Nitin Invofin Trade Pvt. Ltd. vs ACIT – Appeal Withdrawal under Vivad Se Vishwas Scheme – ITA No. 6276/DEL/2019 (Assessment Year 2016-17)

Case Analysis: Nitin Invofin Trade Pvt. Ltd. vs ACIT – ITA No. 6276/DEL/2019

Case Number: ITA 6276/DEL/2019

Appellant: Nitin Invofin Trade Pvt. Ltd., New Delhi

Respondent: ACIT, Circle-18(2), New Delhi

Assessment Year: 2016-17

Order Type: Final Tribunal Order

Date of Order: 28th November 2022

Case Filed On: 25th July 2019

Bench: Shri Saktijit Dey, Judicial Member, and Shri Anadee Nath Misshra, Accountant Member

Introduction

The case of Nitin Invofin Trade Pvt. Ltd. vs ACIT (ITA No. 6276/DEL/2019) pertains to an appeal filed by Nitin Invofin Trade Pvt. Ltd., a corporate entity based in New Delhi, challenging the tax assessment conducted for the financial year 2016-17. The appeal was filed against the assessment order passed by the Assistant Commissioner of Income Tax (ACIT), Circle-18(2), New Delhi. However, the case was resolved under the Vivad Se Vishwas Scheme 2020, leading to the withdrawal of the appeal before the Income Tax Appellate Tribunal (ITAT) Delhi.

Background of the Case

Nitin Invofin Trade Pvt. Ltd., engaged in financial trading and investments, had filed its income tax return for the assessment year 2016-17. During the assessment process, the ACIT raised demands and disallowed certain business expenses claimed by the company under Section 37(1) of the Income Tax Act, 1961, amounting to ₹66,22,511/-. The disallowance was based on the grounds that these expenses were not wholly and exclusively incurred for the purpose of business.

Displeased with the disallowance and the additional tax demand, Nitin Invofin Trade Pvt. Ltd. decided to challenge the assessment order by filing an appeal with the Commissioner of Income Tax (Appeals) [CIT(A)]. However, the CIT(A) upheld the disallowance made by the ACIT, leading the company to escalate the matter to the ITAT.

Reason for Filing the Case

The appeal was filed by Nitin Invofin Trade Pvt. Ltd. due to the following reasons:

• Disallowance of Business Expenses: The primary reason for the appeal was the disallowance of ₹66,22,511/- claimed as business expenses under Section 37(1) of the Income Tax Act. The appellant contended that these expenses were legitimately incurred in the course of business operations and should not have been disallowed.
• Incorrect Application of Law: The appellant argued that the disallowance was made without proper consideration of the facts and law, leading to an unjustified increase in the tax liability for the assessment year 2016-17.
• Seeking Relief from Additional Tax Demand: By challenging the assessment order, the appellant sought relief from the additional tax burden imposed due to the disallowance of expenses, which significantly affected the company’s financials for the year.

The appellant sought redressal from the ITAT, challenging the validity of the disallowance and the resultant tax demand, with the aim of having the disallowed expenses reinstated.

The Vivad Se Vishwas Scheme, 2020

The Vivad Se Vishwas Scheme 2020 was introduced by the Indian government to provide a mechanism for taxpayers to settle their outstanding tax disputes by paying the disputed tax amount while receiving a waiver on penalties, interest, and prosecution. The scheme aimed to reduce litigation and provide a quick resolution to long-pending tax disputes.

Recognizing the benefits of the scheme, Nitin Invofin Trade Pvt. Ltd. decided to opt for the Vivad Se Vishwas Scheme to settle the ongoing dispute with the tax department. By opting for the scheme, the company aimed to resolve the matter efficiently, avoiding further litigation and the associated costs.

Proceedings at the ITAT

The appeal was scheduled for hearing on 28th November 2022 before the ITAT Delhi Bench ‘E’. The bench, comprising Shri Saktijit Dey, Judicial Member, and Shri Anadee Nath Misshra, Accountant Member, conducted the hearing through video conferencing.

During the hearing, it was submitted through a letter dated 12th November 2022 that the appellant, Nitin Invofin Trade Pvt. Ltd., had opted for the Vivad Se Vishwas Scheme 2020. The letter included a copy of Form-5 issued by the Designated Authority under the scheme, confirming that the appellant had completed the necessary formalities and received the certificate under Section 5(1) of The Direct Tax Vivad Se Vishwas Act, 2020.

The Senior Departmental Representative (Sr. DR), Ms. Jeetender Chand, representing the revenue, acknowledged the submission and confirmed that the appeal had become infructuous due to the appellant’s decision to settle the dispute under the Vivad Se Vishwas Scheme. Consequently, the representative requested the tribunal to dismiss the appeal as withdrawn.

After considering the submissions and the fact that the appellant had opted for the Vivad Se Vishwas Scheme, the tribunal agreed to treat the appeal as withdrawn. The appeal was dismissed as it had become infructuous due to the settlement of the dispute under the scheme.

Tribunal’s Findings and Conclusion

The ITAT recognized the appellant’s decision to settle the tax dispute under the Vivad Se Vishwas Scheme 2020. The tribunal noted that all the necessary formalities, including the issuance of Form-5 by the Designated Authority, had been completed. Given that the appeal had become infructuous, the tribunal dismissed the appeal as withdrawn.

However, the tribunal also provided a caveat that if for any reason the dispute was not ultimately resolved under the Vivad Se Vishwas Scheme, the appellant would be at liberty to approach the ITAT for the restoration of the appeal in accordance with the law.

Significance of the Decision

The case of Nitin Invofin Trade Pvt. Ltd. vs ACIT highlights the efficiency and effectiveness of the Vivad Se Vishwas Scheme 2020 in providing a resolution to tax disputes. By opting for the scheme, Nitin Invofin Trade Pvt. Ltd. was able to resolve the matter quickly and avoid prolonged litigation. The decision underscores the judiciary’s support for alternative dispute resolution mechanisms, such as the Vivad Se Vishwas Scheme, that aim to reduce the backlog of tax cases and provide relief to taxpayers.

The tribunal’s decision to dismiss the appeal as withdrawn reflects the growing trend among taxpayers to utilize such schemes to resolve disputes amicably and efficiently.

Final Judgment

The final judgment in the case of Nitin Invofin Trade Pvt. Ltd. vs ACIT (ITA No. 6276/DEL/2019) resulted in the dismissal of the appeal as withdrawn. The tribunal acknowledged the appellant’s decision to settle the dispute under the Vivad Se Vishwas Scheme 2020, effectively bringing the tax dispute to an amicable conclusion.

Bench: Shri Saktijit Dey, Judicial Member, and Shri Anadee Nath Misshra, Accountant Member

Order Pronounced On: 28th November 2022

Result: The appeal was dismissed as withdrawn under the Vivad Se Vishwas Scheme 2020.

Nitin Invofin Trade Pvt. Ltd. vs ACIT – Appeal Withdrawal under Vivad Se Vishwas Scheme – ITA No. 6276/DEL/2019 (Assessment Year 2016-17)