VSO India Trust vs CIT (Exemption)

This appeal by the assessee is directed against the order of the ld. CIT (Exemption), Delhi dated 21.03.2022 for the AY 2017-18.

The grounds of appeal taken by the assessee read as under :-

“1. The order passed u/s 263 of the Income Tax Act, 1961 (“Act”) is bad in law and on the facts and circumstances of the case.

The Learned Commissioner of Income Tax (Exemption) (“Ld. CIT (E)) has erred in law and on the facts and circumstances of the case, by passing the order u/s 263 of the Act, in violation of the principles of natural justice.

The Ld. CIT (E) has erred in law and on the facts and circumstances of the case in passing order u/s 263 of the Act, without considering the written submissions placed on record by the Appellant.

The Ld. CIT (E) has erred in law and on the facts and circumstances of the case in passing order u/s 263 of the Act in violation of section 5 (3) of the Direct Tax Vivad Se Vishwas Act, 2020. Thus, the order passed u/s 263 of the Act is liable to be quashed.

The Ld. CIT (E) has erred in law and on the facts of the case in passing order u/s 263 of the Act by ignoring the various judicial precedents as well as circular relied upon by the Appellant.

The Ld. CIT (E) has erred even on merits, in interpreting the section 13 of the Act while passing order u/s 263 of the Act as regards denial of exemption u/s 11 of the Act.

The above grounds are independent and without prejudice to each other.”

At the outset, in this case, ld. Counsel of the assessee stated that in this case, assessee has gone for resolution of dispute under Direct Tax Vivad Se Vishwas Scheme (VSVS), 2020 and assessee has gotten the issue settled under VSVS. Thereafter, ld. CIT has exercised the power of revision under section 263 of the Income-tax Act, 1961 (for short 'the Act'). Ld. Counsel for the assessee claimed that when the matter has been settled under VSVS, the same cannot be disturbed by a 263 order. In this regard, ld. Counsel for the assessee referred to several case laws. Once case law is from Hon’ble Madras High Court in the case of Gopalakrishnan Rajkumar vs. PCIT (2022) 140 taxmann.com 394 (Madras) in which it was held that once the petitioner had opted to settle the dispute under the DTVSV, the proceedings initiated under section 263 have to go. Ld. Counsel of the assessee pointed out that the issue is identical in assessee’s case and after the issue is settled under VSVS, the ld. CIT is denuded of power of passing the 263 order. Ld. Counsel for the assessee further referred to ITAT decision wherein similar propositions have been upheld. The case law referred to is ITAT, Bangalore Bench in ITA No.522/Bang/2022 for AY 2017-18 order dated 17.11.2022.

Upon hearing both the parties and perusing the records, we find that the above case laws clearly expounded that once the issue is settled by the assessee under dispute resolution mechanism, the ld. CIT cannot exercise jurisdiction u/s 263 of the Act. However, in such cases, it has to be fully established that the matter is settled under VSVS before the ld. CIT exercised his jurisdiction. In this view of the matter, we remit the issue to the file of AO. AO shall examine whether jurisdiction exercised by the ld. CIT u/s 263 was after the due settlement of dispute by the assessee under VSVS. If it is so, the order of ld. CIT u/s 263 of the Act shall stand quashed. Both the parties agreed to the above proposition. Hence, this appeal of the assessee is allowed for statistical purposes.