In explaining the avowed object of the Direct Tax Vivad Se Vishwas Act the High Court in [2022] 441 ITR 434 (Bom) ( Reliance Industries Ltd.) held that the Direct Tax Vivad Se Vishwas Act has been formulated for resolution of disputed tax and for matters connected therewith or incidental thereto. The Direct Tax Vivad Se Vishwas Act allows the eligible assessees to settle pending disputes on payment of the specified amount based on the percentage of the disputed tax. The objective of the Direct Tax Vivad Se Vishwas Act is to inter alia reduce pending Income-tax litigation, generate timely revenue for the Government and benefit taxpayers by providing them peace of mind, certainty and savings on account of time and resources that would otherwise be spent on the long-drawn and vexatious litigation process.
At the same time it held that the Direct Tax Vivad Se Vishwas Act is a beneficial legislation to provide a deviation from the strict application of tax laws towards achieving the purpose.
However it held that the benefits granted by the Direct Tax Vivad Se Vishwas Act are, by legislative policy not available to certain persons like thoseidentified in section 9(c) of the Direct Tax Vivad Se Vishwas Act. In the Courts view the purpose and intent behind the said provision is clear and unambiguous that the Direct Tax Vivad Se Vishwas Act would only apply to monies acquired by legal means and not to monies generated from socio-economic offences. The purpose and intent of section 9(c) of the Direct Tax Vivad Se Vishwas Act is to ensure that the Direct Tax Vivad Se Vishwas Act which is a piece of beneficial legislation, is not utilised for regularising or seeking benefits qua tainted monies or monies which fall under the shadow of a socio-economic offence.
Reliance industries filed several , 27 in all applications/declarations for resolution of tax disputes under the Vivad se Vishwas scheme all of which have been returned with the following two hurdles that were challenged in this case before the High Court :
0. Pending FIR registered by Anti Corruption Bureau of the Delhi Government in 2014. no charge sheet is filed;
0. Pending Special CBI Case for “offences punishable under section 120B read with 420 of the Indian Penal Code and under section 13(2) read with 13(1)(d) of Prevention of Corruption Act. Charge sheet registered in this case.
It is the case of the petitioner that it is entitled to these reliefs on the basis that the petitioner is not covered by section 9(c) of the Direct Tax Vivad Se Vishwas Act because out of the two criminal cases pending against the petitioner, in the first proceeding the prosecution has not been instituted as yet since only the first information report has been registered and the matter has not proceeded further. In the second proceeding where charge sheet is filed and cognizance is taken, even if convicted, the peti- tioner would be convicted for offences under the Indian Penal Code, 1860 and not for offences punishable under the Prevention of Corruption Act, 1988.
Holding these pleas as misconceived and baseless the Court held that the company is not eligible for the benefits available under the Direct Tax Vivad Se Vishwas Act.
These situations are very unfortunate pushing back the ease of doing business framework.