Vivad Se Vishwas Covers Disputed Tax Interest: Bombay HC

Premlata Mohan Agarwal Vs PCIT (Bombay High Court)

In a ruling addressing the scope of the Direct Tax Vivad Se Vishwas Act, 2020 (VSV Act), the Bombay High Court has set aside orders passed by the Principal Commissioner of Income Tax (PCIT) that rejected a taxpayer’s declaration seeking to settle a dispute primarily related to interest levied under the Income Tax Act, 1961. The court clarified that the VSV Act indeed covers disputed interest and that an appeal with a condonation of delay application can be considered ‘pending’ for the scheme’s eligibility criteria.

The case was brought before the court by Premlata Mohan Agarwal, whose income tax assessment for the Assessment Year 2012-13 was reopened. While the reopened assessment resulted in the same total income as originally declared by the petitioner, the Assessing Officer levied mandatory interest under Sections 234A, 234B, and 234C of the Income Tax Act, totalling a demand of ₹16,86,800.

Dissatisfied with this demand, the petitioner filed an appeal before the Commissioner of Income Tax (Appeals). However, this appeal was filed on March 17, 2020, approximately two months after the statutory deadline for filing an appeal against the assessment order dated December 18, 2019, had expired.

In the interim, the VSV Act, a scheme designed to resolve pending tax disputes by allowing taxpayers to pay a specified percentage of the disputed tax, interest, or penalty, came into effect. The petitioner decided to avail the benefits of this scheme and filed a declaration (Form 1) under the VSV Act on December 18, 2020, specifically seeking to settle the disputed interest amount of ₹16,86,800.