TMI Blog2002 (9) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... January 31, 1999, which was the extended time limit for making declarations under section 88 of the aforesaid Act. - - - - - Dated:- 25-9-2002 - Judge(s) : M. S. SHAH., K. A. PUJ. JUDGMENT The judgment of the court was delivered by M.S. SHAH J.- In this petition under article 226 of the Constitution, the petitioner has prayed for a writ, direction or order of this court quashing and setting aside the orders dated February 9, 1999, passed by the respondent-Commissioner of Income-tax, Rajkot, rejecting the petitioner's declarations under the Kar Vivad Samadhan Scheme for the assessment years 1984-85 to 1991-92 and the petitioner has also prayed for a writ to direct the respondent to accept the petitioner's declarations under the said Scheme and to pass necessary orders under the said Scheme as required by law. The petitioner is an individual who has landed properties and various sources of income assessable under the Income-tax Act, 1961 (hereinafter referred to as "the Act"), as well as under the Wealth-tax Act. The petitioner was assessed to income-tax and wealth-tax for various years and on completion of the said assessments, certain tax liabilities arose. The petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81-82 and 1988-89 to 1993-94 in respect of the assessments under the Income-tax Act as well as under the Wealth-tax Act. The details about the appeals including the assessment year, the amount of tax involved, the amount of interest and penalty involved, etc., are set out in a statement which is annexed to this judgment at annexure B. After filing the appeals, in the last week of January, 1999, the petitioner also filed declarations under the KVSS in respect of the assessment years which were the subject matter of those appeals. By his orders dated February 15, 22, 23, 1999, and March 5, 1999, the respondent acting as the designated authority under the KVSS accepted the petitioner's declarations which were filed in the pending appeals in respect of the above assessment years, but by his orders dated February 9, 1999, rejected the declarations in the pending revision applications. The said orders dated February 9, 1999, are under challenge in the present petition. The petition was filed on March 22, 1999, and during pendency of the present petition, the respondent rejected the petitioner's applications for condonation of delay and on that basis dismissed the petitioner's revision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of self-assessment tax, etc. The time limit for filing of further appeal had also long since expired. 2.5 The deponent submits that recovery proceedings under the law were in progress since long, for realisation of these tax arrears by auction of the immovable properties and a part of the total arrears against the petitioner had already been realised by auction of his properties. The outstanding tax arrears mentioned in paragraph 2.2 above, were after adjustment of an amount of Rs. 2.88 crores, realised on November 6, 1996, from auction sale of some land plots at Jamnagar. In connection with these recovery proceedings, the petitioner had also filed a civil suit before the Civil Court, Jamnagar, and the matter relating to auction proceedings also came before the Gujarat High Court in Civil Revision Application No. 340 of 1994, decided on November 28, 1995. The petitioner thereafter filed a special leave petition before the Supreme Court. 2.6 The deponent therefore submits that, the income-tax and wealth-tax assessment proceedings for all the years from the assessment years 1980-81 to 1993-94, except for income-tax assessment for the assessment year 1981-82 and wealth-tax as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under section 264 of the Income-tax Act/section 25 of the Wealth-tax Act, even if the same incumbent happens to hold both the posts. In support of this contention, reliance is placed on the decision of this court in Gufic Pharma Ltd. v. J.G. Arora [1999] 238 ITR 835. On the other hand, Mr. B.B. Naik, learned standing counsel appearing for the respondent-Revenue, has vehemently opposed the petition and made the following submissions: The object of the KVSS was to settle pending disputes. Hence, revision applications had to be pending on September 1, 1998, when the KVSS came into force and also on the date of filing the declarations under the KVSS. Since the revision applications were not pending on September 1, 1998, the revision applications cannot be said to be "pending". Strong reliance has been placed on the decisions of the Karnataka High Court in Gopal Films v. Dy. CIT [1999] 237 ITR 655 and of the Calcutta High Court in Paresh Premji Rajda v. CIT [1999] 239 ITR 11 in support of his submission that the KVSS was introduced to resolve pending disputes and not to create artificial "pendency" of disputes for the purpose of giving benefits to the assessees whose assessments h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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),--... (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 per cent. of the disputed income for the persons referred to 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;... 89. Particulars to be furnished in declaration.