible for settlement under the Scheme as appeal was pending as on 22.07.2024. Disputed tax will be calculated in the same manner as if the appeal pending on 22.07.2024 is yet to be disposed of. |
“89.(1) in the Scheme, unless the context otherwise requires-
(l) “last date” means such date as may be notified by the Central Government in the Official Gazette.”
(n) “specified date” means the 22nd day of July, 2024″
“10. At this juncture, it would be relevant to refer to the decision of Supreme Court in case of Commissioner of Income Tax v. Shatrusailya Digvijaysingh Jadeja, relied upon by the learned Senior Advocate Mr. Hemani, in which the S.C. had an occasion to deal with the issue, as to whether, the department could have rejected the Declaration filed under the similar scheme called Kar Vivad Samadhan Scheme, introduced vide the Finance [No.2] Act 1998, on the ground that the Revision /Appeal filed by the concerned Petitioner was time barred or was not valid. In the said case, the Supreme Court considered the object of the said Scheme as also the other earlier decisions, and observed as under:
“13. In our view, the Scheme was in substance a recovery scheme though it was nomenclatured as a “litigation settlement scheme” and was not similar to the earlier Voluntary Disclosure Scheme. As stated above, the said Scheme was a complete Code by itself. Its object was to put an end to all pending matters in the form of appeals, reference, revisions and writ petitions under the IT Act/WT Act. Keeping in mind the above object, we have to examine section 95(i)(c) of the Scheme, which was different from appeals under section 246, revisions under section 264, appeals under section 260A etc. of the IT Act and similar provisions under the W.T. Act. Under the I.T. Act, there is a difference between appeals, revisions and references. However, those differences were obliterated and appeals, revisions and references were put on par under section 95(i)(c) of the Scheme. The object behind section 95(i)(c) in putting on par appeals, references and revisions was to put an end to litigation in various forms and at various stages under the IT Act/Wealth Tax Act and, therefore, the rulings on the scope of appeals and revisions under the IT Act or on Voluntary Disclosure Scheme, will not apply to this case.
15. In the case of Dr. Mrs. Renuka Delta (supra), this Court has held on interpretation of section 95(i) (c) that if the appeal or revision is pending on the date of the filing of the declaration under section 88 of the Scheme, it is not for the DA to hold that the appeal/revision was “sham”, “ineffective” or “infructuous” as it has.
16. In the case of Raja Kulkarni v. The State of Bombay reported in AIR 1954 SC 73, this Court laid down that when a section contemplates pendency of an appeal, what is required for its application is that an appeal should be pending and in such a case there is no need to introduce the qualification that it should be valid or competent. 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.
17. To the same effect is the law laid down by the judgment of this Court in the case of Tirupati Balaji Developers (P) Ltd. v. State of Bihar & Others reported in (2004) 5 SCC 1, in which it has been held that an appeal does not cease to be an appeal though irregular and incompetent.”
11. In view of the aforestated legal position, there remains no shadow of doubt that appeal could be said to be pending, even if the delay occurred in filing the same was not condoned and even if it was allegedly irregular or incompetent. In the instant case therefore also, the Respondent could not have rejected the Declaration Form of the Petitioner filed under the said Act merely on the ground that the Appeal was not valid or competent, as the delay occurred in filing the Appeal was not condoned by the Appellate Authority. In the opinion of the Court, the Respondent had to only take into consideration, as to whether, the Petitioner had filed an Appeal, and the same was pending on the ‘specified date’ i.e. 31.1.2020. It was not for the Respondent to decide, as to whether, such Appeal was irregular or incompetent or invalid in the eye of law.”
“7. In view of the above provisions of the v. Act, it emerges that the petitioner has to be an appellant so as to be eligible on the specified date i.e. 31st January, 2020 to file declaration under Sections 3 and 4 of the v. Act. Admittedly, the appeal filed by the petitioner in the year 2015 was not pending as on 31st January, 2020. However, in view of order dated 03rd September, 2020 passed by the Tribunal recalling its order dated 26th March, 2019 whereby appeal filed by the petitioner was dismissed, the appeal was restored to its filei.e. Appeal filed in the year 2015. Therefore, the appeal of the petitioner has to be considered as pending as on 31st January, 2020 which is the specified date as per the v. Act.
7.1 It is also pertinent to note that when the petitioner has filed declaration under the v. Act to claim the benefit of the Scheme, the Tribunal had already recalled the order dated 26th March, 2019 and therefore, the appeal preferred by the petitioner before the Tribunal was pending as on 31st January, 2020.
7.2 In view of the above facts, it cannot be said that no appeal was pending as on 31st January, 2020 when the petitioner filed the application/declaration under the provisions of the Scheme in view of order dated 03rd September, 2020 passed by the Tribunal in Miscellaneous Application No.75/Ahd/2020 preferred by the petitioner to recall order dated 26th March, 2019 whereby appeal of the petitioner was dismissed for non-prosecution.”
8. Considering the above facts, the impugned action of the respondent authority of rejecting the declaration filed by the petitioner is not tenable and accordingly, the same is quashed and set aside. The respondent authority is directed to consider and process the declaration filed by the petitioner under the provisions of the v. Act within a period of 12 weeks from the date of receipt of copy of this order. The petition is accordingly disposed of. Notice is discharged. No order as to costs.”