Court Rules Rejection of Application by Vasundhara Builders and Developers as Arbitrary, Orders Acceptance of Settlement Declaration
In a significant judgment, the Gujarat High Court has quashed the rejection of a tax settlement application filed by Vasundhara Builders and Developers under the Direct Tax Vivad Se Vishwas Scheme, 2024. The court found the rejection by the Principal Commissioner of Income Tax to be arbitrary and not in alignment with the statutory provisions of the scheme.
The case revolved around the rejection of Vasundhara Builders' declaration under the Vivad Se Vishwas Scheme, a scheme introduced by the Central Government to reduce pending income tax litigation. The rejection was initially based on the grounds that the proceedings emanated from a "search" under Section 132 of the Income Tax Act, which would debar the petitioner from the scheme’s benefits as per Section 96 of the scheme.
However, the court, comprising Justices A.S. Supehia and Vaibhavi D. Nanavati, highlighted a critical distinction between "search" under Section 132 and "survey" under Section 133A of the Income Tax Act. The court clarified that the proceedings against Vasundhara Builders emanated from a survey action under Section 133A, not a search. Importantly, Section 96 of the scheme does not debar cases arising from survey actions, only those from searches.
The court noted that the initial proceedings under Section 153C of the Income Tax Act, which were linked to a search, had been dropped. Instead, the assessment was reopened under Section 147, based on survey findings, which should not disqualify the petitioner from availing the scheme’s benefits.
Emphasizing the need for strict interpretation of statutory provisions, the court stated that restrictions not explicitly included by the legislature cannot be imposed. The judgment underlined that the legislative intent did not equate survey actions with search actions, which are more severe, thereby affirming the petitioner’s eligibility for the scheme.
Consequently, the court directed the tax authorities to accept the declarations filed by Vasundhara Builders and issue the necessary statutory forms within six weeks.
Bottom line:-
Direct Tax Vivad Se Vishwas Scheme, 2024 - Rejection of application under the scheme - Held, rejection of application is arbitrary and contrary to the scheme when proceedings emanate from "survey action" under Section 133A of the Income Tax Act and not "search" under Section 132 of the Act, as Section 96 of the scheme does not debar cases arising from survey action.
Statutory provision(s): Section 132, Section 133A, Section 96 of Direct Tax Vivad Se Vishwas Scheme, Section 153C, Section 147 of the Income Tax Act, Section 96(a)(i) of the Scheme