--A declaration under section 88 shall be made to the designated authority a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax arrears as on March 31, 1998, which remain unpaid on the date of filing the declaration under section 88--was complied within the instant case. The serious controversy is about the second condition regarding "pendency" of revision applications in respect of the relevant assessment years as on the date of the declarations. Learned counsel for the assessee has relied on the decisions of the apex court interpreting the expression "pending appeals" in cases under the Industrial Disputes Act and under the Indian Income-tax Act, 1922, and the Income-tax Act, 1961 and the decisions interpreting the expression "pending proceedings". In Raja Kulkarni v. State of Bombay, AIR 1954 SC 73; [1953-54] 5 FJR 677 (SC) the controversy arose in the following context: Section 24(b) of the Industrial Disputes Act, 1947, prohibits a workman, who is employed in any industrial establishment, from going on strike during the pendency of an appeal before the Appellate Tribunal. Section 25 renders a strike and a lock-out illegal if it is declared, commenced or continued in contravention of the provisions of section 24. Section 27 provides for penalty for contravention of section 25 which may even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y after the Appellate Assistant Commissioner would condone the delay that the appeal before him would come into existence and, therefore, if he refuse to condone the delay in filing of the appeal before him, the order passed by him is not in appeal and, therefore, no further appeal would lie under section 31 of the Act. In short, the contention was that there is no appeal unless it is presented in time and if presented beyond the time, unless the delay is excused. The apex court rejected the said contention and held that even where an appeal is filed beyond the prescribed period of limitation, it is also an appeal and, therefore, the order rejecting the application for condonation of delay is also an order passed in the appeal. In S.B. Jain, ITO v. Mahendra [1972] 83 ITR 104 (SC), notice for reopening the assessment issued under section 34(1)(a) of the Indian Income-tax Act, 1922, was pending when the Income-tax Act, 1961, came into force on April 1, 1962. Ultimately, that notice came to be discharged by the authority after April 1, 1962, and thereafter the Income-tax Officer issued another notice for reopening the assessment under section 148 of the Income-tax Act, 1961. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly pending" and that merely because the notice or proceedings were not issued or commenced within the period of limitation, that does not detract from the fact that the proceedings were "pending". Mr. Naik, learned counsel for the respondent, however, submitted that unless the delay in filing a revision application is condoned, it cannot be said that the revision application was pending because the revision application can be said to have been instituted only after the delay is condoned. In this connection, reference is made to the provisions of sub-section (3) of section 264 of the Income-tax Act, 1961, which read as under: "264.(3) In the case of an application for revision under this section by the assessee, the application must be made within one year from the date on which the order in question was communicated to him or the date on which he otherwise came to know of it, whichever is earlier: Provided that the Commissioner may, if he is satisfied that the assessee was prevented by sufficient cause from making the application within that period, admit an application made after the expiry of that period." Reliance is also placed on the decision of the Karnataka High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This court directed the designated authority to accept the declaration as complying with the requirements of the KVSS and to extend to the assessee in that case the benefit of the KVSS. In Gufic Pharma Ltd. v. J.G. Arora [1999] 238 ITR 835, another Division Bench of this court held that the following were the conditions precedent for accepting declarations under the KVSS: (1) tax arrears determined on or before March 31, 1998; and (2) pending appeal/revision/writ petition on the date of the declaration. In that case, the designated authority held that the revision application had no merit and, therefore, the declaration under the KVSS filed in such a revision cannot be accepted. Disapproving the said approach of the designated authority, this court held as follows: "It is not the condition for operation of the Kar Vivad Samadhan Scheme that the appeal, revision or reference should have come before March 31, 1998, or before the coming into force of the Scheme. It was not intended to curtail the right of any aggrieved party to prosecute his remedies under law......The mere fact that the assessee had not filed a revision prior to the coming into force of the Kar Vivad Samad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who also was the designated authority under the KVSS, 1998. After filing the revisions, the petitioners also filed before the respondents declarations under the KVSS. When the revisions came up for hearing, the petitioners requested to keep the revisions pending till decisions are taken on the