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2016 (10) TMI 401 - GUJARAT HIGH COURT

2016 (10) TMI 401 - GUJARAT HIGH COURT - 2017 (346) E.L.T. 231 (Guj.) , [2017] 393 ITR 280 - Settlement commission procedure - Settlement of tax payable - Can the Settlement Commission proceed with the petitioner's application made under Section 245C(1) of the Act, after issuance of certificate under Section 90(2) of the KVSS,1998, which had till then only reached the stage of being admitted for further hearing in terms of Section 245D(1) of the Act ? - Held that:- Whatever doubt one may have, w .....

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in a case where the Settlement Commission has passed an order under sub-section (4) of Section 245D, to any tax arrear in respect of such assessment year. This provision would have two purposes; first, it makes it abundantly clear that if other conditions are satisfied, a person can make a declaration in terms of Section 88 of the KVSS,1998 so long as the order has not been passed by the Settlement Commission under sub-section (4) of Section 245D of the Act and secondly, this provision also puts .....

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ar. Till then, however, the issue would be wide open and the assessee, as in the present case, could approach the designated authority under the KVSS,1998. The Settlement Commission therefore, committed a serious error in holding to the contrary. - The Supreme Court in case of Smt. Sushila Rani (2002 (2) TMI 7 - SUPREME Court ) observed that the certificate issued under Section 90(1) of the KVSS,1998 making a determination as to the sum payable under KVSS,1998 is conclusive as to the matters .....

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FOR THE RESPONDENT : MR SUDHIR M MEHTA, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. These petitions arise in common background and would therefore, be disposed of by this common judgment. For convenience, we may record facts from Special Civil Application No.3759 of 2010. The petitioner is an individual. He has challenged an order dated 25.6.1999 passed by the Settlement Commission under the Income-Tax Act,1961 (for short 'the Act') determining the petitioner .....

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l against said order of the Assessing Officer. The Appellate Commissioner by his order dated 13.1.1994 set aside the assessment for the said years and asked the Assessing Officer to carry out fresh assessments. When the assessment proceedings after remand were thus pending before the Assessing Officer, the petitioner filed an application dated 24.11.1995 before the Settlement Commission under Section 245C of the Act for the above 3 years. 3. While such proceedings were pending before the Settlem .....

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d an application on 26.11.1998 before the authority under Section 90(1) of the KVSS,1998. In such application, the petitioner offered to pay tax as per the said Scheme of ₹ 4808/-, ₹ 22720/- and ₹ 231466/- for Assessment Years 1987-88, 1988-89 and 1989-90 respectively on the disputed income of ₹ 12,020/-, ₹ 56,800/- and ₹ 5,78,665/- for the said 3 years. 5. On 13.11.1998, the Commissioner of Income-Tax, to whom such application was made by the petitioner, aske .....

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e High Court by filing Special Civil Application No.11145 of 1998 and prayed for a direction to the competent authority under the KVSS,1998 to accept the application of the petitioner for Kar Vivad and to issue necessary certificate under Section 90(2) of the KVSS,1998. The Division Bench of this Court by the judgment dated 24.3.1999 accepted the petitioner's request and issued following order : In the result, the respondent No.1 is directed to reconsider and pass appropriate order determini .....

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rdingly, allowed. Rule is made absolute. There shall be no order as to costs. 6. The Commissioner of Income-Tax, Surat thereupon issued a certificate in prescribed proforma in terms of Section 90(2) of the KVSS,1998. He accepted the petitioner's declaration that he had paid the sum of ₹ 2,58,993/- which was tax arrears determined by the designated authority. In the certificate, it was provided as under : Now therefore, in exercise of the powers conferred by sub-section (2) of Section 9 .....

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penalty under said enactment in respect of matters covered in the aforesaid declaration made by the declarant. 7. The petitioner thereafter urged before the Settlement Commission that for the same period, there cannot be separate proceedings for settlement. The Settlement Commission by the impugned order dated 25.6.1999 rejected the application, proceeded to decide the petitioner's application for settlement. The Commissioner passed an order under Section 245D(4) of the Act and determined t .....

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rectification on 30.11.2009 and again requested the Commission to drop the entire proceedings which was rejected by the Commission. The petitioner has therefore, filed this petition challenging the order of Settlement Commission dated 25.6.1999 under Section 245D(4) of the Act and the subsequent orders of rectification. 9. In brief, the case of the counsel for the petitioner is that once the proceedings were entertained by the competent authority under the KVSS,1998, it was thereafter not open .....

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earned counsel relied upon the following decisions; 1) on the judgment of the Division Bench of the Bombay High Court in case of Desouza Motors V/s. Income Tax Settlement Commission & Ors., reported in 277 ITR 517 (Bom.). 2) on the decision of the Supreme Court in case of Smt. Sushila Rani V/s. Commissioner of Income- Tax & Anr., reported in 253 ITR 775. 11. On the other hand, learned counsel, Mr.Sudhir Mehta for the department opposed the petition contending that the issues before the a .....

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of being admitted for further hearing in terms of Section 245D(1) of the Act ? 13. We may refer to the statutory provisions. Chapter- XIXA was added to the Act by Finance Act,1987 with effect to 1.6.1987 and pertains to settlement of cases. Under subsection (1) of Section 245C, an assessee in a case relating to him, may make an application for settlement before the Commission in such manner as may be prescribed. The term 'case' has been defined under clause (b) of Section 245A and as it .....

