The Delhi High Court in a significant judgment has held that no action may be initiated against ‘tax arrears’ once a full and final settlement certificate under Section 5(1) of the Direct Tax Vivad Se Vishwas Act, 2020 ( DTVSV Act ) is issued.
The decision was given by the Delhi High Court while hearing a Writ Petition filed by S A N Garments Manufacturing Private Limited (S A N Garments) impugning a certificate determining the payability of balance tax amount against the financials of the Petitioner-Assessee for the Assessment Year (AY) 2012-13.
The Assessee declared an income of ₹13,57,73,250/- which was initially accepted but later subject to notice under Section 148 of the Income Tax Act, 1961 and assessment order under Section 147 of the Act effectuating an income addition of ₹3,07,39,590/- as undisclosed expenditure under Section 69C of the Act.
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S A N Garments proceeded to contest the matter before the Commissioner of Income Tax (Appeals) under Section 246A of the Act. While the matter was sub-judice, the Parliament enacted the DTVSV Act thereby ascribing the Petitioner an ‘appellant’ under Section 2(1)(a) of the DTVSV Act who made a declaration under Section 4(1) of the same Act, seeking to settle a ‘tax arrear’.
Subsequently, the Designated Authority issued a certificate in Form No.3 dated 16.10.2020 determining the balance payable amount at ₹69,56,571/- which was followed by Certificate in Form No.5 affirming that a sum of ₹59,73,812/- had been paid by the declarant towards full and final settlement of the ‘tax arrear’.
The Petitioner was represented by R. Santhanam and Rishabh Ostwal appeared for the Petitioner while Puneet Rai, Ashvini Kumar and Rishabh Nangia appeared for the Respondent Revenue.
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Acting Chief Justice Vibhu Bakhru and Justice Tushar Rao Gedela referred to Section 6 of the DTVSV Act to observe that “once a declarant is issued a certificate in Form No.5 as per Section 5 of the DTVSV Act, and the declarant deposits the determined amount, the Designated Authority is proscribed from initiating any action or proceedings in respect of ‘tax arrear’. The dispute stands settled.”
The two-member Bench of the Delhi High Court proceeded to set aside the impugned Form No.3 certificate, stating that the issuance of a final certificate under Section 5(1) of the DTVSV Act concludes all disputes regarding the ‘tax arrears’.
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