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2025 (7) TMI 608 - HC - Income TaxRectification u/s 154 to modify an order or certificate passed by the designated authority under the DTVSV Act of 2020 - Respondents have issued certificate in the prescribed form 5 of the Direct Tax Vivad se Vishwas Act 2020 Act - petitioner paid the entire amount but the grievance of the petitioner is that since the petitioner was entitled for a refund and the Department was not refunding the excess amount of tax paid by the petitioner the petitioner was pursuing his claim before the competent authority - whether Respondent No.2 has right to reopen a proceeding duly set at rest long back on 5.11.21 by the order of competent authority in the 1st round of litigation? HELD THAT - The scope and ambit of Section 154 of the Act of 1961 cannot be extended by virtue of an answer to a FAQ which has been contained in a circular issued by the Central Board of Direct Taxes. The provisions of the Act of 2020 and that of the Act of 1961 are to be construed by this Court keeping in view the legislative intendment and the scope of the provisions contained therein. We are of the considered opinion that an order of assessment which was passed as back as on 19.12.2018 could not have been reopened by the Assessing Officer by registering a proceeding u/s 154 on 22.12.2022 when the Department was a party before the designated authority under the Act of 2020 and in its presence the designated authority considered the matter and issued the certificate of closure of proceeding on 05.11.2021. The scope of Section 154 which talks of rectification of mistake is limited to amend any order passed by the AO under the provisions of the Act of 1961 but in no way in the garb of exercise of its power under clause (a) of sub-section (1) of Section 154 of the Act of 1961 it may be extended to sit over the order passed and the declaration issued by the designated authority under Section 5 of the Act of 2020. We find from the judgment of SAN Garments Manufacturing Private Limited. 2024 (12) TMI 1177 - DELHI HIGH COURT that in the said case when the designated authority himself wanted to reopen the proceeding by issuing a fresh Form No.-3 dated 29.01.2021 the same was set aside by the Hon ble High Court. If the same designated authority could not have reopened its own order it cannot be allowed to be argued by any stretch of imagination that the AO would be competent to unsettle the order of a designated authority. At the same time he cannot render the order of the designated authority redundant in the eye of law by passing an order under Section 154(1)(a) of the Act of 1961 in the garb of amending the order of the AO We are of the considered opinion that in this case the Revisional Authority has also failed to consider the aforesaid aspect of the matter and has simply endorsed the order of the AO.
The core legal questions considered by the Court in this matter are:
1. Whether the order passed by the designated authority under Section 5 of the Direct Tax Vivad se Vishwas Act, 2020 (hereinafter the Act of 2020), which issued a certificate in Form-5 concluding the disputed tax proceedings, can be reopened or set aside by the Assessing Officer under Section 154 of the Income Tax Act, 1961 (hereinafter the Act of 1961). 2. Whether the Assessing Officer was competent to issue a notice under Section 154 of the Act of 1961 to rectify an alleged mistake apparent from the record by enhancing the tax demand after the dispute was settled under the Act of 2020. 3. Whether the revisional authority under Section 264 of the Act of 1961 was justified in endorsing the Assessing Officer's order reopening the settled dispute. 4. Whether the petitioner is entitled to a refund of the excess amount of disputed tax paid under the Act of 2020 along with statutory interest. Issue-wise Detailed Analysis Issue 1: Competence of Assessing Officer under Section 154 of the Act of 1961 to reopen a settled dispute under the Act of 2020 Relevant Legal Framework and Precedents: The Act of 2020 provides a statutory mechanism for resolution of disputed tax arrears. Section 5(3) of the Act of 2020 expressly states that every order passed under sub-section (1) determining the amount payable shall be conclusive and "no matter covered by such order shall be reopened in any other proceeding under the Income Tax Act or under any other law." The Explanation to this subsection clarifies that making a declaration under the Act of 2020 does not amount to conceding the tax position but bars reopening of the settled dispute. Section 154 of the Act of 1961 permits the Assessing Officer to rectify any "mistake apparent from the record" by amending any order passed by it under the Act of 1961. Clause (a) of sub-section (1) of Section 154 confines the scope of rectification to orders passed by the Assessing Officer under the Act of 1961 and does not extend to orders passed by other authorities under different statutes. A Division Bench judgment of the Delhi High Court was relied upon, wherein the Court held that once a final certificate under Section 5(1) of the Act of 2020 is issued, the dispute stands concluded and cannot be reopened even by the designated authority itself. Court's Interpretation and Reasoning: The Court emphasized the clear legislative intent behind the Act of 2020 to conclusively settle tax disputes and prevent reopening of settled matters. It held that the Assessing Officer cannot invoke Section 154 of the Act of 1961 to reopen or unsettle an order passed by the designated authority under the Act of 2020. The scope of Section 154 is limited to rectifying mistakes in orders passed by the