TMI Blog2002 (2) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeded as if the Explanation to section 140A(1) of the Income-tax Act is applicable to the KVS Scheme. - - - - - Dated:- 22-2-2002 - Judge(s) : R. V. RAVEENDRAN., K. L. MANJUNATH. JUDGMENT The petitioner is an assessee under the Income-tax Act, 1961 (the "I.T. Act" for short). For the assessment year 1995-96 (accounting period ended on March 31, 1995), the appellant filed his return on March 26, 1997, declaring a total income of Rs.2,59,030. His return was processed under section 143(1)(a) on September 27, 1997. As it was a survey case, a notice under section 143(2) was issued and after hearing, an order under section 143(3) was passed on January 8, 1998. Under the said order, the total income was determined as Rs.2,59,600. Income-tax thereon was calculated as Rs.78,840 and after deducting Rs.1,193 as rebate under section 88, the tax payable was arrived at as Rs.77,647. A sum of Rs.77,181 was added as interest under sections 234A, 234B and 234C. Thus, the total amount payable was shown as Rs.1,54,828. Feeling aggrieved by the said order of assessment, the petitioner filed a revision petition under section 264 of the Act on April 23, 1998. The Kar Vivad Samadhan Scheme, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resentation dated April 6, 1999, reiterating that the amount payable was only Rs.8,886 and requested the first respondent to rectify the certificate dated February 19, 1999. The first respondent, by letter dated April 15, 1999, rejected the said representation stating that there was no error in the certificate. Feeling aggrieved, the appellant approached this court by filing W.P. No. 19182/1999 for the following reliefs: (a) for quashing the certificate (Form No. 2A), dated February 19, 1999, and the endorsement dated April 15, 1999. (b) for a direction to respondent No. 2, not to take or initiate any proceeding for recovery as per assessment order dated January 8, 1998, and certificate dated February 19, 1999; and (c) a direction to the first respondent to grant relief as per sections 87 and 88(a)(iii) of the Kar Vivad Samadhan Scheme, as claimed in his declaration dated January 27, 1999. The learned single judge who heard the matter, by order dated June 28, 1999, dismissed the petition. The appellant has filed this appeal, challenging the said order and for grant of the reliefs prayed for in the writ petition. Even though the first respondent had not disclosed in the ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st, for the purpose of the KVS Scheme." To find an answer to the issue, detailed reference to the relevant provisions of the KVS Scheme contained in the Finance Act, as also the clarification given by the Central Board of Direct Taxes (the "CBDT") will be necessary. The relevant portion of section 88 of the Finance (No. 2) Act, relating to settlement of tax payable, reads as follows: "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 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 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the "total tax determined" and the aggregate of the tax paid (in this case it would be Rs.78,840 less Rs.66,993, that is Rs.11,847). (d) The income corresponding to the aggregate of tax paid and the disputed tax will have to be next determined. (in this case, the tax and corresponding income will be as follows: Tax Corresponding income Total tax determined 78,840 2,59,600 Total paid towards arrears 66,993 2,29,980 ---------------------------- Tax remaining unpaid 11,847 29,620 ---------------------------- (e) The disputed income will have to be arrived at by deducting the income corresponding to the aggregate of prepaid taxes from the total income assessed by the Assessing Officer (in this case, the disputed income will there fore be Rs.2,59,600 minus Rs.2,29,980 = Rs.29,620. The tax payable under the scheme by the assessee would be 30 per cent. of Rs.29,620 or Rs.8,886). We therefore find that the appellant-assessee has correctly calculated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KVS Scheme, as contained in Chapter IV of the Finance (No. 2) Act, 1998. The Explanation to section 140A(1) of the Income-tax Act will not apply for the following two reasons: "(i) The provisions of section 88 of the Finance (No. 2) Act, 1998, prevail over the provisions of section 140A of the Income-tax Act, section 88 specifically states that 'notwithstanding anything contained in any direct tax enactment', the amount payable under the KVS Scheme will be as stated in the scheme. (ii) In view of the pendency of the revision, any payment made by the assessee towards tax arrears will be on account and without prejudice subject to the final decision in the revision." The object and intention of the KVS Scheme has been stated by the Finance Minister in his Budget Speech 1998-99, as follows : "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 such disputes. Declogging the system will not only incentivise honest taxpayers, enable Government to realise its reasonable du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g portion of the disputed income and waiver of interest as also penalty if any. If any amount paid towards arrears during the pendency of the litigation (by way of appeal, revision, etc.) is to be irreversibly adjusted against the interest under section 140A, that would render infructuous the pending litigation (in this case pending revision petition). Surely that cannot be and in fact is not the intention. As noticed above, if the appellant had succeeded in the revision petition, his liability towards interest would have been deleted/reduced and obviously the sum of Rs.60,000 that has been paid by him towards tax arrears would have been adjusted either against the tax or would have been refunded. Therefore, the Explanation to sub-section (1) of section 140A of the Income-tax Act applies only where the liability has attained finality. This is clarified by the Department itself. The Government of India, Ministry of Finance (Department of Revenue), Central Board of Direct Taxes, issued certain clarifications by circular F.No. 149/145 of 1998/TPL, dated September 3, 1998, under section 96 of the Finance (No. 2) Act, 1998. The said section 96 enables the Central Government to issue f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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