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Facts
The assessee's appeal before the CIT(A) was dismissed as withdrawn after the assessee applied for settlement under the Vivad se Vishwas scheme. Subsequently, the assessee's application under the scheme was rejected. The assessee then appealed to the Tribunal against the dismissal order.
Held
The Tribunal held that the dismissal of the appeal by the CIT(A) without deciding on merits was not in accordance with the law. The Tribunal ruled that the appeal, having been deemed revived due to the rejection of the Vivad se Vishwas scheme application, should be decided on its merits.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal as withdrawn without deciding on merits, and whether the appeal revived after the rejection of the Vivad se Vishwas scheme application.
Sections Cited
143(2), 142(1), 143(3), 72, 250, 251(1)(a), 246A, 4(6)(b), 5(1), 4(2), 4(7)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
The appeal filed by the assessee is directed against the order dated 20.02.2025 of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)/NFAC”] pertaining to Assessment Year (“AY”) 2015-16.
There is a delay of 22 days in filing of this appeal before the Tribunal for which the assessee has filed an affidavit explaining the reasons for such delay which is mainly due to the age and poor health condition of the assessee. After hearing both the sides, we are of the view that the delay is attributable to the sufficient cause. We, therefore, in light of the decisions of the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors. (1987) 167 ITR 471 (SC) and in the case of Inder Singh Vs. The State of Madhya Pradesh reported in 2025 LiveLaw (SC) 339, condone the said delay and proceed to decide the appeal.
3. Briefly stated the facts are that for AY 2015-16, the assessee filed its return of income on 28.09.2015 declaring total income at Rs. Nil. The case of the assessee was selected for limited scrutiny under CASS for the following reasons: (i) Large long term Capital gain; (ii) Large business loss set off against others heads of income and (iii) Sale of property reported in 26QB. Accordingly, notice(s) u/s 143(2)/142(1) of the Income Tax Act, 1961 (the “Act”) were issued and served upon the assessee. In response thereto, the assessee filed its reply from time to time. The Ld. Assessing Officer (“AO”) completed the assessment u/s 143(3) vide his order dated 21.12.2017 making an addition of Rs.3,31,18,261/- on account of Long Term Capital Gain to the total income of Rs. Nil returned by the assessee.
Aggrieved, the assessee filed an appeal before the Ld. CIT(A)/NFAC who dismissed the appeal of the assessee on the ground that the assessee has requested for withdrawal of the appeal by observing as under : “6. Decision:- During the course of appellate proceedings, the appellant vide its letter dated 12.01.2021stated that it had applied for settlement of this dispute under VSVS scheme. 2020 (as per provisions of the Direct Tax Vivad se Vishwas Act. 2020). Therefore, the appellant requested for withdrawal of its appeal to avail the benefit of the scheme. For the sake of clarity, the relevant part of the letter is reproduced as under: Sub: Withdrawal of Appeal No. CIT (A), Aurangabad-2/10666/2017-18 Ref: Reply to your letter dated 12.01.2021 having DIN ITRA/NFAC/F/API 1/2020-21/1029660349(1) for A.Υ. 2015-16 Dear Sir 1 Mr. Satyanarayan M. Chandak, director of the comparry in the above matter would like to withdraw the Appeal having Appeal No. CIT (A), Aurangabad-2/10656/2017-18 for the A.Y. 2015-10 having Form 35 Ack No. 350006911050215 hled on 05.02.2015 before CIT (A), Aurangabad-2 un reopome to your above notice on 12.01.2021 agairat ay Form 1 && Form 2 filed under Vivad Se Vishwas Scheme 2020 on 24.12.2020 on e-filling portal. The details of the same are as follows: Form filled: Form 1 de Form 2 under Vivad Se Vishwas Scheme 2020 Receipt No.: 562589501241220 Date: 24.12.2000 Α.Υ. 2015-2016 PAN AAKCS4645D Considering the above facts we would request your good office to kindly consider the above application under Vivad Se Vishwas Scheme 2020 and withdraw our appeal for the A.Y. 2015-16 to avail the benefit of the scheme. Thanking you in anticipation 7. In view of the above facts and after considering the appellant's submission, request for withdrawal of appeal is hereby accepted and appeal is dismissed being withdrawn.”