Assessing Officer under the Act of 1961 and does not empower the Assessing Officer to amend or override orders passed under a separate statutory scheme. The Court rejected the Department's contention that a Circular containing FAQs issued by the Central Board of Direct Taxes could enlarge the scope of Section 154 to permit reopening of orders under the Act of 2020. It held that statutory provisions cannot be overridden or extended by administrative circulars, especially when the statute's language is clear and unambiguous. Key Evidence and Findings: The petitioner had filed a declaration under the Act of 2020, and the designated authority issued a certificate in Form-5 on 5 November 2021, concluding the dispute. The petitioner paid the amount determined, and an order of refund for excess payment was issued. Subsequently, the Assessing Officer initiated proceedings under Section 154 alleging additional undisclosed income and enhanced tax liability, which was challenged by the petitioner. The Court found that the Assessing Officer's attempt to reopen the settled dispute was without jurisdiction and contrary to the conclusive nature of the certificate issued under the Act of 2020. Application of Law to Facts: Applying the statutory provisions, the Court held that the Assessing Officer's order under Section 154 was impermissible as it sought to amend or reopen a matter conclusively settled by the designated authority under the Act of 2020. The Department's reliance on Section 154 to enhance tax demand after issuance of the Form-5 certificate was contrary to the statutory bar contained in Section 5(3) of the Act of 2020. Treatment of Competing Arguments: The Department argued that the Assessing Officer had the power to rectify mistakes apparent on record and that the additional demand was valid under Sections 69/69A and 115-BBE of the Act of 1961. It also relied on the Circular's FAQ to support its position. The Court rejected these arguments, clarifying that the Assessing Officer's powers under Section 154 are circumscribed and cannot override the conclusive settlement under the Act of 2020. Administrative circulars cannot expand statutory powers beyond the clear legislative mandate. Conclusion: The Court concluded that the Assessing Officer had no jurisdiction to reopen the settled dispute under Section 154 of the Act of 1961 after issuance of the certificate under the Act of 2020. The impugned proceedings initiated by the Assessing Officer were without authority and liable to be quashed. Issue 2: Validity of the revisional authority's endorsement of the Assessing Officer's order Relevant Legal Framework: Section 264 of the Act of 1961 empowers the Commissioner to revise any order passed by an Assessing Officer. However, this power is subject to the limitations imposed by other statutes and the scope of the original order. Court's Interpretation and Reasoning: The Court observed that the revisional authority failed to consider the conclusive nature of the certificate issued under the Act of 2020 and simply endorsed the Assessing Officer's order reopening the dispute. This was held to be erroneous as it ignored the statutory bar on reopening the settled matter. Application of Law to Facts: Since the Assessing Officer's order was without jurisdiction, the revisional authority's endorsement thereof was also invalid. The Court set aside the revisional order accordingly. Conclusion: The revisional authority erred in endorsing the Assessing Officer's order, and such endorsement was quashed. Issue 3: Entitlement of the petitioner to refund of excess tax paid along with statutory interest Relevant Legal Framework: Section 154(5) of the Act of 1961 mandates refund of any amount due to the assessee where an amendment reduces the liability. The Act of 2020 also contemplates refund of excess amounts paid under the settlement scheme. Court's Interpretation and Reasoning: Since the Department failed to refund the excess amount of Rs.4,81,087/- despite the certificate under the Act of 2020, the petitioner was entitled to the refund along with statutory interest from the date of issuance of the certificate to the date of actual payment. Application of Law to Facts: The Court directed the Department to refund the excess amount with statutory interest within four weeks. Conclusion: The petitioner's claim for refund was upheld and directed to be granted with interest. Significant Holdings "Every order passed under sub-section (1), determining the amount payable under this Act, shall be conclusive as to the matters stated therein and no matter covered by such order shall be reopened in any other proceeding under the Income-tax Act or under any other law for the time being in force or under any agreement, whether for protection of investment or otherwise, entered into by India with any other country or territory outside India." (Section 5(3), Act of 2020) "The scope of Section 154 which talks of rectification of mistake is limited to amend any order passed by the Assessing Officer under the provisions of the Act of 1961 but in no way in the garb of exercise of its power under clause (a) of sub-section (1) of Section 154 of the Act of 1961, it may be extended to sit over the order passed and the declaration issued by the designated authority under Section 5 of the Act of 2020." "If the same designated authority could not have reopened its own order, it cannot be allowed to be argued by any stretch of imagination that the Assessing Officer would be competent to unsettle the order of a designated authority." Core principles established include:
Final determinations on each issue:
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