Case Law Details
Modi Shelters Private Limited Vs ITO (Telangana High Court)
Telangana High Court Restores Income Tax Appeals After Failure to Complete Vivad Se Vishwas Formalities
The Telangana High Court granted relief to a taxpayer who was left without a remedy after withdrawing its income tax appeals to avail benefits under the Vivad Se Vishwas Scheme, 2024, but failed to complete the final procedural requirement under the scheme. Recognizing that the taxpayer should not be rendered remediless due to an inadvertent omission, the Court directed restoration of the withdrawn appeals for adjudication on merits.
Introduction
In Modi Shelters Private Limited v. Income Tax Officer & Others, the Telangana High Court examined whether a taxpayer who had withdrawn pending appeals to opt for the Vivad Se Vishwas Scheme, 2024, but could not successfully complete the settlement process, could seek restoration of the withdrawn appeals.
The Court balanced procedural compliance under the Scheme against the principle that litigants should not be deprived of a substantive remedy due to a technical lapse.
Facts of the Case
The petitioner was subjected to assessment proceedings for Assessment Year 2018-19, resulting in:
- A quantum assessment order.
- A separate penalty order.
The petitioner challenged both orders before the appellate authority by filing separate appeals.
During the pendency of the appeals:
- The Vivad Se Vishwas Scheme, 2024 was introduced.
- The petitioner opted to settle disputes under the Scheme.
- Both appeals were withdrawn for availing the benefits of the Scheme.
Subsequently:
- The petitioner successfully availed the Scheme concerning the quantum assessment dispute.
- For the penalty proceedings, the department accepted the petitioner’s proposal and the petitioner filed Form-2.
- However, the petitioner failed to file Form-3, allegedly under the mistaken belief that a refund was payable based on the accepted Form-2.
As a result:
- The declaration under the Scheme was rejected.
- The penalty dispute remained unresolved.
- Since the appeals had already been withdrawn, the petitioner was left without an effective remedy.
Petitioner’s Contentions
The petitioner contended that:
- The failure to file Form-3 was purely inadvertent.
- The department had already accepted the proposal under the Scheme.
- The omission should not deprive the petitioner of a remedy.
- Either the benefit under the Vivad Se Vishwas Scheme should be restored, or the withdrawn appeals should be reinstated and heard on merits.
Revenue’s Stand
The Income Tax Department argued that:
- The Vivad Se Vishwas Scheme was no longer in force.
- The petitioner had failed to comply with mandatory procedural requirements within the prescribed time.
- Since the appeals were withdrawn without any liberty for restoration, revival of those appeals may not be legally permissible.
Court’s Observations
The High Court noted that:
- The petitioner had already been permitted to avail benefits under the Scheme regarding the quantum assessment dispute.
- The department had accepted Form-2 submitted by the petitioner.
- Records indicated that a refund was payable to the petitioner.
- The failure to file Form-3 was an inadvertent lapse rather than a deliberate abandonment of rights.
The Court observed that while it was difficult to grant relief by reviving proceedings under the Vivad Se Vishwas Scheme because the Scheme was no longer operational, the taxpayer should not be left remediless solely due to a procedural omission.
According to the Court, principles of fairness required that an effective remedy remain available.
Final Decision
The Telangana High Court:
- Declined to direct revival of proceedings under the Vivad Se Vishwas Scheme, 2024.
- Directed restoration of Appeal Nos. NFAC/2017-18/10105074 and NFAC/2017-18/10105073.
- Ordered the appellate authorities to restore the appeals to their original numbers.
- Directed the authorities to hear and decide the appeals on merits in accordance with law.
- Partly allowed the writ petition.
- Made no order as to costs.
Key Takeaways
1. Procedural Lapses Should Not Automatically Eliminate Substantive Remedies
The Court emphasized that taxpayers should not be deprived of legal remedies due to inadvertent procedural mistakes, particularly when substantial compliance is evident.
2. Vivad Se Vishwas Benefits Cannot Be Revived After Scheme Closure
Where the Scheme has ceased to operate, courts may be reluctant to reopen settlement proceedings under the Scheme.
3. Restoration of Withdrawn Appeals May Be Granted in Exceptional Cases
Even where appeals were withdrawn without express liberty, courts may restore them to prevent injustice and ensure access to adjudication.
