Direct tax dispute settlement certificate and audit objection: penalty revision after 153A/153C assessment blocked; immunity upheld

Where an assessee obtained a certificate under the Direct Tax Dispute Resolution Scheme, 2016, the dominant issue was whether penalty proceedings could be reopened by revision on an audit objection to impose penalty under a different provision (s. 271AB instead of s. 271AAB) after assessment under ss. 153A/153C. Applying s. 204(3) of the Scheme, the HC held that the order under s. 204(1) is conclusive and matters covered cannot be reopened under the Act; the immunity granted is general against penalty proceedings and is not provision-specific. Consequently, the proposed de novo revision to initiate penalty under s. 271AB was unsustainable and the appeal raised no substantial question of law.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether, while a certificate under the Direct Tax Dispute Resolution Scheme, 2016 granting immunity from penalty continues to hold the field and has not been challenged, the revenue can sustain a revision directing a de novo penalty order on the ground that penalty was imposed under an incorrect provision.

(ii) Whether the immunity recorded in the certificate operates generally against penalty proceedings in respect of the disputed tax, thereby rendering immaterial the controversy as to the specific penalty section (Section 271AAB versus Section 271AB) and consequently negating the basis for revision.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) & (ii): Effect of unchallenged Scheme certificate granting immunity on revision seeking fresh penalty order

Legal framework (as discussed by the Court): The Court relied on the operative contents of the certificate issued under the Direct Tax Dispute Resolution Scheme, 2016, which recorded that (a) immunity was granted "from the imposition of penalty" in respect of the disputed tax, and (b) under Section 204(3) of the Scheme, the order is "conclusive" and the matter covered "shall not be reopened in any proceeding under the Act."

Interpretation and reasoning: The Court treated it as undisputed that the certificate issued under the Scheme continues to operate and "holds the field," and further noted that the revenue had not challenged the certificate. The Court rejected the revenue's attempt, at the appellate stage, to contend that the certificate was void for ineligibility, observing that such challenge had not been made before the Tribunal and that eligibility was at least arguable on the assessment provisions involved. Proceeding on the continuing conclusiveness of the certificate, the Court held that once immunity against penalty proceedings is granted, the dispute over whether the penalty ought to have been levied under Section 271AAB or Section 271AB becomes inconsequential. The immunity was construed as general "against the penalty proceedings" and not limited to a particular penalty provision. Therefore, a revision directing a de novo penalty order based solely on an audit objection that a different penalty provision should have been applied could not be sustained in the face of the operative immunity and conclusiveness attached to the certificate.

Conclusions: The Court concluded that, because the Scheme certificate granting immunity from penalty remains effective and unchallenged, the revision seeking a fresh penalty order on the premise of applying a different penalty section is unsustainable. On this basis, the Court held that the substantial questions of law framed did not arise from the Tribunal's order and dismissed the appeal.

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