TMI Blog2001 (3) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... further prayer is for the quashing of the order and for a direction to the Commissioner of Income-tax to admit and accept the declaration filed by the petitioner under the Kar Vivad Samadhan Scheme (hereinafter referred to as "the K.V.S. Scheme"). Obviously, the basic challenge was made in W. P. No. 1425 of 1999 because only if the order dated November 18, 1998, challenged in that writ petition was quashed, the petitioner could get the advantage of the KVS Scheme. The facts, as they appear, are in the short sphere. The petitioner is an income-tax assessee. His assessment for the income tax assessment year 1994-95 was completed by the Assessing Officer, viz., Income-tax Officer, Film Ward-II, Chennai, by his order dated March 29, 1996. The tax liability of Rs. 29,21,282 along with the consequential interest was found against the petitioner. The petitioner, therefore, preferred an appeal before the Commissioner of Income-tax (Appeals) and his appeal was dismissed by the order dated December 20, 1996. The petitioner, therefore, filed an application dated january 29, 1997, before the commissioner of Income-tax, Tamil Nadu-IV, for stay of collection of tax but that was rejected by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er also sought for a direction to lift the attachment orders. However, it is clear that in spite of this letter. which was earlier in point of time, the authorities had diverted the amount of Rs. 24,25,700 from out of the cash seized during the search for wiping out the tax arrears of the assessment years 1993-94 and 1994-95. It seems that the petitioner filed a declaration under the KVS Scheme for the assessment year 1994-95 but, his petition was rejected on the ground that there were no arrears of tax for the assessment year 1994-95 as the Department had already adjusted the amount. The Commissioner of Income-tax, Chennai, issued a letter that the petitioner's request dated October 21, 1998, seeking adjustment of a part of the seized cash towards the tax arrears for the block assessment had no merit as a sum of Rs. 24,25,810 has already adjusted towards the arrears of tax for the assessment years 1993-94 and 1994-95 by the then Assessing Officer and the appropriation had taken place in February, 1997, before the petitioners case was notified to the Central Circle of the Income-tax Department. On November 19, 1997, the petitioner was directed to file his returns for the block as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial provision for the assessment of the search cases" and, therefore, the concerned authorities were not justified in making the adjustment and thereby wiping out the tax arrears for the assessment year 1994-95. The learned judge has also rejected the case pleaded by the Department that the adjustment made by the Department against the earlier arrears of tax for the assessment year 1994-95 was valid and justified under section 158BC read with section 132B(1) of the Act. The learned judge has also rejected the stand taken by the Department that once the adjustment was made towards the tax arrears for the assessment year 1994-95 validly on February 20, 1997 itself, there would be no tax arrears for the assessment year 1994-95 on the date of filing of the declaration by the petitioner and, therefore, there would be no question of applicability of the KVS Scheme. This judgment was very heavily assailed by learned standing counsel for the Department, Mrs. Chitra Venkataraman. Learned counsel contended that the interpretation by the learned judge of section 158BC of the Income-tax Act was not correct. According to learned standing counsel, there were ample powers in that section if re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 158BB. The language of the section is extremely positive. It undoubtedly requires the Assessing Officer "to proceed to determine the undisclosed income". Clause (c) requires the Assessing Officer to pass an order of assessment and determine the tax payable by him on the basis of such assessment. Lastly, clause (d) provides the manner in which the assets seized under section 132 could be retained. A specific reference there is made to section 132B of the Act. It is perhaps because of this specific reference that learned standing counsel stressed that under section 132B(1)(i) a reference is made to the amount of "existing liability" as referred to in clause (iii) of section 132(5). Learned counsel then points out that under section 132(5) of the Act, the fallowing language is used : " (5) Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in sections 132A and 132B referred to as the assets) is seized under sub-section (1) or sub-section (lA), as a result of a search initiated or requisition made before the 1st day of july, 1995, the Income-tax Officer, after affording a reasonable opportunity to the person concerned of being bea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears to be no scope for any hiatus in between clauses (a), (b), (c) and (d). Therefore, there would be no question of dealing with the assets seized under section 132 in any other manner excepting under Chapter XIV-B. Unfortunately for the Department, it is an admitted position that the assessment under section 158BC is not yet over. That was disclosed to us during the arguments by learned standing counsels If that is so, then there could not be this intervening step of adjusting the assets towards the tax arrears of the assessment year 1994-95. That would be completely contrary to the scheme of the section. (iii) Even as regards the language of section 132B and more particularly clauses (i) and (ii) thereof it has to be realised that because of the language of section 158BC(d), the assets retained under sub-section (5) of section 132 can be dealt with only after the completion of regular assessment or reassessment for all the assessment years relevant to the previous years to which the income referred to in clause (i) of that sub-section relates. Now, under section 158BC(d) it is specified that the terms "regular assessments or "reassessment" used under section 132B have to be c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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