5. Dissatisfied, the assessee is in appeal before the Tribunal raising the following grounds of appeal :
1. BREACH OF PRINCIPLES OF NATURAL JUSTICE 1.1 The Ld. CIT(A) erred in dismissing the appeal without verifying to the fact whether the Appellant has settled the appeal in Vivad se Vishwas. 1.2 The Ld. CIT(A) erred in dismissing the appeal without granting and sufficient and adequate opportunity of being heard. 1.3 In the facts and circumstances of the case and in law, the order passed by the Ld. CIT(A) u/s 250 deserves to be set aside on this ground itself.
2. DISALLOWANCE OF SET OFF OF BUSINESS LOSS U/S 72 OF THE Act 2.1 The Ld. CIT(A) erred in confirming the disallowance of the set off of loss claimed of the business loss and depreciation loss u/s 72 of the Act of Rs. 3,83,73,199/-. 2.2 While disallowing such set off of loss the Ld. Income tax Officer, Ward 2(3), Aurangabad ['the Ld. AO'] has erred in properly appreciating the facts of the case. 2.3 In the facts and circumstances of the case and in law, the disallowance of loss is bad in law and therefore deserves to be deleted.
3. NOT ALLOWING THE INDEX COST AGAINST THE SALE CONSIDERATION 3.1 The Ld. CIT(A) erred in confirming the disallowance of indexed cost of acquisition. 3.2 While doing so the Ld. AO failed to appreciate the facts of the case and which resulted in disallowance of indexed cost of acquisition. 3.3 In the facts and circumstances of the case and in law, the disallowance of index cost of acquisition is bad in law and therefore deserves to be allowed.”
6. The Ld. AR submitted that the assessee’s application under the Direct Tax Vivad Se Vishwas Act, 2020 (“DTVSV Act, 2020”) has been rejected by the Income Tax Department. Admittedly, there was a lapse on the part of the assessee to inform the Ld. CIT(A)/NFAC regarding the same who dismissed the appeal of the assessee basis the withdrawal application filed before him on 12.01.2021. Relying on the decision of the Chennai Bench of the Tribunal in the case of M/s. Lifecell International Private Limited in dated 02.11.2022 and the provisions of section 4(6)(b) of the DTVSV Act, 2020, the Ld. AR submitted that the Tribunal under the identical set of facts, has upheld the maintainability of the appeal filed by the assessee. He also relied upon the decision of the Mumbai Tribunal in the case of M/s. Deekay Gears in dated 16.01.2019.
7. The Ld. DR supported the order of the Ld. CIT(A)/NFAC and submitted that the Ld. CIT(A)/NFAC was completely justified in dismissing the appeal of the assessee on the basis of withdrawal application that the assessee itself filed. The assessee failed to inform the Ld. CIT(A)/NFAC regarding the rejection of the assessee’s application under DTVSV Act, 2020. It was therefore not necessary for the Ld. CIT(A)/NFAC to decide the appeal on merits.
We have heard the Ld. Representatives of the parties and perused the material on record as well as decisions relied upon by the Ld. AR. Undisputedly, during the course of appellate proceedings before the Ld. CIT(A)/NFAC, the assessee had filed a letter dated 12.01.2021 seeking withdrawal of the appeal. Taking note of the said letter, the Ld. CIT(A)/NFAC dismissed the appeal of the assessee in limine without deciding it on merit. We have perused the order of the Chennai Bench of the Tribunal in the case of M/s. Lifecell International Private Limited (supra). Relying on the said decision, the assessee has contended that in the present case the assessee has violated the condition of payment of tax as determined by the designated authority in Form No. 3 and therefore appeal filed by the assessee is deemed to have revived. The relevant findings and observations of the Tribunal are reproduced below : “4. We have heard both the parties and considered petition filed by the Revenue in light of various provisions of the DTVSVS Act, 2020 and we find that as per sub-section (1) of section 5 of the DTVSVS Act, 2020, the designated authority shall, within a period of 15 days from the date of receipt of the declaration, by an order, determine the amount payable by the declarant in accordance with the provisions of this Act and grant a certificate to the declarant containing particulars of the tax arrear and the amount payable after such determination. The provisions of section 4(2) deals with deemed withdrawal of appeal and as per said provisions, upon filing the declaration any appeal pending before the Income-Tax Appellate Tribunal in respect of the disputed income or the tax shall be deemed to have been withdrawn from the date on which certificate under sub-section (1) of section 5 of the DTVSVS Act, 2020 issued by the designated authority. The Revenue contends that appeal filed by the assessee is not maintainable, because of provisions of section 4(2) of the DTVSVS Act, 2020. The Revenue had also taken support from sub-section (7) of section 4 of the DTVSVS Act, 2020 and contended that no appellate forum including Tribunal shall proceed to decide any issue relating to the tax arrear mentioned in the declaration in respect of which an order has been made under sub-section (1) of section 5 of the DTVSVS Act, 2020 by the designated authority or the payment of sum determined under that section. The assessee contends that appeal filed by the assessee is maintainable in view of sub-section (6) of section 4 of the DTVSVS Act, 2020. The assessee had also negated arguments of the Ld. CIT(DR) on sub-section (7) of section 4 of the DTVSVS Act, 2020.
