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TMI Blog2002 (4) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1961 (for short, "the Act"). The petitioner paid the amount of tax and interest on December 29, 1990. After eight years, it filed a declaration dated January 31, 1999, for availing of the benefit under the KVSS. Vide letter dated February 10, 1999, respondent No. 1 asked the petitioner to explain as to how its case was covered under the KVSS and after considering its reply, he held that the declaration filed by it was non est. The petitioner has averred that as on the date of declaration, a sum of Rs. 15 was payable out of the interest levied under section 220 and a sum of Rs. 40 was payable under section 234C of the Act and, therefore, order annexure P-5 dated February, 26, 1999, passed by respondent No. 1 rejecting its declaration should be declared as vitiated by an error of law. In his reply, respondent No. 1 has defended the impugned order by asserting that the petitioner's case was not covered by the provisions of the KVSS. The precise case of respondent No. 1 is revealed from the following extracts contained in the written statement: "As per information available on record, the whole of the tax arrear including interest under section 220(2) was paid by the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew 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 such deemed interest as on the date of declaration, as such, the declaration filed by the petitioner firm was not considered valid and was, accordingly, treated as non est, by treating the declaration as though it had never been made by the petitioner firm. In reply to the show cause notice, the petitioner firm and its partners had pleaded that since the partners' shares have been revised, these were required to be considered to have been revised prior to March 31, 1998, as per the clarification of the Central Board of Direct Taxes and as the partners were otherwise eligible for the Kar Vivad Samadhan Scheme, their cases would be considered for relief under the Kar Vivad Samadhan Scheme, 1998, along with the petitioner firm. Since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority 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;... (m) 'tax arrear' means,- (i) in relation to direct tax enactment, the amount of tax, penalty or interest determined on or before the 31st day of March, 1998, under that enactment in respect of an assessment year as modified in consequence of giving effect to an appellate order but remaining unpaid on the date of declaration (ii) in relation to indirect tax enactment,- (a) the amount of duties (including drawback of duty, credit of duty or any amount representing duty), cesses, interest, fine or penalty determined as due or payable under that enactment as on the 31st day of March, 1998, but remaining unpaid as on the date of making a declaration under section 88; or (b) the amount of duties (including drawback of duty, credit of duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied, 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 company or a firm, at the rate of forty per cent. of the disputed income; (b) where the tax arrear is payable under the Wealth-tax Act, 1957 (27 of 1957),- (i) at the rate of one per cent. of the disputed wealth (ii) in the case where tax arrear includes wealth-tax, interest or penalty levied, at the rate of one per cent. of the disputed wealth; (iii) in the case where tax arrear includes only interest payable or penalty levied, at the rate of fifty per cent. of the tax arrear; (iv) where the tax arrear includes the tax, interest or penalty determined in any assessment on the basis of search and seizure proceedings under section 37A or section 37B of the Wealth-tax Act, at the rate of two per cent. of the disputed wealth; (c) where the tax arrear is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears. 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 the date of declaration. In Biru Mal Gauri Shankar Jain and Co. v. CIT [2000] 243 ITR 234, a Division Bench of this court interpreted the KVSS introduced by the Finance (No. 2) Act, 1998, and held as under: "A person who does not fulfill the basic pre-requisites of the Kar Vivad Samadhan Scheme, 1998, cannot claim its benefit merely on the ground that the designated authority has passed an order determining the sum payable in full and final settlement under section 90(1) of the Finance (No. 2) Act, 1998. Further, once a declaration is held to be not covered by the Kar Vivad Samadhan Scheme any tax paid thereunder would automatically become refund able. In that event, even the provisions of section 93 of the Act would also not applicable." We may now advert to the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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