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Bombay HC Allows Taxpayer to Claim Benefit of DTVVA, 2020

In a recent judgment[1], the Bombay High Court allowed the taxpayer to claim benefit of Direct Tax Vivad Se Vishwas Act, 2020 (‘DTVVA, 2020’) and held that the interpretation adopted by the Revenue in deciding the ineligibility of the taxpayer was not in accordance with the objective and rationale of the DTVVA, 2020. The High Court relied heavily on Macrotech Developers case[2] to provide weight to its reasoning and conclusion.  


The assessment of the taxpayer for Assessment Years 2010-11 and 2011-12 were reopened under Section 147, IT Act, 1961 and after conclusion of the reassessment proceedings the assessing officer passed an order. The assessing officer thereafter raised a demand based on the additional income determined in the reassessment proceedings. While the assessment order and consequent notice for additional demand were pending in appeal, taxpayer was served a notice as to why prosecution should not be initiated against him for intentionally evading tax. And the Revenue subsequently commenced prosecution by filing a complaint before the relevant Chief Metropolitan Magistrate. 

In the interim, DTVVA, 2020 was notified and taxpayer took advantage of it to file returns for the Assessment Years 2010-11 and 2011-12 under it. The Revenue noted that the taxpayer was not entitled to take advantage of the DTVAA, 2020 and settle the appeal since the prosecution in respect of the same had already been instituted. The taxpayer, on the other hand, claimed that under Section 9(a)(ii), DTVVA, 2020 a taxpayer was disentitled to claim the benefit only if the prosecution had been initiated ‘in respect of tax arrear’. And the amount payable by the taxpayer in the impugned case did not amount to a tax arrear.    

High Court Adjudicates

The High Court cited the ratio of Macrotech Developers case where the Bombay High Court had made a categorical observation that a bar on filing declaration is only when the prosecution initiated by the Revenue relates to tax arrears and not for any prosecution in relation to an assessment year per se. The High Court rejected the States’ weak argument that the taxpayer’s wilful evasion of tax would be covered by tax arrear. The High Court relying on the Macrotech Developers case, held that the taxpayer will be able file returns under the DTVVA, 2020. 

The Bombay High Court also examined the definition of tax arrear under Section 2(1)(o) which stated that tax arrear would mean the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax and penalty levied or leviable on such disputed tax or disputed interest or disputed penalty or disputed fee as determined under the provisions of the Act. Based on the definition and ratio of Macrotech Developers case, the High Court concluded that delayed payment cannot amount to tax arrear. As per the High Court: 

the intention of the legislature was that the provisions of DTVSV Act shall not, in view of Section 9(a)(ii), apply in the case of a declarant in whose case a prosecution has been instituted in respect of tax arrear relating to an assessment year on or before the date of filing of declaration. The prosecution has to be in respect of tax arrear which naturally is relatable to an assessment year. (para 18) 


The Bombay High Court’s judgment in the impugned case reiterates the substance and ratio adopted in the Macrotech Developers case, and for good reason. There is little to suggest that the definition of tax arrear under DTVVA, 2020 should include delayed payment by the assessee. And the State’s contention suggesting that tax arrears should be interpreted broadly was not based on any concrete foundation and was correctly rejected by the High Court.  

[1] Pragati Pre Fab India Pvt Ltd v Principal Commissioner of Income Tax, Mumbai TS-552-HC-2023-BOM. 

[2] Macrotech Developers Ltd v Principal Commissioner of Income Tax (2021) 126 1 (Bombay).