4. Principles of Equity Continue to Guide Tax Litigation
The decision reflects the judiciary’s willingness to adopt a practical and equitable approach where strict procedural application would otherwise leave a litigant without any remedy.
Conclusion
In Modi Shelters Private Limited v. Income Tax Officer, the Telangana High Court held that although the taxpayer could not be allowed to revive proceedings under the discontinued Vivad Se Vishwas Scheme, 2024, it should not be left remediless due to an inadvertent failure to file Form-3. The Court therefore restored the withdrawn income tax appeals and directed the appellate authority to adjudicate them on merits, reinforcing the principle that procedural lapses should not defeat substantive justice.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Heard Ms. K. Prabhabati, learned counsel for the petitioner and Mr. K.Sudhakar Reddy, learned Senior Standing Counsel for the Income Tax Department for respondent Nos.1 to 6. Perused the record.
2. The present is a writ petition which has been filed by the petitioner seeking for, firstly directing respondent No.6 to accept Form 3 along with proof of withdrawal of the appeal for the assessment year 2018-19 under the Vivad Se Vishwas Scheme, 2024 and also to consider the same and pass appropriate orders under the said Scheme of 2024. In the alternative, the petitioner has also prayed for a direction to respondent Nos.4 and 5 to restore Appeal Nos.NFAC/2017-18/10105074 and NFAC/2017-18/10105073 to its original number and to proceed and decide the same on its own merits.
3. The whole dispute arose where for the assessment year 2018-19, the Assessing Officer had passed an order both on quantum and penalty against the assessee which was subjected to challenge by way of two separate appeals before the Appellate Authority. Pending the appeals before the Appellate Authority, came the Scheme of 2024 under the Vivad Se Vishwas. The petitioner preferred to avail the benefits under the said Scheme and in the process withdrew both the appeals, both on quantum and penalty. So far as availing of benefit under the Vivad Se Vishwas Scheme on quantum is concerned, the petitioner has availed the said benefit and the matter stood settled. However, so far as the penalty part is concerned, the petitioner approached the authorities under the said Scheme and the authorities also accepted the proposal put-forth and which was accepted by the petitioner and in the process, the petitioner had also filled up Form 2. However, inadvertently, according to the petitioner, Form 3 could not be filed under the wrong impression of the fact that since there was a refund payable to the petitioner, as would be reflected from Form 2 dated 18.03.2025. However, on account of non-submission of Form 3, the proceedings got rejected finally and the declaration submitted stood rejected consequently.
4. It is being aggrieved of that, the present writ petition has been filed contending that either the department may permit the petitioner to pursue the claim under the Vivad Se Vishwas Scheme, 2024 or at least in the alternative restore the appeal. The learned Standing Counsel appearing for the respondents contended that since the Scheme itself is not in existence any further and moreover the formalities required at the relevant point of time were not completed, the authorities cannot be blamed for rejecting the declaration. The learned Standing Counsel further contended that since the earlier appeal which was filed as penalty was withdrawn without any liberty, the restoration of the appeal also may not be possible.
5. Be that as it may, considering the factual matrix of the case in its entirety, more particularly taking into consideration the fact that the petitioner has been permitted to avail the benefit under the Vivad Se Vishwas Scheme so far as quantum assessed in the assessment order is concerned and moreover considering the fact that as per Form 2 that was filed and which was accepted by the department, there is a refund which was payable to the petitioner, the inadvertence that has occurred at the hands of the petitioner should not render the petitioner remediless. Though we find it difficult to accept relief No.1 which has been sought for on account of the Scheme itself not being in force as of now and the authorities not having the power to restore the case under the Vivad Se Vishwas Scheme, ensuring that the petitioner is not rendered remediless, we direct respondent Nos.4 and 5 to forthwith restore Appeal Nos.NFAC/2017-18/10105074 and NFAC/2017-18/10105073 to its original number and to proceed further and decide the appeal on its own merits in accordance with law. As a consequence of the appeal being ordered to be restored, the respondents are expected to open the appeal and to proceed further.
6. The writ petition is, accordingly, partly allowed. There shall be no order as to costs.
Consequently, miscellaneous petitions pending, if any, shall stand closed.
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