2021 (3) TMI 1269 - HC - Income Tax

Search case in terms of VsVs Act - petitioner challenging the subsequent Form-3 issued by the respondent/revenue after a full and final settlement of disputed taxes in Form-5 - petitioner is aggrieved by the fact that after a certificate in Form (5) was issued by the designated authority on 28.12.2020 indicating therein that there has been a full and final settlement qua disputed tax, the designated authority has gone on to issue, once again, Form (3) which is dated 21.01.2021 thereby seeking to treat its case as a search case - HELD THAT - It is not in dispute that the deadline prescribed stands extended till 30.04.2021. We may also indicate that in the impugned form, i.e., Form (3), referred to hereinabove, the following remark is incorporated This case is treated as a Search case in terms of VsVs Act/Rules 2020 and the CBDT circular No.21/2020 and the amount payable has been re-calculated accordingly. As such this is the revised Form 3 has been issued. The original Form 3 issued on 23.12.2020 and the Form 5 issued on 28.12.2020 may be treated as cancelled/withdrawn. Petitioner, says that the designated authority was rendered functus officio after Form (5) was issued on 28.12.2020 and therefore, the impugned communication is not sustainable in law. Prima facie, to our minds, the submission made by Mr. Jain appears to be correct. Accordingly, issue notice to the respondents. Mr. Puneet Rai, who appears on advance notice, accepts service on behalf of the respondents.Mr. Rai seeks and is granted two weeks to file a counter-affidavit. Rejoinder thereto, if any, will be filed before the next date of hearing.There shall be a stay on the operation of the impugned Form 3 dated 21.01.2021.

Summary

Issues:
1. Dispute regarding the issuance of Form (3) after a settlement certificate in Form (5).
2. Validity of the additional demand raised on the petitioner.
3. Interpretation of the authority's actions in treating the case as a search case.
4. Legality of the impugned communication by the designated authority.
5. Jurisdiction and sustainability of the impugned communication.
6. Stay on the operation of the impugned Form (3) dated 21.01.2021.

Analysis:
The petitioner is aggrieved by the issuance of Form (3) after a settlement certificate in Form (5) was issued by the designated authority. The impugned Form (3) dated 21.01.2021 raised an additional demand on the petitioner, with specific deadlines and revised amounts payable, indicating a search case treatment. The petitioner argues that the authority was functus officio after the issuance of Form (5), rendering the impugned communication unsustainable in law. The High Court finds prima facie merit in the petitioner's submission, leading to the issuance of notice to the respondents, with the respondents accepting service and seeking time to file a counter-affidavit.

The impugned Form (3) incorporates remarks treating the case as a search case under specific Acts and rules, with recalculated amounts payable. The original Form (3 and Form 5 were mentioned to be cancelled or withdrawn. The petitioner's representative contends that the authority exceeded its jurisdiction by issuing the impugned communication after the settlement certificate was issued. The court acknowledges the prima facie correctness of this argument, leading to the grant of a stay on the operation of the impugned Form (3) until further proceedings.

The respondents are given time to file a counter-affidavit, and a subsequent rejoinder may be filed before the next hearing date. The matter is listed for further hearing on 27.04.2021 to address the issues raised regarding the legality and jurisdiction of the impugned communication. The High Court's decision to stay the operation of Form (3) reflects a cautious approach pending a detailed examination of the legal aspects involved in the case, particularly concerning the authority's actions post the issuance of the settlement certificate in Form (5).