Delhi High Court Condones Delay In Payments Under VSV Due To Covid and Death Of Managing Director

The Delhi High Court, while exercising its extraordinary writ jurisdiction under Article 226 of the Constitution of India, has condoned the delay in payments under Direct Tax Vivad Se Vishwas (VSV) due to COVID and the death of the managing director of the company.

The division bench of Justice Manmohan and Justice Manmeet Pritam Singh Arora has observed that the power to condone the delay with regard to delay in payment is not vested with the departmental authorities, yet this Court, under its inherent powers in extraordinary writ jurisdiction under Article 226 of the Constitution of India can pass any order necessary to remedy the injustice.

The court stated that the principle of a judgement rendered in a normal circumstance cannot be applied to abnormal and extraordinary circumstances such as Covid, wherein the organisation of the petitioners was affected due to the death of a director. The petitioners in no manner derived any benefit from the delay.

The petitioners/assessees had filed Form 1 as well as Form 2 within the time stipulated as per the provisions of the VSV Act on 4 March 2021 and Form No. 3 was issued to Petitioners on 7 May 2021 and 22 June 2021. The petitioner companies were unable to pay the disputed amount prior to the due date due to the death of a director of the companies, who were looking after taxation and other affairs.

The petitioners stated that the delay in payment was not intentional, and the petitioners always intended to settle the dispute with the Income Tax Department and avail themselves of the benefits of the VSV Act. Not condoning the delay in payment would be against the very object and purpose of the scheme, as the object of the scheme is to reduce litigation and collect revenue.

The department contended that payment had to be mandatorily made within fifteen days of the determination of the demand. There was no provision permitting the department to extend the time for payment. The VSV Act is mandatory in nature, as it provides for consequences on account of non-compliance.

The court noted that the timeline to pay under the VSV was not mandatory as the last date stipulated under the VSV Act was extended by virtue of the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020.

"The delay in payments of the amounts, in the present cases are attributable to unforeseen and extraneous circumstances that were beyond control of the Petitioners. In fact, the country was intermittently in lockdown on account of the COVID-19 pandemic from 25th March, 2020. In recognition of these difficulties as pointed out hereinabove, the Scheme was amended several times to extend the deadline for payment. Moreover, death of the Managing Director of the companies was an extraordinary and exceptional event which would render non-grant of relief on equitable consideration irrational," the court observed.

The court, while allowing the petition, directed the department to accept the declarations/applications dated 4 March 2021 filed by the petitioners as valid declarations/applications within two weeks. The department was directed to accept the balance of disputed amounts as stipulated by respondents in Forms 3 issued under the VSV Act, along with simple interest of 9% per annum, till the date the amounts are paid within four weeks.

Case Title: Srishtii Infra Housing Pvt. Ltd. Versus PCIT

Citation: 2022 LiveLaw (Del) 1045

Date: 02.11.2022

Counsel For Petitioner: Salil Kapoor, Sumit Lalchandani, Vibhu Jain, Ananya Kapoor

Counsel For Respondent: Sunil Agarwal, Sr. St. Counsel

Click Here To Read Order