Delhi High Court on VSV Scheme Finality: High Profile Softech Pvt Ltd Vs ITAT & Anr.

Background of the Dispute

The Delhi High Court in High Profile Softech Pvt Ltd Vs ITAT & Anr. examined whether assessment proceedings can continue once a settlement under the Direct Tax Vivad se Vishwas Scheme, 2024 (VSV Scheme) has attained finality by issuance of Form No.4.

The matter related to Assessment Year 2018-19, where an assessment order dated 24.03.2023 was passed against the assessee. This order was challenged before the Commissioner of Income Tax (Appeals) (CIT(A)) / National Faceless Assessment Centre (NFAC).

While that appeal was pending, the assessee opted for resolution under the VSV Scheme, 2024. This choice and the subsequent steps under the Scheme turned out to be central to the writ petition before the High Court.

Key Chronology of Events

Assessment and Appeal

  1. An assessment order was framed on 24.03.2023 for A.Y. 2018-19.
  2. The assessee lodged an appeal before the CIT(A)/NFAC challenging this assessment.
  3. During the pendency of the appellate proceedings, the assessee decided to settle the dispute under the VSV Scheme, 2024.

Initiation of VSV Proceedings

  • The assessee filed an application under the VSV Scheme for settlement of the demand arising from the impugned assessment.
  • The competent authority, after processing the application, issued Form No.2 on 16.01.2025.
  • Based on this, the payable amount was determined and the assessee deposited the requisite sum in accordance with the Scheme.
  • Thereafter, Form No.4 – the certificate evidencing final settlement – was issued on 14.05.2025.

Intimation to CIT(A)/NFAC and Request to Defer

After receiving Form No.2, the assessee:

  • Formally informed the CIT(A)/NFAC that a VSV application had been filed and that Form No.2 had already been issued.
  • Requested that:
    • The pending appeal be kept in abeyance, and
    • Post issuance of final settlement order (Form No.4), the appeal be treated as disposed of in line with the terms of the VSV Scheme.

Despite this clear communication, the appellate authority did not pause the proceedings.

Order of CIT(A)/NFAC and Subsequent Litigation

Remand to the Assessing Officer

Instead of waiting for the VSV process to culminate and then disposing of the appeal in line with the Scheme, the CIT(A)/NFAC:

  • Proceeded to adjudicate the appeal on merits, and
  • Passed an order dated 07.03.2025, by which the assessment order was:
    • Set aside, and
    • Remanded back to the Assessing Officer for fresh consideration.

This approach effectively reopened the controversy which, under the Scheme, was in the process of being conclusively settled.

Appeal before the Tribunal

Aggrieved by the remand order, the assessee approached the Income Tax Appellate Tribunal (Tribunal) contending that:

  • The demand in relation to A.Y. 2018-19 stood modified and discharged under the VSV Scheme.
  • The CIT(A)/NFAC ought not to have proceeded with the appeal once informed that VSV proceedings were underway and Form No.2 had been issued.
  • The order dated 07.03.2025 deserved to be quashed.

However:

  • The Tribunal, by order dated 29.09.2025, treated the appeal as withdrawn instead of examining the legal effect of the VSV settlement and the correctness of the remand order.
  • A later miscellaneous application filed by the assessee to recall or rectify this position also came to be dismissed on 08.05.2026.