declarations under the KVSS. The respondent-Commissioner of Income-tax by his order dated December 14, 1998, held that the revision petitions filed by the petitioners were not maintainable and cannot be treated as valid revision petitions and, therefore, the declarations under the KVSS cannot be accepted. The assessee contended before the Kerala High Court that the only question that has to be looked into is whether the revisions were pending at the time when the declarations were filed and that the designated authority is not competent to go into the question whether the revision petitions are maintainable or any relief can be granted in the revision petitions. According to the Revenue, the revisions were not maintainable because the assessee did not file any appeal to challenge the assessment of tax, but only filed the revisions to challenge the interest, but the levy of interest is auto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght condonation of delay on the ground that the petitioner's advocate was sick for a prolonged period and subsequently expired on August 7, 1996, and thereby could not attend to the affairs of the petitioner. After filing of the said revision on January 5, 1999, the petitioner also filed a declaration under the KVSS on January 6, 1999, claiming the benefit under the Scheme, by contending that the revision application was pending on the date of declaration. The designated authority rejected the declaration on the ground that the revision application was filed beyond the period of limitation and, therefore, was not maintainable. The assessee challenged that order. Negativing the challenge, the Karnataka High Court held as under: "The contention of the petitioner that 'admission' is not a condition precedent to hold that the revision petition is 'pending' for purposes of section 95 of the Finance (No. 2) Act, 1998, may be correct in so far as revisions initiated by the Commissioner on his own motion and revision proceedings initiated on an application made by the assessee within the period of limitation of one year provided under sub-section (3) of section 264 are concerned. But, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... none of the aforesaid three decisions of the apex court interpreting the expression "pending appeals" or "pending proceedings" were brought to the notice of their Lordships of the Karnataka and the Calcutta High Courts. In absence of the expression "admitted and pending revisions" we fail to appreciate the reasoning of the above High Courts that "pending revisions" would mean revisions filed within the period of limitation or where filed beyond time, delay is excused. This interpretation flies in the face of the three decisions of the Supreme Court in favour of the assessee. Mr. Naik, for the Revenue, submitted that since the appeals filed by the petitioner for the relevant assessment years were earlier dismissed for non-deposit of tax, the revisions were not maintainable by virtue of the provisions of section 264(4) which reads as under: "264. (4) The Commissioner shall not revise any order under this section in the following cases-- (a) where an appeal against the order lies to the Deputy Commissioner (Appeals) or to the Commissioner (Appeals) or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired or, in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislative intent for framing the Scheme. Mr. Naik, learned counsel for the Revenue, has vehemently submitted that the assessee had allowed the assessment orders to become final long back in the years 1992-93 when the petitioner's appeals were dismissed for failure to predeposit the self-assessed tax. It is, therefore, submitted that it was not intended that the benefit of the KVSS should be given to tax defaulters who allowed the assessment orders to become final long back and thereafter upon coming into force of the KVSS they create dishonest litigation or create artificial pendency by filing grossly belated revision applications and then file declarations under the KVSS. The scheme was evolved only to settle the pending disputes and not to create new disputes after coming into force of the KVSS. Mr. Naik has relied on the following paragraph from the speech of the Finance Minister while introducing the Scheme: "Litigation has been the bane of both direct and indirect taxes. A lot of energy of the Revenue Department is being frittered in pursuing large number of litigations pending at different levels for long periods of time. Considerable revenue also gets locked up in suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e March 31, 1998, and remaining unpaid on the date of making a declaration under section 88. It is submitted that if the legislative intent was what the Revenue contends, section 95(1)(c) would have accordingly provided that the scheme shall not apply in respect of the tax arrear under any direct tax enactment to a case where no appeal or reference or writ petition or application for revision was pending on the date of commencement of the scheme and also on the date of filing declaration. It is further submitted on behalf of the assessee that the object of the scheme was not just to settle the pending disputes, i.e., litigations pending on the date of commencement of the scheme but the main object of the scheme was to