Facts of the Case

The petitioners filed declarations (Form 1 & 2) under the Vivad Se Vishwas Scheme on 04 March 2021 to settle pending tax disputes. The designated authority issued Form 3 determining the payable amount. However, the petitioners failed to make payment within the prescribed timeline due to the death of the Managing Director and disruptions caused by the COVID-19 pandemic.

The petitioners sought acceptance of delayed payment along with interest and validation of their declarations.

Issues Involved

  1. Whether the timeline for payment under the VSV Act is mandatory or directory.
  2. Whether delay in payment due to extraordinary circumstances like COVID-19 and death of a key person can be condoned.
  3. Whether High Court can exercise jurisdiction under Article 226 to grant relief despite absence of statutory provision for condonation.

Petitioner’s Arguments

  • The delay was unintentional and caused by exceptional circumstances (COVID-19 + death of director).
  • The objective of the VSV Scheme is to reduce litigation and collect revenue, which would be defeated if relief is denied.
  • Relied on a Rajasthan High Court judgment granting similar relief with interest.
  • Supreme Court’s COVID limitation extension orders applied to extend timelines.
  • VSV Act is a beneficial legislation and should be interpreted liberally.

Respondent’s Arguments

  • Payment timeline is mandatory, not extendable.
  • Sections 4(6)(b) and 5 clearly provide consequences for non-compliance.
  • Relied on Hemalatha Gargya v. CIT (2003) where strict compliance of scheme timelines was upheld.
  • No statutory power exists to condone delay under the VSV Act.

Court’s Findings / Judgment

  • The Court held that the payment timeline is not strictly mandatory in light of multiple statutory extensions during COVID.
  • Recognized that:
    • The country was under intermittent lockdown.
    • The death of the Managing Director was an extraordinary circumstance.
  • Distinguished Hemalatha Gargya case, holding it inapplicable as it related to a different scheme (VDI Scheme).
  • Observed that the VSV Act is a beneficial and remedial legislation and must be interpreted liberally.
  • Held that even if authorities cannot condone delay, the High Court under Article 226 can grant relief to ensure justice.

Court Order

  • Writ petitions allowed.
  • Respondents directed to:
    • Accept Form 1 & 2 as valid declarations.
    • Accept delayed payment under Form 3.
  • Petitioners required to pay:
    • Outstanding amount + simple interest @ 9% per annum within specified time.

Important Clarifications by Court

  • VSV Act aims to reduce litigation and generate revenue, hence must be interpreted pragmatically.
  • Courts can intervene in exceptional circumstances even where statute is silent.
  • Delay caused by genuine hardship (COVID + death) deserves equitable relief.
  • No prejudice is caused to Revenue if delayed payment is accepted with interest.

Section Involved

  • Sections 4(6)(b), 5(1), 5(2) – Direct Tax Vivad Se Vishwas Act, 2020 (VSV Act)
  • Section 10(2) – VSV Act
  • Article 226 – Constitution of India
  • Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/MMH02112022CW35602022_181720.pdf


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