Weber Hydraulics India Pvt. Ltd. v. Union of India

1. Union of India Represented through Secretary Ministry of Finance, Government of India, Aykar Bhavan, Marine Lines, Mumbai-400 020

2. The Principal Commissioner of having Tax Department PMT Building, Swargate Pune-411 037 … Respondents *** Mr. K.K. Chaitanya, Senior Advocate a/w Mr. P.K. Shetty for the Petitioner. Mr. Suresh Kumar for the Respondents. *** CORAM: DHIRAJ SINGH THAKUR & ABHAY AHUJA, JJ. DATE: 23 AUGUST 2022: JUDGMENT: Per DHIRAJ SINGH THAKUR, J.. Despite opportunities granted, reply has not been fled. Considering the limited nature of controversy in the present Petition, learned Counsel for the parties agree for fnal disposal at this stage. The Petition is accordingly admitted and taken up for fnal disposal.

2 The Petitioner is agrieved of the issuance of a Certifcate in Form No.3 under the Direct Tax Vivad Se Vishwas Act, 2020 (“VSV Act”) and the Rules framed thereunder, as also the rejection of the rectifcation application fled by the Petitioner vide communication dated 18 January 2021. The Petitioner consequently seeks issuance of writ of mandamus directing the Respondents to issue a fresh Form No.3 in terms of rule 4 of the Rules under Direct Tax Vivad Se Vishwas Scheme Rules, 2020, by considering the disputed tax at Rs.1134218/- and tax arrears at Rs.1542537/-, which was declared by the Petitioner in Form No.1 for the assessment year 2013-14.

3 Briefly stated the material facts are as under: The Petitioner fled its return of income declaring loss of Rs.11364543/- for the assessment year 2013-14. The Order of assessment came to be passed under Section 143(3) of the Income Tax Act, 1961 (“the Act”) dated 14 March 2016 assessing the total income at Rs.22663380/-.

4 An appeal was preferred before the Commissioner of Income Tax (Appeal), Pune on 19 April 2016. On 29 April 2016, the Petitioner fled a rectifcation application before the assessing offcer, which was allowed by revising the assessed income at Rs.3670608/- and demand of Rs.1542537.

5 An Application was fled by the Petitioner before the assessing offcer on 17 June 2016 requesting stay of recovery of demand. The assessing offcer, accordingly, on 25 July 2016 directed payment of 50 per cent of the revised demand for the said assessment year, pursuant to which, the Petitioner deposited an amount of Rs.771265/-.

6 For the assessment year 2018-19, the Petitioner was intimated under Section 143(1) that amount of Rs.673480/- was due as refund. Further intimation under Section 245 dated 9 April 2020, was issued proposing to adjust the refund of Rs.673480/pertaining to assessment year 2018-19 against the demand of Rs.790265/- under Section 154 and demand of Rs.1170 under Section 220(2) pertaining to the assessment year 2013-14. The Petitioner against the intimation issued under Section 245 on 9 June 2020 submitted a reply on the Income Tax e-Filing Portal objecting to the adjustment of the refund.

7 The case of the Petitioner is that being eligible under VSV Act, it submitted Form No.1 on 22 December 2020 declaring ‘tax arrear’ of Rs.1542537/-, which represented disputed tax of Rs.1134218/and interest on the disputed tax of Rs.408319/- levied under Section 234B for the assessment year 2013-14. In the meantime, it is stated that on 31 January 2021, the refund of Rs.673480/pertaining to assessment year 2018-19 was adjusted against the demand of Rs.790265/- for the assessment year 2013-14.

8 It is stated that Form No.3 was issued in terms of Rule 3 of Direct Tax Vivad se Vishwas Rules, reflecting tax arrears of Rs.7353133/- as per the assessment Order 14 March 2016, as against Rs.1542537/- as per the rectifcation Order dated 26 May 2016 for the said assessment year.

9 A rectifcation application was, thus, fled before the 2nd Respondent on 25 February 2021 seeking rectifcation of mistake. This request was, however, rejected vide communication dated 18 June 2021. What is stated in the communication dated 18 June 2021 for the purpose of rectifcation of Form No.3 is reproduced hereinunder: “Subject: Direct Tax Vivad se Vishwas Act, 2020- Letter. Kindly refer to the above.

02. I am directed to convey that in respect of your application for rectifcation in Form 3 issued by this offce, disputed income as seen from the assessment order passed under Section 143(3) of the I.T. Act, 1961 dated 14 March 2016 is Rs.2,26,63,380/-. In the application fled by you under DTVSVS in Form 1 it is mentioned that appeal is fled against Order passed under Section 143(3) of the I.T. Act, 1961 dated 14 March 2016, therefore, the disputed income in this case is Rs.2,26,63,380/- only. Form 35 fled before the CIT(A) on 19 April 2016 states amount in disputed appeal is Rs.2,26,63,380/-. No appeal is seen fled against Order u/s 154 dated 26 May 2016. Therefore, the only appeal pending before CIT(A) as on date is against order passed u/s 143(3).

03. The Form-3 is correctly issued by this offce considering the disputed income as per Order passed u/s 143(3) of the I.T. Act, 1961 dated 14 March 2016. This is issued for your reference and consideration.” 10 The case of the Petitioner is that the Respondents ought not to have ignored the earlier Order of rectifcation passed by the assessing offcer under Section 154 of the Act for the purpose of calculating tax arrears and disputed tax, and that the 2nd Respondent ought to have decided the matter in terms of the clarifcation issued by the Central Board of Direct Taxes (“CBDT”) vide circular no.9 of 2020 dated 22 April 2020 and in particular Question No.25 thereof, which reads as under: Question No.25 Answer In a case appeal or arbitration is pending on the specifed date, but a rectifcation is also pending with the AO which is accepted will reduce the total assessed income. Will the calculation of disputed tax be circulated on rectifed total assessed income ? The rectifcation order passed by the AO may have an impact on determination of disputed tax, if there is reduction or increase in the income and tax liability of the assessee as a result of rectifcation. The disputed tax in such cases would be calculated after giving effect to the rectifcation order passed, if any.

11 We agree with the argument advanced by learned Counsel for the Petitioner that the 2nd Respondent ought to have taken into consideration FAQ No.25 while determining the disputed tax. The CBDT appears to have been alive to a situation, where although an appeal was preferred against the Order of assessment, the Order of assessment itself could be rectifed reducing the demand and keeping in view the purpose and spirit of VSV Act, the clarifcations were made by the CBDT, one of which, as reproduced hereinabove squarely applies to the facts of the case. The 2nd Respondent did not seem to be aware of Circular No.9 of 2020 while rejecting the application for rectifcation vide communication dated 18 June

2021.

12 Be that as it may, the present Petition is allowed. The rectifcation Order dated 18 June 2021 as also the impugned Certifcate issued by the 2nd Respondent in Form No.3 dated 31 January 2021 for the assessment year 2013-14 are quashed and set aside. The 2nd Respondent is directed to issue a fresh Form No.3 by considering the rectifcation Order dated 18 June 2021 under Section 154 of the Act read with FAQ No.25 of CBDT Circular No.7 of