collect revenue. Reference is also made to the decisions of the Kerala High Court in the case of Lukkose John Thoppil v. CIT [2000] 242 ITR 1 taking the view that the object of the KVSS contained in the Finance (No. 2) Act, 1998, was not only to put an end to the litigation but also to see that the tax is collected from the assessees. It is further submitted that the Revenue having accepted this view of the Scheme in the appeals filed by this very assessee (the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emorandum explaining the provisions of the Finance Bill which sets out the object behind the clause. The apex court then referred to the well recognised rule of interpretation of statutes that where a literal interpretation leads to an absurd or unintended result, the language of the statute can be modified to accord with the intention of Parliament and to avoid absurdity. The court then quoted with approval the following passage from Maxwell's Interpretation of Statutes (12th edition): "Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity which can hardly have been intended, a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence. This may be done by departing from the rules of grammar, by giving an unusual meaning to particular words, or by rejecting them altogether, on the ground that the Legislature could not possibly have intended what its words signify, and that the modifications made are mere corrections of careless language and really give the true meaning. Where the mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as early as possible. A similar view is taken by the Delhi High Court in Jyotsna Holding P. Ltd. v. Designated Authority, under Kar Vivad Samadhan Scheme [2000] 243 ITR 246, that the scheme is meant to provide a quick and voluntary settlement of tax dues outstanding as on March, 31, 1998, by offering waiver of a part of the arrears of tax, interest and penalty and providing immunity against institution of prosecution and imposition of penalty. The central idea of the Kar Vivad Samadhan Scheme is the existence of "tax arrear" as on March 31, 1998, and as on the date of declaration and pendency of dispute before the appropriate forum as on the date of filing of the declaration and culmination of such pending proceedings or dispute in payment of the amount determined under the scheme. Secondly, while we agree that the rule of interpretation enunciated in C.W.S. (India) Ltd.'s case [1994] 208 ITR 649 (SC), will have to be adopted if literal construction of a statutory provision leads to a discriminatory or incongruous result or if it leads to a manifest contradiction of the apparent purpose of the enactment or to some inconvenience or absurdity which can hardly have been intended, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e justified in inferring a casus omissus and then supplying the same. What tilts the balance in favour of the assessee is the fact that the Revenue itself has accepted the declarations made by the assessee under the same scheme in January, 1999, in appeals which were also filed belatedly for challenging the assessment orders made in the year 1992 and even earlier. The Revenue having accepted the interpretation in favour of the assessee in appeals filed under identical circumstances cannot be permitted to take the diametrically opposite view. We are conscious of the fact that some times the Revenue may not carry the matter further where the amounts of tax/penalty are comparatively smaller. However, the following figures (rounded off in lakhs) clearly indicate that the Revenue had accepted the declarations under the KVSS in respect of appeals filed in January, 1999, for challenging the assessment orders dated March 29, 1996, made under the Income-tax Act for the assessment years 1992-93 and 1993-94 and similarly the appeals filed on January 13, 1999, for challenging the assessment orders dated March 31, 1992 under the Wealth-tax Act for the assessment years 1988-89, 1989-90 and 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very assessee and the Revenue in case of appeals and the Revenue had accepted the assessee's interpretation of section 95(i)(c) that in view of the decision of the Supreme Court in Mela Ram and Sons v. CIT [1956] 29 ITR 607, the declaration could not be rejected merely on the ground that the declaration was filed in an appeal or other proceeding which was instituted beyond the period of limitation prescribed for filing such proceedings. As already indicated above, we are unable to find any difference between appeal and revision so as to make the decision in the case of declarations made under the KVSS in the pending appeals inapplicable to the declarations made under the same scheme in the revision applications which were also similarly belated as the appeals were. As per the decision of the Supreme Court in Shankar Ramchandra Abhyankar v. Krishnaji Dattatraya Bapat, AIR 1970 SC 1, appeals and revisions are part of the same appellate jurisdiction that the higher forum exercises for examining the legality of the orders passed by the subordinate courts or fora. While, therefore, we agree with Mr. Naik that acceptance of the petitioner's declarations under the KVSS in appeals cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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