Section 154 rectification cannot reopen tax matters settled under DTVSV Act after compliance with determination certificate

Delhi HC held that rectification proceedings under Section 154 of Income Tax Act cannot reopen matters already settled under DTVSV Act. The court found that once Designated Authority issues determination certificate and declarant complies with payment obligations, the settlement attains finality under Section 5(3) of DTVSV Act. Revenue cannot subsequently rectify assessment orders covering settled matters unless declaration contained incorrect information or suppressed material facts. Since no such allegations were made against petitioner, the rectification notice, order and demand notice were quashed as the DTVSV Act provides complete closure to tax disputes for both parties.

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Issues Involved:
1. Validity of the rectification notice dated 08 March 2022.
2. Validity of the rectification order dated 30 March 2022.
3. Validity of the demand notices issued pursuant to the rectification order.
4. Applicability and finality under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act).
5. Statutory period of limitation under Section 154 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of the Rectification Notice Dated 08 March 2022:
The petitioner challenged the rectification notice dated 08 March 2022 issued under Section 154 of the Income Tax Act, 1961. The notice indicated that there was an apparent mistake in the computation sheet, leading to the charging of short gross tax liability. The petitioner argued that the notice was issued after the final determination of liability under the DTVSV Act, which conferred finality to the tax arrears. The court noted that the original assessment order was passed on 22 December 2017, and the issue of incorrect tax rate was not raised during the assessment or appeal stages.

2. Validity of the Rectification Order Dated 30 March 2022:
The rectification order dated 30 March 2022 was issued following the rectification notice. The order stated that the wrong tax rate was applied to the additions made by the Assessing Officer (AO), and the income was recomputed at INR 1,04,50,164/-. The petitioner contended that this rectification was not tenable, given the finality accorded under the DTVSV Act. The court observed that the rectification was sought after the issuance of Form 5 under the DTVSV Act, which should have concluded the matter.

3. Validity of the Demand Notices Issued Pursuant to the Rectification Order:
The demand notices issued on 30 March 2022 and 28 April 2022 were also challenged. These notices were based on the rectified computation of tax liability. The court held that since the rectification itself was not sustainable, the consequent demand notices were also invalid.

4. Applicability and Finality under the DTVSV Act:
The court emphasized the provisions of Sections 4 and 5 of the DTVSV Act, which confer finality on the determination of tax arrears once the Designated Authority issues a certificate (Form 5). The court noted that the DTVSV Act aims to provide a conclusive settlement of tax disputes, and the determination made under this Act cannot be reopened or revised unless there is a false declaration or suppression of material facts by the declarant. The court found no such false declaration or suppression in this case, rendering the rectification action unsustainable.

5. Statutory Period of Limitation under Section 154 of the Income Tax Act, 1961:
The court considered the statutory period of limitation for rectification under Section 154, which allows rectification within four years from the end of the financial year in which the order sought to be amended was passed. The court noted that the rectification order, though dated 30 March 2022, appeared to have been signed and communicated only on 22 April 2022, potentially beyond the permissible period. However, the court primarily struck down the rectification on the grounds of finality under the DTVSV Act.

Conclusion:
The court allowed the writ petition, quashing the rectification notice dated 08 March 2022, the rectification order dated 30 March 2022, and the subsequent demand notices. The court directed the parties to proceed in terms of the determination made under the DTVSV Act, emphasizing the finality and conclusiveness of the settlement under this Act.

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