CA Satyaprakash Singh from Mumbai has challenged Constitutional validity of Section 9 of Vivad se Vishwas Act, 2020 by FIling a Public Interest Petition with Hon’ble Supreme Court of India. By this Public Interest Petition, the Petitioner is impugning the Constitutional validity of Section 9 of Vivad se Vishwas Act, 2020. The Respondent No.1 has inserted Section 9 to the Bill of Vivad se Vishwas Act, 2020. The Section seeks to exclude from the Scheme tax arrears relating to an assessment year in respect of which an assessment has been made under section 153A or section 153C of the Income-tax Act and also cases in which prosecution has been instituted on or before the date of filing of declaration in excess of Rupees Five crores.
Full Text of the Petition is as follows:-
1. The Petitioner is filing the present Writ Petition in public interest under Article 32 of the Constitution of India in as much as the fundamental rights enshrined in the Part III of the Constitution are violated.
2. The Petitioner is before this Hon’ble Court seeking issuance of appropriate, writ, direction or order declaring the Section 9 of Vivad se Vishwas Bill, 2020-dated 04.03.2020, passed by the Parliament as unconstitutional and being in violation of Petitioner fundamental rights under Article 14 and 21 of the Constitution of India; and for issuance of consequential writ quashing the same.
3. That this is a Writ Petition under Article 32 of the Constitution of India as Public Interest Litigation(PIL) seeking Writ of Certiorari for Quashing and Stay constitutional validity of the Amendments to the Section 9 of Vivad se Vishwas Act 2020, That the present Writ Petition seeks this Hon’ble Court to direct the Central Government to make rules for the better governance and to generate more revenue through the Tax Mechanism so that the Government may collect more tax revenue for better development of the Country without discrimination class/classes of the Assessee for a better and healthy democracy in India. The present Section 9 and the amendments to the Section 9 of Vivad se Vishwas Act 2020 by the Respondent No.1 is in direct violation of Articles 14, & 21 and the entire Vivad se Vishwas Act 2020.This petition is filed by the Petitioner in individual The Petitioner therefore seeks a relief Certiorari for Quashing and Stay the Constitutional validity of Section 9 and amendments to the Section 9 of Vivad se Vishwas Bill 2020.
4. That the Petitioners have no personal or individual ulterior interest, motive and intention to file the said Petition before this Hon’ble Court. There will be violation of Articles 14 and 21 of the Constitution of India, if this Petition is not heard, legal injury being public in nature.
5. The Petitioner is a Chartered Accountant practicing in the city of Mumbai and also appearing before Income Tax Appellate Tribunal (ITAT) throughout the Country having his Office at 292, Jamna Building, Office No. 6, LT. Marg, Opp. St. Xaviers School, Mumbai-400002, Maharashtra,bearing PAN:FGBPS3891H and having another office at A13, Sanjay Enclave, Uttam Nagar, New Delhi-1100059 and is a law abiding public-spirited Citizen of India. The Petitioner’s Annual Income is less than Rs. 10 lakhs (PAN: FGBPS3891H).The Petitioner has no personal/interest, motive in filing the instant Writ Petition. There is no civil, criminal, revenue or any litigation involving the Petitioner, which has or could have a legal nexus with the issues involved in the present Public Interest Litigation.
6. The Respondent No. 2 is a Statutory body formed under the Central Board of Direct Taxes Act, to supervise the effective implementation of Direct taxes. After introduction of the Vivad se Vishwas Bill in Lok Sabha, several queries have been received from the stakeholders seeking clarifications in respect of various provisions contained therein. The Respondent No. 2 has considered these queries and decided to clarify the same in form of frequently asked questions (FAQs) and has issued a Circular No.4 of 2020 dated 4th March, 2020. The clarifications are, approved by the both house of the Parliament and is pending for assent by the Hon’ble President of India.
