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TMI Blog2012 (6) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... ther on the facts and in the circumstances of the case, the Tribunal is right in law in concluding that the sum of Rs.20,00,000/- represents the appellant's income, while at the same time the interest which is allowed to be deducted by the Commissioner of Income Tax (Appeals) in computing the aforesaid income is not liable to be deducted?" 2. The facts in brief are as follows:- The assessee herein opted for the benefit of Kar Vivad Samadhan Scheme and accordingly filed an application by offering income at Rs.24,33,687/-. By proceedings dated 17.6.99, the Commissioner of Income Tax, the Designated authority passed an order in terms of Section 90 of the Finance (No.2) Act, 1998 treating the final settlement of tax arrears at Rs.5,88,684/-. It is a matter of record that in respect of interest payment of Rs.20 lakhs, which was referable to a loan taken from the Bank, which was utilised for the purposes of investment in a company promoted by the assessee, was sought to be disallowed by the Assessing Officer. 3. The assessee herein, an individual promoted a company by name M/s.Sugantha Sugars Limited. The shares therein were subsequently sold to Prudential Mouli Sugars Limited. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice charges. The Revenue preferred an appeal to the Tribunal in I.T.A.No.2015 of 1998 on the claim on the interest payment to the Bank on the money borrowed for the purpose of investment in Sugantham Sugars Ltd. The Revenue contended that the investment of the borrowed funds were in non-income earned assets and hence, the corresponding interest could not be allowed. In any event, if interest was to be allowed, it should be only Rs.7,01,079/-. 4. As far as the appeal preferred by the assessee was concerned, considering the offer made by the assessee under the Kar Vivad Samadhan Scheme 1998, nothing remained for the Tribunal to proceed further with the assessee's appeal and the same was withdrawn by the assessee. As regards the Revenue's appeal before the Tribunal was concerned, the assessee took a specific stand that after the determination of the tax payable under the Kar Vivad Samadhan Scheme, nothing survived in the Revenue's appeal for the Tribunal to pass orders on merits. In making such a contention, the assessee placed reliance on the decision of the Apex Court reported in KILLICK NIXON LIMITED v. DEPUTY CIT (2002) 258 ITR 627, wherein it was held that once on the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come to an end by reason of the certificate issued in the declaration made by the assessee under the Kar Vivad Samadhan Scheme. 7. Countering the said statement of the assessee, learned counsel for the Revenue pointed out that the clarification given on 17.12.1998 after the decision of the Delhi High Court clearly pointed out that the embargo to proceed with the appeal on the certificate issued on the declaration would arise only in those cases of cross appeals dealing with the self same issues before the appellate authority and that when the declaration filed by the assessee evidently did not include the issue raised in the appeal filed by the Revenue, it is not open to the assessee to contend that on the determination of the amount payable under Section 90, the appeal filed by the Revenue would not be available for further proceeding thereon on merits before the Tribunal. In the circumstances, there could be no inhibition on the part of the Tribunal to get along with the appeal on merits. 8. Heard learned counsel for the appellant as well as learned standing counsel for the Revenue. 9. Before going into the various contentions raised in the appeal, the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate authority shall decide the appeal irrespective of such declaration. 10. A reading of the said provision show that once an order has been made on the declaration filed, there is a total ban on the hearing of the appeal on any issue covered under the declaration. However the proviso made an exception in respect of the appeal filed at the instance of the Revenue that such declaration would not have any effect on the hearing of the Revenue's appeal. Dealing with the vires of the proviso thus making an exception to the Revenue's appeal, in the decision reported in 236 ITR 1 ALL INDIA FEDERATION OF TAX PRACTITIONERS v. UNION OF INDIA, Delhi High Court held that the proviso to Section 92 of the Finance Act (No.2) Act, 1998 is ultra vires article 14 of the Constitution as it results in creating two artificial classes between the same class of assessees, i.e. the litigating assessees in arrears and the definition of tax arrears in clause (m) of Section 87 of the Finance (No.2) Act, 1998, particularly with reference to the appeal filed at the instance of the Revenue pending before the Appellate Forum. The Delhi High Court pointed out that the proviso to Section 92 of the Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In such cases, there are no outstanding taxes and hence the process of working out "disputed income" from outstanding taxes is not involved. The entire income under dispute in various grounds of appeal may constitute "dispute income" on which the sum payable can be determined. In respect of Departmental appeals, the declaration has to be for the entire income disputed in such appeals. (iii) Where the declaration in respect of Departmental appeals are accepted by the designated authority, the CIT may proceed to withdraw such appeals on passing of the order under section 90(2). (iv) In the event of cross appeals on same issue, if the assessee does not opt to declare in respect of taxes involved in Departmental appeals, the provisions of Section 92 would not apply as these place bar only in respect of issue covered in the declaration in respect of which order under Section 90 has been passed. This will also be the position, if the assessee does not opt for declaration in respect of other Departmental appeals. The appeals in all such cases should not be withdrawn. 3. The designated authorities working under your region may kindly be informed accordingly. " 12. The said clarificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an appeal by the Revenue. It was open to the designated authority to have called upon the assessees to avail the benefit of settlement only if all tax arrears, including those which are disputed by the Revenue and which are pending in appeal as on the date of such determination, are paid. .............." 13. The Karnataka High Court pointed out that it was open to the Designated Authority to call upon the assessees to avail the benefit only if all tax arrears including those issues which are disputed by the Revenue, which are pending in appeal as on the date of such determination are paid. Thus Section 90 requires the designated authority to determine the amount payable in accordance with the provisions of the Scheme and the sum payable after such determination towards the full and final settlement of the tax arrears. Upon payment of such amount determined under Section 90(1), it is conclusive and the scheme could not be reopened. Once determination is made, failure to include the dispute raised by the Revenue in its appeal being attributable to the Revenue's own lapse, the same cannot be put against the assessee for the purpose of proceeding further with the appeal filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se by the designated authority at any stage, all the proceedings against the declarant shall be deemed to have been revived, thus enabling the designated authority to amend the certificate for reasons in writing. In the absence of any such situation arising herein, the Revenue cannot sustain its plea that irrespective of determination made under Section 90, the appeal would nevertheless be kept, treating as one pending for further consideration at the hands of the Tribunal. 16. It may be of relevance to note that the assessee's declaration was accepted and the amount payable was determined by the Commissioner of Income Tax in his proceedings dated 17.6.1999. The said order was despatched on 15.7.1999. A perusal of the file produced show that the Revenue's appeal before the Tribunal was filed on 7.7.1999, by which time, the Samadhan Certificate had already been made. 17. Going by the above facts and further pointed out by the Apex Court in the decision reported in KILLICK NIXON LIMITED v. DEPUTY CIT (2002) 258 ITR 627, once determination is made under Section 90 towards full and final settlement of tax arrears, there is nothing to be treated as pending for final cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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