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Informist, Friday, Dec. 12, 2025

NEW DELHI – The Bombay High Court Friday ruled that the tax department cannot demand interest and penalty on the grounds of belated payment of tax when a party was discharged by the department after settling the case through Sabka Vishwas - Legacy Dispute Resolution Scheme, 2019. The high court set aside the show cause notices issued to Astute Valuers and Consultants Pvt. Ltd. for payment of interest and penalty on alleged non-payment of service tax, even when the company had got a discharge certificate from the department under the dispute resolution scheme.

The demand of interest and penalty by issuance of show-cause notices were "ex-facie contrary" to the Finance Act, 2019, and without authority in law. "The actions of the tax department ought to be within the conspectus and realm of Article 265 of the Constitution, which is the sine qua non for imposition of any tax," said the high court.

The chronology of the events clearly demonstrate that Astute Valuers was bonafide pursuing the proceedings with the tax department right from a time when the audit objections were raised in 2019. "It would be a travesty of justice to shut the doors on the petitioner in the given case when the respondents themselves have issued a discharge certificate to the petitioner indicating final settlement and a quietus to any further litigation," said the court.

The schemes such as Sabka Vishwas are floated by the government to strike a balance between amicable resolution of tax disputes and protecting revenue interest, said the court, adding that these were vital in contemporary times. Such schemes encourage bonafide assessees to disclose unpaid taxes and bring a closure to the past disputes which ultimately result in a win-win situation for the stakeholders as also for the nation's economy, said the court.

"We are confident that the government/executive would enforce such schemes in accordance with law and under the applicable statutory framework. The authorities concerned would bear in mind its avowed object and purpose and ensure its smooth implementation, without unnecessary hurdles/bottlenecks and unwarranted technicalities. This would be a step forward in facilitating the vision of ease of doing business in India," said a bench of Justice Advait M. Sethna and Justice M.S. Sonak.

The case relates to an audit conducted into Astute Valuers' financial affair and records for the period 2013-14 to 2017-18. Thereafter, the tax department intimated the petitioner about certain discrepancies which were observed during the audit proceedings and asked them to pay an amount. In 2019, the government came up with the Sabka Vishwas scheme, under which the company filed its case for settlement of previous arrears. In 2020, a discharge certificate was issued to the petitioner after payment of the requisite amount. However, the tax department thereafter sought interests and penalties from Astute Valuers on the late payment of tax for the same period. Challenging the same, Astute Valuers moved the high court.  End

Reported by Surya Tripathi

Edited by Ashish Shirke

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