TMI Blog2003 (5) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... The construction period was from the middle of 1991 to the end of September 1994. The cost of construction according to the appellant's registered valuer was Rs. 60,68,000 but as per the Income-tax Departmental Valuer it was Rs. 1,03,96,000 as on September 30, 1994. The appellant estimated the cost of construction up to Mardi 31, 1994 (previous year ending date for the assessment year 1994-95), at Rs. 30,00,000 and after claiming the sources of funds to the extent of Rs. 10,25,000, he made voluntary disclosure of income at Rs. 19,57,000 under section 69B of the Income-tax Act, 1961 (for short "the Act") plus the income from business at Rs. 90,000 and filed a return of income declaring a total income of Rs. 20,65,000 for the assessment year 1994-95. The Assessing Officer adopted the valuation made by the Departmental Valuer at Rs. 1,03,96,936 and determined the total income at Rs. 45,54,965 in his assessment order dated March 21, 1997, passed under section 143(3) and demanded the following taxes and interests: Rs. Rs. (a) Income-tax 18,00,986 (b) Surcharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as on Net tax payable as date of filing declaration under per order of the CIT the Scheme as per the CIT ------------------------------------------------------------------------------------------------ Rs. Rs. ------------------------------------------------------------------------------------------------ (a) Tax and surcharge 5,96,114 3,99,184 (b) Interest under section 234A/B/C 13,32,524 Nil ------------------------------------------------------------------------------------------------ Since the first respondent set off the self assessment tax paid by the appellant under section 140A on December 26, 1994, against the interest demand of Rs. 16,32,514, the appellant being aggrieved by the said action of the first respondent, filed an application under section 96(2) of the Scheme on January 1, 1999, to the Central Board of Direct Taxes (the "CBDT"). Before the Central Board of Direct Taxes, the appellant contended, inter alia, that the Scheme is independent of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 3,00,184 and nullify the orders dated December 22, 1998, at annexure D and order dated January 19, 1999, at annexure H to the extent they are not in accordance with the Board's instructions. (e) Direct the respondents to pay the costs of this writ petition." The learned single judge, having held that nowhere under the Scheme it is stated that where the assessment is already made and where the tax was paid under section 140A of the Act and the same has been adjusted, even then, in terms of the Scheme readjustment has to be done, dismissed the writ petition. In other words, the learned judge has held that the Scheme does not contemplate adjustments of the amount paid by an assessee under section 140A of the Act. Hence, this appeal by the aggrieved assessee. We have heard Sri S. Ganesh Rao, learned counsel for the appellant, and learned standing counsel for the Income-tax Department. Sri Ganesh Rao contended that it is quite apparent and clear from the statements made by the Finance Minister with regard to the Scheme on the floor of the House in his Budget Speech to which reference is made by the learned single judge in the impugned order, under the Scheme in prepaid or pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tax enactment or indirect tax enactment or any other provision of any law for the time being in force, the amount payable under this Scheme by the declarant shall be determined at the rates specified hereunder, namely:-- (a) where the tax arrear is payable under the Income-tax Act, 1961 (43 of 1961),-- (i) in the case of a declarant, being a company or a firm, at the rate of thirty five per cent. of the disputed income; (ii) in the case of a declarant, being a person other than a company or a firm, at the rate of thirty per cent. of the disputed income; (iii) in the case where tax arrear includes income-tax, 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." The last date for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the department that with regard to payment made by the assessee under section 140A of the Act, the assessee cannot be regarded as a person who was litigating with regard to tax paid by him under section 140A of the Act on the date of declaration under section 89 of the Act. According to the department, the assessee would be entitled to the benefit under the Scheme only if he was litigating with regard to disputed tax as from the date of declaration and not otherwise. The appellant in support of his contention places reliance on the judgment of a Division Bench of this court in Mangilal S. Jain v. CIT [2002] 257 ITR 31. In that case the assessee, the declarant under the Scheme, computed his tax arrear for the assessment year 1995-96 at Rs. 8,886 but the Commissioner did not accept that computation and issued a certificate of information where it showed the tax arrear as Rs. 89,028. The assessee sent a representation and requested the Commissioner to verify the certificate. The Commissioner rejected the representation stating that there was no error in the certificate. On a writ petition to quash the certificate and direct the Commissioner to grant relief, the learned single ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id under section 140A of the Act, Be that as it may, even according to the judgment of this court in Mangilal S. Jain v. CIT [2002] 257 ITR 31, where a sum of money in respect of which benefit is claimed under the Scheme is admitted or undisputed, the applicant will not be entitled to the benefit under the Scheme. The Scheme clearly contemplates that the benefit of the Scheme could be claimed with regard to disputed tax arrears only and not with regard to admitted tax. In forming the above opinion, we are fortified by a judgment of the Kerala High Court in E. Philip Joseph v. ITO [1998] 234 ITR 846 with which, we are in respectable agreement. In that case, the petitioner-firm had filed returns for the assessment years 1975-76 and 1976-77 declaring income of Rs. 78,010 and Rs. 76,190, respectively, under section 140A of the Act and paid tax in respect of the income. The Income-tax Officer determined the income of the petitioner-firm at Rs. 1,26,360 for the assessment year 1975-76 and Rs. 1,04,838 for the assessment year 1976-77. The Commissioner of Income-tax set aside the additions made by the Income-tax Officer. Since fresh assessments were not made pursuant to the order of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able and, accordingly, the assessments were completed vide his order dated March 19, 1998, assessing the total amounts payable for 1994-95 as Rs. 93,032 and for 1995-96 as Rs. 51,458. The Assessing Officer simultaneously initiated penal proceedings under section 13 of the Interest-tax Act. The petitioner filed appeals before the Commissioner of Income-tax (Appeals) and the said appeals were pending. The petitioner filed a declaration on December 29, 1998, under section 89 of the Finance (No. 2) Act, 1998, to avail of the benefit of the Scheme in respect of the interest-tax determined for the assessment years 1994-95 and 1995-96. But the declaration filed by the petitioner was lodged on the ground that there were no tax arrears remaining unpaid on the date of declaration. The refund due under the Income-tax Act to the tune of Rs. 2,59,445 was already adjusted before March 31, 1998, against the interest-tax due and the said adjustment was never challenged. On a writ petition to declare that the petitioner was entitled to the benefit of the Scheme, the Division Bench of the Andhra Pradesh High Court, while dismissing the writ petition, held that since the demand under the Interest-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest. It cannot be said that the impugned 'adjustment', even if it is vitiated by procedural irregularity or failure in putting the petitioner on prior notice, effaces itself out of existence and remains a dead letter. I am inclined to think that the adjustment is not beyond the apparent authority of the Assessing Officer nor does it lack the sanction of law, taking an overall view. The same officer is the assessing authority under the Income-tax Act as well as the Interest-tax Act. Though he acts in different capacities, he is empowered to recover the tax falling due under either of the enactments. It would have been open to him to attach the refundable amount due under the Income-tax Act for the purpose of recovering the outstanding interest-tax. Instead of doing that, he has resorted to the mode of recovery by way of adjustment which did not evoke any sort of protest from the assessee. At best, it is a procedural irregularity. In fact, there is every reason to think that the adjustment was done with the implied consent of the assessee. The long silence of the assessee coupled with the fact that learned counsel for the assessee made it clear that the assessee did not have an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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