Facts of the Case

The petitioner, Medeor Hospital Limited, filed a writ petition challenging the action of the Income Tax Department in partially settling its dispute under the Vivad Se Vishwas Scheme (VSV Scheme).

The dispute pertained to Assessment Year 2014–15 where:

  • A penalty appeal was pending before the ITAT.
  • A quantum appeal was pending before the CIT(A), though filed with delay.

The respondent authority accepted settlement of the penalty appeal but rejected settlement of the quantum appeal on the ground that the appeal was filed beyond limitation and was not admitted prior to filing declaration under the VSV Scheme.

Issues Involved

  1. Whether an appeal filed beyond limitation but pending before an appellate authority qualifies as a “pending appeal” under Section 2(1)(a) of the VSV Act?
  2. Whether admission of appeal is a mandatory condition for eligibility under the VSV Scheme?
  3. Whether CBDT Circular (FAQ-59) can impose additional conditions beyond the statute?

Petitioner’s Arguments

  • The petitioner contended that the only requirement under the VSV Act is that the appeal must be “pending” before an appellate forum.
  • There is no requirement that the appeal must be:
    • Filed within limitation, or
    • Admitted before the specified date.
  • It was argued that once delay is condoned, the appeal relates back to the original filing date.
  • Reliance was placed on judicial precedent holding that pendency begins from filing till disposal, irrespective of admission status.

Respondent’s Arguments

  • The Revenue argued that:
    • The quantum appeal was filed after expiry of limitation (approx. 2 years delay).
    • As per FAQ-59 of CBDT Circular No. 21/2020, an appeal is considered pending only if:
      • Delay condonation application is filed within specified period, and
      • Appeal is admitted before declaration.
  • Therefore, the petitioner was not eligible for settlement of quantum appeal under the VSV Scheme.

Court’s Findings / Judgment

The Delhi High Court held:

1. Meaning of “Pending Appeal”

  • An appeal is considered pending from the moment it is filed until it is disposed of, regardless of:
    • Validity
    • Competency
    • Limitation

2. Admission Not Required

  • The Court clarified that the statute does not require admission of appeal as a condition.
  • Adding such requirement would amount to reading into the law something not provided.

3. CBDT Circular Cannot Override Law

  • FAQ-59 imposing the condition of “admission before declaration” was held:
    • Contrary to the VSV Act
    • Invalid to that extent

4. Binding Nature of Judicial Precedents

  • Circulars cannot override judgments of Courts.

5. Final Order

  • The Court:
    • Quashed the impugned Forms issued by the authority
    • Directed that the quantum appeal be treated as pending as on 31.01.2020
    • Directed settlement of both quantum and penalty appeals under the VSV Scheme within 8 weeks

Important Clarification

  • “Pending” ≠ “Admitted”
  • Even an appeal filed beyond limitation is considered pending unless dismissed.
  • CBDT cannot impose conditions that are prejudicial to the assessee.
  • Circulars inconsistent with statutory provisions are non-est in law.

 Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/MMH28102022CW121162021_140103.pdf

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