Settlement Under Vivad Se Vishwas Cannot Be Reopened by Rectification: ITAT Rules
The Income Tax Appellate Tribunal (ITAT) recently quashed a ₹1.13 crore rectification demand passed after a taxpayer had already settled the matter under the Vivad Se Vishwas scheme. The Tribunal ruled that such rectification is legally unsustainable, bringing relief to thousands of assessees who opted for settlement under this special scheme.
This blog explains the legal basis behind the decision, implications for other taxpayers, and action points if you’ve faced a similar rectification post-VSV.
What Is Vivad Se Vishwas Scheme?
Key Features:
- Allowed full and final settlement of tax disputes
- CBDT Circular No. 21/2020 clarified no further actions permissible post Form 5
Case Snapshot: ITAT Delhi Bench Decision (July 2025)
Case Title: XYZ Ltd. vs ITO
Citation: ITA No. 786/Del/2024
Date of Order: July 2025
Issue: Rectification u/s 154 after Form 5 under VSV issued
Taxpayer’s Argument: Demand already settled, order passed under Section 154 is invalid
AO’s Action: Issued rectification demand of ₹1.13 crore
ITAT’s Key Observations
The Tribunal made the following points while ruling in favour of the taxpayer:
- Section 154 limitation: Rectification cannot override a completed and settled case.
Why the Rectification Order Was Invalid
| Legal Provision | Reason for Invalidity |
|---|---|
| Section 154 | Cannot be invoked to revise concluded matters |
| VSV Scheme (Finance Act, 2020) | Offers finality – no further appeal or rectification |
| CBDT Circular No. 21/2020 | Clarifies immunity from further action post Form 5 |
| Principle of Natural Justice | No hearing given before demand raised |
Expert View: Always Keep Form 5 Handy
“Once Form 5 under VSV is issued, the department has no legal ground to reopen or rectify. Taxpayers should always retain certified copies of Form 5 to defend against such unjustified demands.”
— Efiletax Advisory Team
What Should You Do If You Get a Demand After VSV Settlement?
- Check Form 5 Issuance Date – Confirm it covers the disputed demand.
- File a Reply Under Section 154 or Appeal to CIT(A)/ITAT – Refer to the above case as precedent.
- Attach CBDT Circular 21/2020 – Reinforce your stand with official circular.
- Use ITAT Order as Legal Support – Refer ITA No. 786/Del/2024 as a reference.
- Consult Tax Professionals – For structured representation.
FAQs
Q1. Can the department issue demand after Vivad Se Vishwas settlement?
A: No. Once Form 5 is issued, the matter is considered settled. Any further demand is invalid.
Q2. What is the remedy against such rectification orders?
A: You can file an appeal before CIT(A) or ITAT citing violation of VSV finality and natural justice.
Q3. Is the ITAT decision binding on all cases?
A: While ITAT rulings are case-specific, they are persuasive and can be cited in similar situations.
Summary
ITAT quashes ₹1.13 crore rectification order raised after Vivad Se Vishwas Form 5 issuance. Tribunal held such post-settlement action as legally invalid under CBDT guidelines.
Final Word
The ITAT ruling reinforces the legal sanctity of the Vivad Se Vishwas scheme. If you face such an issue, Efiletax can help you file the right response and secure your rights.