BRIEF FACTS OF THE CASE:-
a) The Respondent No. 1 is Union of India. During the Union Budget 2020 presentation, the ‘Vivad se Vishwas’ Scheme was announced to provide for dispute resolution in respect of the pending income tax litigations. Pursuant to Budget announcement, the Direct Tax Vivad se Vishwas Bill, 2020 was introduced in the Lok Sabha on 5th February, 2020. The objective of Vivad se Vishwas is to inter alia reduce pending income tax litigations, 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
b) By this Public Interest Petition, the Petitioner is impugning the Constitutional validity of Section 9 of Vivad se Vishwas Act, 2020. The Respondent No.1 has inserted Section 9 to the Bill of Vivad se Vishwas Act, 2020. The Section seeks to exclude from the Scheme tax arrears relating to an assessment year in respect of which an assessment has been made under section 153A or section 153C of the Income-tax Act and also cases in which prosecution has been instituted on or before the date of filing of declaration in excess of Rupees Five crores.
c) The Petitioner before elaborating on the grounds of Challenge, want to give the brief facts pertaining to the impugned legislation. The same are as under:
i) The Act provides a mechanism for resolution of pending tax disputes related to income tax and corporation tax.
(i) The Act defines an Appellant as the income tax authority, or the person, or both, whose appeal is pending before any appellate forum as on January 31, 2020. These appellate forums are the Supreme Court, the High Courts, the Income Tax Appellate Tribunals, and the Commissioner (Appeals).
(ii) The Act proposes a resolution mechanism under which an appellant can file a declaration to the designated authority to initiate resolution of pending direct tax disputes. The last date to file such declaration will be notified by the Central Government. Based on the declaration, the designated authority will determine the amount payable by the Appellant against the dispute and grant a certificate, containing particulars of the amount payable, within 15 days of the receipt of the declaration. The Appellant must pay this amount within 15 days of the receipt of the certificate and inform the designated authority of such payment. Such amount will not be refundable.
(iii) Once the designated authority issues the certificate, appeals pending before the Income Tax Appellate Tribunals and the Commissioner (Appeals) will be deemed to be withdrawn. In case of appeals or petitions pending before the Supreme Court and High Courts, the Appellant is required to withdraw the appeal or petition.
(iv) The Principal Chief Commissioner will designate an officer, not below the rank of a Commissioner of Income Tax, as the designated authority to manage the proposed resolution mechanism.
(v) The amount payable by the Appellant for resolution of disputes is determined based on whether the dispute relates to payment of tax, or payment of interest, penalty, or Further, he is required to pay an additional amount if such payment is made after March 31, 2020.
(vi) For dispute resolution, the Appellant is required to furnish an undertaking waiving his rights to seek any remedy or claim in relation to that dispute under any law, including the Income Tax Act, 1961. All such claims already filed in relation to the dispute must be withdrawn before filing the declaration.
(vii) Once a dispute is resolved, the designated authority cannot levy interest or penalty in relation to that dispute. Further, no appellate forum can make a decision in relation to the matter of dispute once it is resolved. Such matters cannot be reopened in any proceeding under any law, including the Income-Tax Act.
(viii) The declaration filed by an Appellant will become invalid if: (i) its particulars are found to be false, (ii) he violates any of the conditions referred to in the IT Act, or (iii) he seeks any remedy or claim in relation to that dispute. Consequently, all proceedings and claims withdrawn based on the declaration will be deemed to have been revived.
(ix) Initially at the time of introduction of the Bill, the provisions of the Scheme were not be applicable in respect of tax arrears,— (i) relating to an assessment year in respect of which an assessment has been made under section 153A or section 153C of the Income-tax Act, if it relates to any tax arrear; (ii) relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of declaration; (iii) relating to any undisclosed income from a source located outside India or undisclosed asset located outside India; (iv) relating to an assessment or reassessment made on the basis of information received under an agreement referred to in section 90 or section 90A of the Income-tax Act, if it relates to any tax arrear; (v) relating to an appeal before the Commissioner (Appeals) in respect of which notice of enhancement under section 251 of the Income-tax Act has been issued on or before the specified date.
d) However, before passing of the Bill in the Lok Sabha, the exclusion provisions in Section 9 were amended to provide that the provisions of the Scheme were not be applicable in respect of tax arrear if they relate to an assessment year in respect of which an assessment has been made under sub-section (3) of section 143 or section 144 or section 153A or section 153C of the Income-tax Act on the basis of search initiated under section 132 or section 132A of the Income-tax Act, if the amount of disputed tax exceeds five crore rupees.
