Karnataka High Court Rejects Revenue's Bid to Review DTVSV Scheme Order in Airbus India Case

Background and Overview

The Karnataka High Court recently dismissed a review petition filed by the Revenue authorities challenging an earlier order that had quashed a revised Form-2 issued under the Direct Tax Vivad Se Vishwas Scheme, 2024 (hereinafter "DTVSV Scheme"). The case — PCIT-1 Vs Airbus India Pvt Ltd. — involved a significant question regarding the limited scope of review jurisdiction and whether a CBDT circular that was not placed before the Court during the original hearing could form a valid ground for review.

The Court firmly held that the earlier order contained no error apparent on the face of the record and that the Revenue's attempt to introduce a new circular to re-agitate already decided contentions amounted to nothing more than an appeal in disguise — a course of action not permissible under review jurisdiction.

Factual Matrix: How the Dispute Arose

To appreciate the legal significance of this ruling, it is essential to trace the chronology of events that led to the present review petition.

Assessment and Appellate History

For Assessment Year 2015-16, a final assessment order was passed on 29.10.2019 against Airbus India Pvt Ltd. The assessee challenged this before the Income Tax Appellate Tribunal (ITAT), which disposed of the matter vide its order dated 05.08.2022, partly deciding certain issues in favour of the assessee while remitting remaining issues back to the Assessing Officer.

Aggrieved by those portions of the ITAT order that favoured the assessee, the Revenue filed an appeal before the Karnataka High Court, registered as ITA No. 130/2023, which was pending adjudication.

Filing Under DTVSV Scheme, 2024

While the appeal was still pending before the High Court, the Government introduced the Direct Tax Vivad Se Vishwas Scheme, 2024 in July 2024. Taking benefit of the scheme, the assessee filed a Declaration in Form No. 1 on 20.12.2024.

In response, the 1st Respondent issued Form No. 2 on 04.01.2025, determining the refund payable to the assessee. However, a critical error crept in at this stage — the authorities failed to grant credit for tax deducted at source and advance tax that the assessee was legitimately entitled to claim.

Rectification Application and Subsequent OGE

To address this deficiency, the assessee filed a rectification application dated 21.01.2025 before both respondents, seeking re-computation of the refund after granting appropriate tax credits.

While this rectification application remained pending, the 2nd Respondent passed an Order Giving Effect (OGE) on 26.03.2025 — giving effect to the ITAT's order dated 05.08.2022. This OGE deleted the Transfer Pricing (TP) adjustment and simultaneously made disallowances of reimbursement of salary costs of seconded employees under Section 40(a)(i) of the Income-tax Act, 1961.

The Impugned Revised Form-2

Using the OGE as its basis, the 1st Respondent issued a revised Form-2 on 28.07.2025, which treated the quantum involved in the pending High Court appeal as referable solely to the TP adjustment, while reducing the disallowance under Section 40(a)(i) of the Income-tax Act, 1961 to 'Nil'.

The assessee challenged this revised Form-2 before the Karnataka High Court by way of a writ petition.

The Original Writ Petition: Reliefs Sought

In W.P. No. 24690/2025, the assessee sought the following reliefs: