TMI Blog2002 (4) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner was in arrears of tax as on the date of declaration. Thus, we do not find any merit in the argument that respondent No. 1 had erred in refusing to accept the declaration filed by the petitioner. - - - - - Dated:- 22-4-2002 - Judge(s) : G. S. SINGHVI., NIRMAL SINGH. JUDGMENT This is a petition for quashing order annexure P-5 dated February 26, 1999, passed by the Commissioner of Income-tax, Patiala (respondent No. 1), treating the declaration filed by the petitioner under section 89 of the Finance (No. 2) Act, 1998, as non est. The other prayer made in the partition is for issuance of a direction to allow the petitioner benefit under the Kar Vivad Samadhan Scheme (hereinafter described as "the KVSS") for the assessment year 1989-90. The petitioner is a partnership firm engaged in the business of wholesale scrap material. It filed a return on August 30, 1989, for the assessment year 1989-90 declaring an income of Rs. 1,04,560. By an order dated January 29, 1990, the Assessing Officer assessed the income of the petitioner at Rs. 3,80,080 and created demand of Rs. 89,589. He also levied interest amounting to Rs. 6,936 under section 220(2) of the Income-tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quence of giving effect to the appellate order but remaining unpaid on the date of declaration. However, on going through the record, it was found that no arrears were outstanding as on March 31, 1998, or as on the date of the declaration in the case of the petitioner firm. Accordingly, a show cause notice was issued for February 17, 1999, on which date, the petitioner firm filed a written reply stating that interest under section 220(2) amounting to Rs. 15, was payable by the firm. He further stated that the assessee is also liable to pay statutory interest under section 234C, amounting to Rs. 55 was payable by the petitioner firm as on March 31, 1998, which constituted the tax arrear. The plea of the declarant was not accepted in view of the specific provisions of clause (f) and clause (m) of section 87 of the Finance (No. 2) Act, 1998, which defines disputed tax as the total tax determined and payable as on the date of making declaration under section 88 and the tax arrear, as the tax and interest determined on or before March 31, 1998. As there was no determined and payable tax arrear as on the date of the declaration and no appeal had been filed by the petitioner firm against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner as on the appointed day and, therefore, it was not entitled to avail of the benefit under the KVSS. He pointed out that interest was determined on January 29, 1990 and was paid by the petitioner on December 29, 1990, and therefore, nothing was payable by it on the appointed day. Shri Sawheny controverted the argument of Shri Mittal that the firm and its partner; filed a joint declaration and asserted that two separate declarations were filed by them. In support of his argument that the petitioner is not entitled to the benefit under the KVSS, Shri Sawheny relied on the decision of this court in Biru Mal Gauri Shankar lain and Co. v. CIT [2000] 243 ITR 234 and of the Delhi High Court in Jyotsna Holdings Pvt. Ltd. v. Designated Authority under Kar Vivad Samadhan Scheme [2000] 243 ITR 246. We have given serious thought to the respective arguments. Sections 87(f) and (m) and 88 of the Finance (No. 2) Act, 1998, which constitute the core of the KVSS read as under: "(f) 'disputed tax' means the total tax determined and payable, in respect of an assessment year under any direct tax enactment but which remains unpaid as on the date of making the declaration under section 88;... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermined 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; (v) where the tax arrear includes the tax, interest or penalty determined in any assessment on the basis of search and seizure proceedings under section 132 or section 132A of the Income-tax Act,-- (A) in the case of a declarant, being a company or a firm, at the rate of forty-five per cent. of the disputed income; (B) in the case of a declarant, being a person other than a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esses, at the rate of fifty per cent. of the amount of such fine, penalty or interest, due or payable as on the date of making a declaration under section 88; (ii) in any other case, at the rate of fifty per cent. of the amount of duties (including drawback of duty, credit of duty or any amount representing duty) or cesses due or payable on the date of making a declaration under section 88." Before proceeding further, we may mention that by an amendment made in 1999, the cut off date specified in section 88 was changed from December 31, 1998, to January 31, 1999. An analysis of the provisions quoted above shows that for the purpose of availing of the benefit under the KVSS, an assessee is required to file a declaration in accordance with section 89 in respect of tax arrears. The expression "tax arrears" which has been defined in relation to direct tax enactments, is the amount of tax, penalty or interest determined on or before March 31, 1998, which remains unpaid on the date of declaration. This necessarily means that for availing of the benefit under the KVSS, the assessee must prove that the tax arrears which were determined prior to March 31, 1998, had remained unpaid on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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