In a recent Judgement, the Delhi High Court has ruled that the charging of short gross tax liability determined under Section 5(3) Direct Tax Vivad Se Vishwas Act ( DTVSV Act ) by the Commissioner of Income Tax ( Appeal ) (CIT(A)) is final and non-revisable, thereby quashing the rectification notice issued under Section 154 of the Income Tax Act, 1961.
The petitioner Satish Kumar Dhingra challenges a rectification notice dated March 8, 2022, and the subsequent order dated March 30, 2022. The petitioner seeks a writ of prohibition to prevent further action based on these documents. The dispute originated from demands under the Income Tax Act, 1961, which were settled under the Direct Tax Vivad Se Vishwas Act ( DTVSV Act ) of 2020. The petitioner applied for settlement under this Act, and following the declaration, Form 5 was issued, confirming the total liability as final.
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The respondents later attempted to invoke Section 154 of the Income Tax Act to revisit the settled liability, despite the matter being finalized up to the Commissioner of Income Tax ( Appeals ) stage. This action began after Form 5 had been issued under the DTVSV Act, leading the petitioner to challenge the rectification process. The petitioner had opted for the DTVSV Act settlement after its announcement in the 2020 Budget Speech, submitting Forms 1 and 2 on November 17, 2020. The Designated Authority determined the amount payable, and Form 3 was issued on December 18, 2020. The petitioner paid the disputed tax on March 26, 2021, after which Form 5 was issued.
The petitioner raised objections to the rectification, which were dismissed in an order dated March 30, 2022. The order stated that the wrong tax rate had been applied in the original assessment, leading to the issuance of the rectification notice. The original assessment was completed on December 22, 2017, and partially upheld by the CIT (A), with the taxable income recomputed at INR 1,04,50,164. The issue of the wrong tax rate was not raised at that time.
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The court noted that the dispute pertained to the 2015-16 Assessment Year, with the petitioner filing a return on September 15, 2015. The return was processed under Section 143(1) of the Income Tax Act. The petitioner’s case was selected for scrutiny, and a final assessment was made on December 22, 2017, adding INR 54, 50,438 to the returned income, resulting in a total assessed income of INR 1,04,81,590. The petitioner challenged this assessment before the CIT (A), who upheld the additions in an order dated March 11, 2019. The petitioner then appealed to the Income Tax Appellate Tribunal.
The Division bench of Justice Yashwanth Varma and Justice Ravinder Dudeja emphasized that even if Section 154 of the Income Tax Act could be invoked despite the DTVSV Act’s finality, such action would be invalid due to the statutory limitation period. The petitioner’s counsel argued that the original order could only be rectified until March 31, 2022, but the rectification order, though dated March 30, 2022, was signed and communicated on April 22, 2022. The court noted that the validity of the notice must be evaluated based on its issuance date.
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The court examined Sections 4 and 5 of the DTVSV Act, which require the Designated Authority to determine the payable amount based on the declaration and issue a certificate. This determination is final and binding, prohibiting the reopening of the matter under the Income Tax Act or any other law. The court found that the petitioner had not made any incorrect declaration or suppressed material facts, so the finality under the DTVSV Act should stand. The court concluded that the rectification action under Section 154 was unsustainable and quashed the relevant notices and orders, directing the parties to proceed based on the DTVSV Act’s determination.
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