e) The Respondent No.2 has issued a Circular No. 7 of 2020 dated 4th March, 2020 wherein at Question No.6 in response to the Query, “Can the benefit of the Vivad se Vishwas be availed, if a search and seizure action by the Income-tax Department has been initiated against a taxpayer?” the reply provided is as under:
“Case where the tax arrears relate to an assessment made under section 143(3) or section 144 or section 153A or section 153C of the Act on the basis of search initiated under section 132 or section 132A of the Act are excluded if the amount of disputed tax exceeds five crore rupees in that assessment year.
Thus, if there are 7 assessments of an assessee relating to search & seizure, out of which in 4 assessments, disputed tax is five crore rupees or less in each year and in remaining 3 assessments, disputed tax is more than five crore rupees in each year, declaration can he filed for 4 assessments where disputed tax is five crore rupees or less in each year.”
f) The Vivad Se Vishwas Bill 2020 has been passed by the Lok Sabha on 4th March, 2020 and by the Rajya Sabha on 13th March 2020.The Bill will become an Act after the assent of the Hon’ble President of India.
g) The Petitioner submits that the provisions of Section 9 which provide for exclusion of tax arrears raised under Section 143(3) or section 144 or section 153A or section 153C of the Act on the basis of search initiated under section 132 or section 132A of the Act, if the amount of disputed tax exceeds five crore rupees in that assessment year are unconstitutional, invalid and inoperative for the following amongst other reasons which are without prejudice to one another.
h) The Petitioner further submits that the provisions of Section 9 which provide for exclusion of cases in which prosecution has been instituted on or before the date of filing of Declaration are unconstitutional, invalid and inoperative for the following amongst other reasons which are without prejudice to one another.
i) That the following substantial questions of law of general public importance arises from the present writ petition:
QUESTIONS OF LAW
1) Can the amendment of Section 9 of Vivad se Vishwas Act, 2020 allowed for exclusion of tax arrears raised under Section 143(3) or section 144 or section 153A or section 153C of the Act on the basis of search initiated under section 132 or section 132A of the Act, if the amount of disputed tax exceeds five crore rupees in that assessment year?
2) Can the amendment of Section 9 of Vivad se Vishwas Act, 2020 allowed for exclusion of cases in which prosecution have been initiated on or before the date of filing of Declaration before the Designated Authority to initiate resolution of pending direct tax disputes?
3) Can the such amendments be allowed which violate Article 14 and 21 of the Constitution of India, since the amendments propose to discriminate Assessees on the basis of the amount of a tentative pending tax disputed?
GROUNDS
I) THE IMPUGNED PROVISIONS OF SECTION 9 ARE DISCRIMINATORY AND VIOLATE ARTICLE 14 OF THE CONSTITUTION OF INDIA:
As observed, the provisions of Section 9 exclude tax arrears raised under Section 143(3) or section 144 or section 153A or section 153C of the Act on the basis of search initiated under section 132 or section 132A of the Act, if the amount of disputed tax exceeds five crore rupees in that assessment year and exclusion of cases in which prosecution has been initiated on or before the date of filing of Declarationbefore the Designated Authority to initiate resolution of pending direct tax disputes. Section 9 proposes to discriminate Assessees on the basis of the amount of a tentative pending tax disputed. Therefore, this discrimination constitutes violation of Article 14 of the Constitution of India rendering the impugned provisions unconstitutional and invalid. Only exception to the rule of equality under Article 14 is the reasonable classification. Dealing with the scope of Article 14, the Hon’ble Supreme Court in the case of Lachmandas Kewalram v/s. State of Bombay AIR 1952 S.C. 235, clear held that held as under:
“While Article 14 forbids class legislation it does not forbid reasonable classification for the purposes of legislation. In Order, however, to pass the test of permissible classification, two conditions must be fulfilled, namely, (i) that the classification must be found on an intelligible differentia which distinguishes persons or things that are grouped together from others who are left out of the group and (ii) that differentia must have a rational relation to the object sought to be achieved by the Act. What is necessary is that there must be a nexus between the basis of classification and the object of the Act.”
