Facts of the Case

The petitioners filed declarations (Form 1 and Form 2) under the Vivad Se Vishwas Act, 2020 on 04 March 2021 to settle pending tax disputes. The department issued Form 3 determining the payable amount.

However, the petitioners failed to pay the disputed amount within the prescribed time limit (by 31 October 2021). The delay occurred due to:

  • Death of the Managing Director handling tax affairs (July 2021)
  • Disruptions caused by the COVID-19 pandemic

The petitioners sought acceptance of their declarations and permission to pay the amount despite delay.

Issues Involved

  1. Whether the time limit for payment under the Vivad Se Vishwas Act is mandatory.
  2. Whether delay in payment can be condoned due to extraordinary circumstances like COVID-19 and death of a key person.
  3. Whether High Court can grant relief under Article 226 despite absence of statutory provision for condonation.

Petitioner’s Arguments

  • Delay was unintentional and caused by extraordinary circumstances (COVID-19 and death of Director).
  • Objective of the scheme is to reduce litigation and collect revenue, which would be defeated if relief is denied.
  • Relied on similar relief granted in comparable cases.
  • Limitation periods were extended by Supreme Court during COVID-19.
  • VSV Act is a beneficial legislation and should be interpreted liberally.

Respondent’s Arguments

  • Payment timeline under the VSV Act is mandatory and strict.
  • No provision exists for extending the payment deadline.
  • Relied on Supreme Court judgment in Hemalatha Gargya v. CIT to argue strict compliance is required.
  • Non-compliance results in declaration being treated as never made.

Court’s Findings / Judgment

    • The timeline is not strictly mandatory, considering multiple extensions granted due to COVID-19 (as reflected in the notification chart on page 7–8 of the judgment).
    • Delay was due to genuine and unavoidable circumstances, including pandemic disruptions and death of Managing Director.
    • The VSV Act is a beneficial legislation and must be interpreted liberally.
    • Reliance on Hemalatha Gargya was misplaced as that case involved a different scheme.
    • High Court has wide powers under Article 226 to do complete justice.

Court Order

  • The writ petitions were allowed.
  • Authorities were directed to:
    • Accept Form 1 and Form 2 declarations as valid.
    • Accept payment of disputed tax amount.
    • Allow payment with simple interest @ 9% per annum within specified time.

Important Clarifications

  • VSV Act is a remedial/beneficial statute, not to be interpreted rigidly.
  • Courts can grant relief in extraordinary circumstances, even when statute does not provide for condonation.
  • COVID-19 and personal hardship can be valid grounds for equitable relief.
  • Objective of tax settlement schemes is resolution, not rejection on technicalities.

Sections Involved

  • Sections 4(6)(b), 5(1), 5(2) – Direct Tax Vivad Se Vishwas Act, 2020
  • 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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