Having heard both the sides and considered relevant provisions of the DTVSVS Act, 2020, we find that as per section 4(2) of the said Act, the moment designated authority issues Form No. 3 (certificate), any appeal pending before the appellate authorities shall be deemed to have been withdrawn from the date on which certificate under subsection (1) of section 5 of the DTVSVS Act, 2020 is issued by the designated authority and there is no dispute on this legal position. However, the very same Act, provides amnesty to the Revenue as well as the assessee by way of section 4(6), as per which the declaration under sub-section (1) shall be presumed never to have been made, if any material particulars furnished in the declaration is found to be false at any stage and further, the declarant violates any of the conditions referred to in this Act, and in such cases, the proceedings and claims which were withdrawn u/s. 4 and all the consequences under the Income-tax Act, 1961 against the declarant shall be deemed to have been revived. In this case, clause (a) of sub-section (6) is not applicable, but as per clause (b) of sub-section (6) of section 4, if the declarant violates any of the conditions referred to in this Act, then pending proceedings shall be deemed to have been revived. That means, if assessee violates any of the conditions including tax determined by the designated authority in Form No. 3 is not paid within the specified period, then it is nothing but violation of conditions referred to in this Act. Therefore, if assessee does not make payment of taxes as determined by the designated authority, then, even if appeal filed by the assessee is dismissed or deemed dismissal of the appeal, then as per sub- section (6) of section 4 of the DTVSVS Act, 2020, all the proceedings and claims which were withdrawn u/s. 4 and all the consequences under the Income-tax Act, 1961 against the declarant shall be deemed to have been revived. Therefore, in our considered view, if a conjoint reading of sub-section (2) and sub section (6) of section (4), it is clear that the moment designated authority issues Form no. 3, pending appeal shall be deemed to have been withdrawn and further, the moment declarant violates any of the conditions, the appeals which were withdrawn u/s. 4, shall be deemed to have been revived. Therefore, we are of the considered view that in the present case, the assessee has violated conditions prescribed under DTVSVS Act, 2020 and thus, even if appeal filed by the assessee is dismissed or deemed dismissal of appeal, the same can be revived the moment the Department notices any of the conditions prescribed therein are violated.
As regards, arguments of the Ld. CIT(DR) in light of sub-section (7) of section 4 of the DTVSVS Act, 2020, we find that sub-section (7) deals with a situation where the declarant challenges the order passed by the designated authority under sub-section (1) of section 5 on any issue relating to tax arrear and or the payment of sum determined under any section, then no appellate forum or arbitrator or conciliator or mediator shall proceed to decide said dispute. In other words, designated authority determines sum payable by declarant under DTVSVS Act, 2020, then the same becomes final and which cannot be challenged by the declarant before any appellate forum. Therefore, we are of the considered view that the Revenue cannot take shelter under sub-section (7) of section 4 of the DTVSVS Act, 2020. In so far as FAQs referred to in Circular 09 of 2020 issued by CBDT, we find that CBDT in question no. 43 & 47 has clarified the position of the law as per DTVSVS Act, 2020, and in our considered view, said clarification is only on withdrawal of appeal by the declarant after receipt of Form no. 3 (certificate) and further, the legal position of section 4(7) of the DTVSVS Act, 2020. In our considered view, as per section 4(6) of DTVSVS Act, 2020, the law is very clear, in as much as in case the declarant violates any of the conditions, then all the proceedings and claims which were withdrawn u/s. 4 and all the consequences under the Income-tax Act, 1961 against declarant shall be deemed to have been revived. In the present case, the declarant has violated the conditions of payment of tax as determined by the designated authority in Form no.
Therefore, appeal filed by the assessee is deemed to have been revived and thus, we are of the considered view, that since the appeal filed by the assessee is pending before the Tribunal for adjudication, the same needs to be decided on the issues challenged in said appeal and thus, we reject application filed by the Revenue on maintainability of appeal filed by the assessee.