ii) It is humbly submitted that there is no nexus between the basis of classification and the object of the Act in the instant case. The classification is not found on any intelligible differentia. It is therefore, submitted that the impugned exclusion is not protected by the exception of reasonable classification and as such is hit by the provisions of Article 14 of the Constitution. Hence the impugned exclusion of tax arrears raised under Section 143(3) or section 144 or section 153A or section 153C of the Act on the basis of search initiated under section 132 or section 132A of the Act, if the amount of disputed tax exceeds five crore rupees in that assessment year and exclusion of cases in which prosecution has been instituted on or before the date of filing of Declaration before the Designated Authority to initiate resolution of pending direct tax disputesare unconstitutional, invalid and inoperative.
iii) The Petitioner further state and submit that the Hon’ble Court may be pleased to issue Article 226 of the Constitution of India, and appropriate direction, order a writ, including a writ in the nature of “Mandamus” and / or “Prohibition” permanently restraining and prohibiting, the Respondents, their officers and agents, from operating upon the provisions of Section 9 of Vivad se Vishwas Bill 2020 as regards exclusion of tax arrears raised under Section 143(3) or section 144 or section 153A or section 153C of the Act on the basis of search initiated under section 132 or section 132A of the Act, if the amount of disputed tax exceeds five crore rupees in that assessment year and exclusion of cases in which prosecution has been instituted on or before the date of filing of Declaration before the Designated Authority to initiate resolution of pending direct tax
iv) The Petitioner submit that the exclusion brought through Section 9 of the Vivad se Vishwas Bill 2020 is of far reaching consequence and shall effect a large number of Assessees. The Petitioner being committed to the fair and judicious implementation of the tax laws, is approaching this Hon’ble Court for an appropriate declaration about the invalidity of the Section 9 of the Vivad se Vishwas Bill 2020. The Petitioner, therefore, submit that this is a fit case in which this Hon’ble Court will, during the pendency of this Petition, stay the operation of Section 9 of the Vivad se Vishwas Bill 2020.
v) It may be noted that the impugned exclusion shall cause avoidable hardships to the Assessee without there being commensurate revenue to the Government. Some of the hardships are as under:
i) Huge avoidable litigation costs and time wasted on account of the long drawn process of litigations for the Assessee and the Department.
ii) Misuse of Assessee funds for avoidable litigation costs on account of the long drawn process of litigations for the Assessee which could be used for betterment of Society.
iii) Such proposed exclusion will therefore result in wastage of considerable time, monetary and manpower resources, etc in as much as the Department would have to continue monitoring the excluded Assessees in all tehsils of the Country.
iv) Such measure as proposed does not have any provisions for abatement of appeals filed by the Assessees against the tax arrears raised under Section 143(3) or section 144 or section 153A or section 153C of the Act on the basis of search initiated under section 132 or section 132A of the Act.
(v) Further, such measure as proposed does not have any provisions for abatement of appeals filed by the Assessees against the cases in which prosecution has been instituted on or before the date of filing of declarationbefore the Designated Authority to initiate resolution of pending direct tax disputes.
(vi) It is therefore, submitted that the impugned exclusion has no justification and hence should be amended to cover all tax arrears irrespective of the sections under which the same have been raised.
7. Because of unconstitutional amendment and violation of equal before law under Article 14 and Article 21 of the Constitution of India is violating the principles of equality and transparency;
8. The Petitioner has not filed any other similar Petition regarding the matter in dispute in this Hon’ble Court or any High Court throughout the territory of India. The Petitioner has no better remedy available.
9. That the Petitioner is left with no other alternative remedy except to approach this Hon’ble Court by way of filling this present PIL under Articles 32 of the Constitution of India.
10. That this Hon’ble Court has the jurisdiction to entertain the present petition, as this Hon’ble court has extra ordinary power of judicial review of the acts passed by the Parliament.
