Mistake in ‘Disputed Tax’ and ‘Tax Arrears’ Can Be Rectified Under Vivad Se Vishwas Scheme: Delhi High Court

Introduction
The Delhi High Court recently ruled that errors related to “disputed tax” and “tax arrears” under the Vivad Se Vishwas (VSV) Scheme can be corrected. If a relief was already granted in the original assessment order, the Designated Authority (DA) is allowed to fix mistakes by permitting the assessee to submit a revised Form 3 under the VSV Act. This article explains the case details, the High Court’s observations, and the broader implications for taxpayers and the government.

Key Takeaways:

• Rectification of mistakes under the Vivad Se Vishwas (VSV) Scheme
• Importance of “disputed tax” and “tax arrears” in tax dispute settlements
• The High Court’s decision to allow corrections in Form 3 under the VSV Act

What is the Vivad Se Vishwas Scheme?
The Vivad Se Vishwas Scheme was introduced by the Indian government to resolve long-pending tax disputes. Its main aim is to reduce litigation and expedite revenue collection, providing relief to both taxpayers and the government. Under this scheme, taxpayers can settle disputes by paying the disputed amount, and in return, the government waives off interest, penalties, and prosecution.

Case Overview: Fresh Pet Private Limited vs. Principal Commissioner of Income Tax
In this case, the petitioner, Fresh Pet Private Limited, sought a revision of Form 3 submitted under the VSV Act. The petitioner had failed to claim the set-off/carry forward of losses and unabsorbed depreciation in the original Form 3. They argued that the assessment order had already allowed these claims, and hence, the omission was a mistake that should be rectified.

When the tax authority denied the request for rectification, the petitioner took the matter to the Delhi High Court, seeking justice under the VSV Act.

High Court’s Observations
The Delhi High Court, after analyzing the provisions of the VSV Act, emphasized the following points:

1. Disputed Tax and Tax Arrears:
   The VSV Act aims to resolve disputes related to “disputed tax,” which refers to the amount of tax under litigation. It also defines “tax arrears” as the total of disputed tax, interest, penalty, or fee, along with any interest charged on them. The court noted that these definitions are crucial to the fair settlement of disputes.
2. Right to Claim Set-off and Carry Forward of Losses:
   The court pointed out that the petitioner’s right to claim set-off and carry forward of losses had already been accepted in the original assessment order. This right should not be denied in the settlement process under the VSV Act.
3. Rectification of Form 3:
   The court held that if the Designated Authority (DA) fails to rectify such errors, it undermines the finality of the assessment. By refusing to amend Form 3, the assessee’s rightful claims could be denied, which goes against the principles of the VSV Act.

Court’s Decision
The Delhi High Court quashed the tax authority’s order, allowing the petitioner’s request for rectification of Form 3. This means that the assessee is entitled to submit a revised Form 3, incorporating the carry forward of losses and unabsorbed depreciation as originally provided in the assessment.

Conclusion
The Delhi High Court’s ruling underlines the importance of ensuring fairness in the Vivad Se Vishwas Scheme. Taxpayers who have been granted relief in their assessment should not be denied the same benefits when settling disputes under the VSV Act. This judgment helps clarify the rights of taxpayers to seek corrections for genuine mistakes and ensures the smooth functioning of the scheme.