As regards, the appeal filed by the assessee, the same need to be heard on the issues involved in the appeal and thus, we treat the appeal as part heard and post for further hearing on 16.11.2022. The Registry is directed to inform the date of hearing to both the parties.”
The SMC Bench of the Mumbai Tribunal in the case of M/s. Deekay Gears (supra) relying on the decision of the Jurisdictional Bombay High Court in the case of Premkumar Arjundas Luthra (HUF) (ITA No. 2336 of 2013, dated 25.04.2016), had set aside the impugned order of the Ld. Commissioner (Appeals) holding that while dismissing assessee’s appeal in limine without deciding on merit, Ld. Commissioner (Appeals) has not exercised his power in consonance with the provisions of section 251(1)(a) of the Act. The relevant findings and observations of the Tribunal are reproduced below :
“9. I have considered rival submissions and perused material on record. I have also applied my mind to the decisions relied upon by the learned Authorised Representative. Undisputedly, in the course of proceedings before the first appellate authority the assessee had filed letter dated 19th September 2017, seeking withdrawal of the appeal. Taking note of the said letter, learned Commissioner (Appeals) dismissed assessee’s appeal in limine without deciding it on merit. Therefore, the issue which arises for consideration before me is, whether as per the provisions of section 251 of the Act, learned Commissioner (Appeals) can permit withdrawal of the appeal by dismissing it in limine without deciding on merits. As per the provisions of section 251(1)(a) of the Act, the first appellate authority is conferred with the powers to decide an appeal against an order of assessment by confirming, reducing, enhancing or annulling the assessment. Even, the power to set–aside an assessment order was taken away from the first appellate authority by the amendment brought to the statute in Finance Act, 2001, w.e.f. 1st June 2001. Therefore, while deciding an appeal filed by the assessee under section 246A of the Act, learned Commissioner (Appeals) has to act within the parameters laid out in section 251(1)(a) of the Act. Interpreting the aforesaid statutory provision, the Hon'ble Jurisdictional High Court in Premkumar Arjundas Luthra (HUF) (supra) has held as under:– “8. From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act. Further Section 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(1)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) is coterminus with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore just as it is not open to the Assessing Officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.”
Similar view was expressed by the Hon'ble Madras High Court in M. Loganathan (supra). If the ratio laid down in the aforesaid decisions is carefully examined, it clearly emerges that learned Commissioner (Appeals), notwithstanding the fact that the assessee has filed an application seeking withdrawal of the appeal, is obliged and duty bound under the Act to decide the appeal on merits within the parameters of section 251(1)(a) of the Act. Thus, following the ratio laid down in the aforesaid decision, I have to hold that while dismissing assessee’s appeal in limine without deciding on merit, learned Commissioner (Appeals) has not exercised his power in consonance with the provisions of section 251(1)(a) of the Act. Accordingly, I am inclined to set–aside the impugned order of the learned Commissioner (Appeals). However, since, the issues raised in the said appeal have not been decided on merit, I restore all the issues raised in the present appeal to the learned Commissioner (Appeals) for de novo adjudication. Consequently, the appeal filed by the assessee before the learned Commissioner (Appeals) is restored back to its original position. It is open for the assessee to raise all such issues before the first appellate authority for contesting the assessment order passed by the Assessing Officer. Needless to mention, the learned Commissioner (Appeals) must afford reasonable opportunity of being heard to the assessee before deciding the appeal. With the aforesaid observations, the grounds raised are allowed for statistical purposes.”
10. In light of the factual matrix of the case and the legal position set out above and following the decision(s) of the Chennai Bench of the Tribunal in the case of M/s. Lifecell International Private Limited (supra) and the Mumbai Tribunal in the case of M/s. Deekay Gears (supra) and in the absence of any contrary material brought on record by the Revenue, in our considered view, the appeal of the assessee is deemed to have revived requiring the Ld. CIT(A)/NFAC to decide the same on merits. We therefore deem it fit to set aside the impugned order of the Ld. CIT(A)/NFAC and restore the matter back to his file for de-novo adjudication on merit as per fact and law after affording reasonable opportunity of being heard to the assessee. The assessee is also hereby directed to appear and make submissions before the Ld. CIT(A)/NFAC on the appointed date without seeking any adjournment under any pretext unless required for the sufficient cause, failing which the Ld. CIT(A)/NFAC shall be at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 27th October, 2025.