11. That the present Petition is being filed in the most bona fide manner, as advised by law.
12. That the present Petitioner has not filed any other petition in any High Court or the Supreme Court of India on the subject matter of the present petition.
13. That the Petitioner will bear the costs of the petition if this Hon’ble Court directs any imposition of costs in this regard.
14. The Petitioner submit that they have locus standi to file this petition. The Petitioner 1 is a practicing Chartered Accountant. Therefore, the Petitioner has filed this petition by way of public interest litigation in the interest of his public at large. This Petition, is therefore, maintainable.
15. The Petitioner submit that they are challenging constitutional validity of the impugned provisions. Therefore, there is no effective and alternative remedy is available to the Petitioner. Hence, the Petition is maintainable.
16. The Petitioner No.1 is a resident of Mumbai and having his office in Delhi and Mumbai, therefore submit that this Hon’ble Court has jurisdiction to entertain and dispose off this petition.
17. The Petitioner submit that the Vivad se Vishwas Scheme 2020 has received assent of the Lok Sabha on 4th March, 2020 and by the Rajya Sabha on 13th March 2020 the amendment brought through Section 9 shall become effective after the accent of the Hon’ble President of India. The Petitioner, therefore, submit that there is no delay in filing this The Petitioner further state that, if there is any delay, it is on account of reasonable cause and this Hon’ble Court may be pleased to condone the same.
18. The petitioner relying the Exhibits/Annexures attached with this
19. The Petitioner have paid the Court Fees of Rs.________ towards this
20. The Petitioner crave leave to add, amend, alter and / or delete any of the grounds or submissions.
PRAYER
In the aforesaid facts and circumstances of the case and in the interest of justice it is most respectfully prayed that this Hon’ble Court may be pleased to:-:
a) This Hon’ble Court may be pleased to declare Section 9 of Vivad se Vishwas Bill, 2020 nonest, void, unconstitutional and ultra vires in
b) That this Hon’ble Court may be pleased to issue Article 226 of the Constitution of India, an appropriate direction, order or a writ, including a writ in the nature of ‘Certiorari’ calling for the records of the case and after satisfying itself as to the legality thereof, declare that the impugned provisions are unconstitutional, invalid and imperative.
c) The Petitioner further state and submit that this Hon’ble Court may be pleased to issue under Article 226 of the Constitution of India, an appropriate direction, order or a writ, including a writ in the nature of ‘Mandamus’ and / or ‘Prohibition’ permanently restraining and prohibiting the Respondents, their officers and agents, from operating upon the impugned provisions of Section 9 of the Vivad se Vishwas Bill, 2020 as regards exclusion of tax arrears raised under Section 143(3) or section 144 or section 153A or section 153C of the Act on the basis of search initiated under section 132 or section 132A of the Act, if the amount of disputed tax exceeds five crore rupees in that assessment year and cases in which prosecution has been instituted on or before the date of filing of declaration.
d) The Hon’ble Court be pleased to issue a writ of prohibition or any other suitable writ, order or direction, restraining the Respondents and their officers and agents, from giving effect to the impugned provisions of Section 9 of the Vivad se Vishwas Bill 2020 or taking any further steps whatsoever in implementation of the impugned
e) This Hon’ble Court be pleased to issue a direction to the Respondents directing them to not to give effect to impugned provisions and withdraw the said amendment or in the alternative modify the said Bill as the Court deems fit for or;
f) Pending the hearing and the final disposal of this petition the Hon’ble Court may be pleased to restrain the Respondents from implementing the impugned provisions. The Respondents be restrained from giving effect to Section 9 of the Vivad Se Vishwas Bill, 2020.
g) Ad interim reliefs in terms of prayer (c) and (d).
h) This Hon’ble Court be pleased to make appropriate provision for reimbursement in respect of such cost of the Petition as are actually incurred by the Petitioner.
i) Issue appropriate, directions and guidelines in the nature of Writ of Mandamus or any other writ or writs in the interim, till the Respondent No. 1 makes any law;
j) Pass such other and further Writs, Orders and directions as this Court may deem fit and proper in the facts and circumstances of this case.
And for this act of kindness, the Petitioner shall ever remain duty bound.
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