Revival of Revision Petitions Under DTVSV Act: J&K High Court Rules on Automatic Restoration of Withdrawn Tax Appeals

Background of the Dispute

In the matter of Vidya Sagar Sharma Vs Union of India And Others (Jammu & Kashmir High Court), a significant judicial determination was made concerning the eligibility criteria under the Direct Tax Vivad Se Vishwas (DTVSV) Scheme, 2024. The case centered around whether revision proceedings that were withdrawn under the earlier DTVSV framework of 2020 could be considered pending for the purpose of claiming benefits under the subsequent scheme introduced in 2024.

The assessee's dispute originated from an assessment order passed for Assessment Year 2011-2012. The tax authorities had assessed the liability by invoking Sections 144/147 of the Income Tax Act, 1961, which resulted in a demand amounting to Rs.29,73,640/-. Additionally, a separate penalty order under Section 271(1)(c) of the Income Tax Act, 1961 imposed a penalty of Rs.10,62,037/- on grounds of income concealment.

Procedural History and Initial Settlement Attempt

The assessee contested both the assessment and penalty orders by filing revision applications under Section 264 of the Income Tax Act, 1961 before the Revisional Authority on 16.03.2020. While these revision proceedings were underway, the Government of India introduced the Direct Tax Vivad Se Vishwas Act, 2020, aimed at resolving pending tax disputes through a settlement mechanism.

Seeking to avail this opportunity, the assessee submitted the prescribed Forms 1 and 2 electronically on 23.02.2021, accompanied by the necessary undertaking. In response, the designated authority issued Form-3 dated 04.03.2021, which specified the amount payable for settlement. Following this, the assessee's tax consultant requested withdrawal of both revision petitions, which were consequently disposed of through a common order dated 17.03.2021.

Failure to Complete Settlement Formalities

Despite receiving Form-3 and the formal withdrawal of revision proceedings, the assessee failed to deposit the determined amount within the prescribed timeline. The original deadline required payment of Rs.10,62,037/- on or before 31.03.2021, or Rs.11,68,241/- if paid thereafter. Multiple extensions were granted through official notifications, but the assessee could not comply even with the extended deadlines.

On 14.05.2022, the assessee received communication from the authorities noting that Form-4 had not been submitted for Assessment Year 2011-2012. The assessee responded on 16.05.2022, requesting additional time and explaining that he would be retiring on 30.09.2022 and anticipated receiving retirement benefits that would enable payment. Subsequently, on 27.10.2023, the assessee made a representation to the Ministry of Finance detailing the circumstances preventing compliance with the Act of 2020.

Reintroduction of the Settlement Scheme

When the DTVSV Scheme was reintroduced in 2024, it provided fresh opportunities for assessees whose litigation remained unresolved as on the specified cut-off date of 22.07.2024. The assessee filed Form-1 under this new scheme on 25.11.2024, declaring his liability for the Financial Year 2011-2012 as Rs.11,68,241/-. This application was subsequently revised on 23.12.2024, well within the final deadline of 31.12.2024.

However, through an order dated 10.01.2025, the designated authority rejected the assessee's application. The rejection was based on the interpretation that under Section 89 of the DTVSV Scheme, 2024, a revision petition under Section 264 must be pending as on 22.07.2024. Since the assessee's revision petitions had been disposed of on 17.03.2021, the authority concluded that no such proceedings existed on the relevant date, rendering the assessee ineligible.

Contentions Before the High Court

Assessee's Arguments

The assessee challenged the rejection order, advancing several key contentions:

The assessee argued that Section 4(6) of the Act of 2020 contains a statutory mechanism whereby failure to fulfill payment obligations results in the declaration being deemed never to have been made. Consequently, this legal fiction automatically revives all proceedings and claims that were withdrawn under Section 4 of the Act.