Facts of the Case

The writ petition pertains to Assessment Year 2011–12. The petitioner, MUFG Bank Ltd., challenged the order of the Revenue rejecting its declaration in Form‑1 and undertaking in Form‑2 filed under the Direct Tax Vivad Se Vishwas Rules, 2020, along with the communication dated 17.02.2021 stating reasons for rejection.

The Revenue rejected the application on the ground that the petitioner sought to settle only part of the dispute while other proceedings, including appeals and a Special Leave Petition filed by the Revenue, were pending.

The petitioner filed its Return of Income declaring total income of Rs. 2,28,02,36,682/-. After scrutiny, the Assessing Officer issued a draft assessment order under Sections 143(3)/144C(1) of the Income‑tax Act, 1961 proposing additions, including interest from External Commercial Borrowings. The Dispute Resolution Panel partly allowed the objections.

A final assessment order computed the total taxable income at Rs. 4,43,08,79,550/-. Cross‑appeals were filed before the Income Tax Appellate Tribunal, which partly allowed the petitioner’s appeal. Subsequently, cross‑appeals were filed before the Delhi High Court, and the Revenue also filed a Special Leave Petition.

The petitioner applied under the Vivad Se Vishwas Scheme to settle only the Revenue’s appeal before the High Court, which was rejected by the Revenue.

Issues Involved

1. Whether an assessee can settle only one or some disputes under the Direct Tax Vivad Se Vishwas Act, 2020 while other appeals or SLPs remain pending.
2. Whether rejection of the declaration on the ground of partial settlement is legally sustainable.
3. Whether the Revenue is justified in denying scheme benefits when multiple proceedings arise from the same assessment year.

Petitioner’s Arguments

The petitioner contended that the scheme permits settlement of individual disputes and does not mandate settlement of all pending matters. Each appeal or proceeding constitutes a separate dispute, making selective settlement permissible. Denial of benefits merely because other proceedings remained pending was contrary to the scheme.

Respondent’s Arguments

The Revenue argued that the petitioner was ineligible for the scheme because it attempted to settle only one of the three pending matters—namely the Revenue’s appeal—without settling the petitioner’s own appeal and the Revenue’s Special Leave Petition. According to the Revenue, partial settlement was not permissible.

Court Order / Findings

The Delhi High Court allowed the writ petition, holding that under the Direct Tax Vivad Se Vishwas Act, an applicant may choose to settle one or more appeals or SLPs arising from a particular assessment year and is not required to settle all pending matters. The impugned rejection order was set aside, and the Revenue was directed to process the petitioner’s forms in accordance with the Act.

Important Clarification 

The Court clarified that settlement under the Vivad Se Vishwas Scheme can be dispute‑specific. An assessee is not obligated to resolve all pending appeals or SLPs for a given assessment year, and authorities must process declarations when statutory conditions are met.

Link to download the order -

https://delhihighcourt.nic.in/app/showFileJudgment/RAS22032024CW49092021_200037.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.