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settlement in connection with any proceedings pending for assessment or reassessment or any appeal or revision in connection with such assessment or reassessment. 14. On such an application being filed, the same would be processed by the Settlement Commission as per the procedure laid down in Section 245D of the Act. As per the provisions of sub-section (1) of Section 245D, the Settlement Commission would first decide, whether such application should be allowed to proceed further or that the sam .....

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on to grant immunity from prosecution and penalty. 15. The KVSS,1998 contains Section 87 which is a definition provision. Clause (e) of Section 87 defines term disputed income , which reads as under : (e) disputed income , in relation to an assessment year, means the whole or so much of the total income as is relatable to the disputed tax. 16. Clause (f) of Section 87 defines term disputed tax as under : (f) disputed tax means the total tax determined and payable, in respect of an assessment yea .....

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d on the date of declaration. 18. Section 88 of the KVSS,1998 pertains to settlement of tax payable, relevant part of which reads as under : Settlement of tax payable. 88. Subject to the provisions of this Scheme, where any person makes, on or after the 1st day of September,1998 but on or before the 31st day of December,1998, a declaration to the designated authority in accordance with the provisions of section 89 in respect of tax arrear, then, notwithstanding anything contained in any direct t .....

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at the rate of thirty per cent of the disputed income; (iii) in the case where tax arrear includes incometax, interest payable or penalty levied, at the rate of thirty-five per cent of the disputed income for the persons referred to in clause (i) or thirty per cent of the disputed income for the persons referred to in clause (ii); (iv) in the case where tax arrear comprises only interest payable or penalty levied, at the rate of fifty per cent of the tax arrear; (v) where the tax arrear includes .....

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n. Section 90 pertains to time and manner of payment of tax arrear, which reads as under : Time and manner of payment of tax arrear. 90. - (1) Within sixty days from the date of receipt of the declaration under Section 88, the designated authority shall, by order, determine the amount payable by the declarant in accordance with the provisions of this Scheme and grant a certificate in such form as may be prescribed to the declarant setting forth therein the particulars of the tax arrear and the s .....

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esignated authority may amend the certificate for reasons to be recorded in writing. (2) The declarant shall pay the sum determined by the designated authority within thirty days of the passing of an order by the designated authority and intimate the fact of such payment to the designated authority along with proof thereof and the designated authority shall thereupon issue the certificate to the declarant. (3) Every order passed under Sub-section (1), determining the sum payable under this Schem .....

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ns of any law for the time being in force, such appeal or reference or reply shall be deemed to have been withdrawn on the day on which the order referred to in Sub-section (2) is passed: Provided that where the declarant has filed a writ petition or appeal or reference before any High Court or the Supreme Court against any order in respect of the tax arrear, the declarant shall file an application before such High Court or the Supreme Court for withdrawing such writ petition, appeal or referenc .....

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ority shall proceed to decide any issue relating to the disputed chargeable expenditure, interest, income, wealth etc. in respect of which an order has been made under Section 90 by the designated authority. 21. Section 95 of the KVSS,1998 pertains to scheme not to apply in certain cases, relevant portion of which reads as under: 95. The provision of this Scheme shall not apply- (i) in respect of tax arrear under any direct tax enactment,- (a)xxx xxx xxx (b)in a case where an order has been pass .....

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the designated authority in respect of tax arrears. The term tax arrear in relation to direct tax enactments is defined as amount of tax, penalty or interest determined before 31.3.1998 which remained unpaid on the date of declaration. In such a case therefore, a person could make an application as referred to in Section 88. If such an application is so made, the computation of the tax arrear would be as provided in clause (a) thereof. Such computation would be on the basis of certain percentage .....

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ys from the date of the order, upon which the designated authority would issue a certificate to the declarant. Under Section 91, the designated authority would subject to the conditions provided in Section 90, grant immunity from prosecution and penalty in respect of matters covered under the declaration under Section 88 of the KVSS,1998. 23. It can thus be seen that the KVSS,1998 envisaged settlement of tax arrears. A declaration under Section 88 could be made only in respect of tax arrear i.e. .....

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application was accepted, it is difficult to comprehend how the Settlement Commission would continue to enjoy the jurisdiction over the same subject matter, particularly when the settlement declaration was accepted by the designated authority and the petitioner also paid the taxes as per the directives of the designated authority. For the same period the Settlement Commission would not be allowed to process the application for settlement. Any other view would give rise to independent and separat .....

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apply in case where an order was passed by the Settlement Commission under sub-section (4) of Section 245D of the Act or similar such provision for settlement under the Wealth Tax Act to any tax arrear in respect of such assessment year. In plain terms therefore, the provisions of the KVSS,1998 would be ousted in a case where the Settlement Commission has passed an order under sub-section (4) of Section 245D, to any tax arrear in respect of such assessment year. This provision would have two pur .....

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f which an offer for settlement could be made under the KVSS,1998. Once therefore the Settlement Commission passes an order under sub-section (4) of Section 245D of the Act, it would not be open for an assessee to then approach the designated authority under the KVSS,1998 and seek any adjustment in the tax arrear. Till then, however, the issue would be wide open and the assessee, as in the present case, could approach the designated authority under the KVSS,1998. The Settlement Commission theref .....

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