2024 (12) TMI 1177 - HC - Income Tax

Qualification as an appellant u/s 2(1)(a) of the DTVSV Act - validity of a certificate issued under the Direct Tax Vivad Se Vishwas Act, 2020 - HELD THAT - Rule 7 of the DTVSV Rules expressly provides that the order of the designated authority under sub-Section (2) of Section 5 with respect to the payment of amount made by the declarant as per the certificate granted under sub-section (1) of section 5, shall be in Form No. 5. In terms of Section 5 of the DTVSV Act, the Designated Authority (respondent no. 1) issued a certificate in Form No. 3 dated 16.10.2020 determining the balance amount payable as Rs. 69,56,571/-. Thereafter, the Designated Authority issued a certificate in Form No. 5, in terms of Rule 7 of the Direct Tax Vivad Se Viswas Rules, 2020 (hereafter DTVSV Rules), under Section 5 (2) read with Section 6 of the DTVSV Act. The said certificate clearly recorded that a sum had been paid by the declarant towards full and final settlement of the tax arrear . Once a declarant is issued a certificate (Form No. 5) in terms of 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. In view of the above, all disputes regarding the tax arrear stood settled with the issuance of a certificate as contemplated under Section 5 of the DTVSV Act. The petitioner is aggrieved by the issuance of the fresh Form No. 3 dated 29.01.2021, which is a modified version of the earlier Form No. 3 dated 16.10.2020. Thus, effectively the Designated Authority seeks to reopen a concluded settlement. On a pointed query from this court as to under which provisions the said action has been taken, Mr. Rai fairly states that there is no provision under the DTVSV Act that empowers a Designated Authority to reopen a concluded settlement. As noted above, a plain reading of the provisions of the DTVSV Act indicates that once a final certificate is issued under Section 5 (1) of the Act, all disputes with regard to the tax arrear stand concluded. It is apparent that the issuance of the impugned certificate is without authority of law. The impugned certificate dated 29.01.2021 is set aside.

Summary

Issues:
Challenge to the validity of a certificate issued under the Direct Tax Vivad Se Vishwas Act, 2020

Analysis:
The petitioner challenged the Form No. 3 dated 29.01.2021 issued by the Principal Commissioner of Income Tax-7, seeking to reopen a settled tax arrear. The petitioner's income for AY 2012-13 was reassessed, resulting in an addition under Section 69C of the Income Tax Act. Subsequently, the petitioner filed an appeal and made a declaration under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act) to settle the tax arrear. The definition of "tax arrear" under the DTVSV Act was crucial in this context.

The DTVSV Act provided a mechanism to resolve tax arrears, with specific provisions for the amount payable based on different categories of tax arrears. Section 3 outlined the resolution process, while Section 4 mandated the withdrawal of pending appeals upon filing a declaration. The role of the Designated Authority in determining the payable amount and issuing certificates was governed by Section 5. The Act also granted immunity from further proceedings once a settlement was reached, as per Section 6.

The Designated Authority issued a certificate in Form No. 3 and subsequently Form No. 5, indicating the settlement of the tax arrear. However, a modified Form No. 3 was issued later, leading to the petitioner's challenge. The court noted that the DTVSV Act did not empower the Designated Authority to reopen a settled tax arrear. The issuance of the impugned certificate was deemed unauthorized, and the court set it aside, thereby allowing the petition in favor of the petitioner.

In conclusion, the judgment highlighted the importance of finality in tax settlements under the DTVSV Act and emphasized that once a certificate is issued, all disputes regarding the tax arrear are considered settled. The court's decision to set aside the impugned certificate underscored the need for adherence to the statutory provisions governing tax dispute resolutions.