TMI Blog1999 (8) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... challenging only the demand of interest under section 220(2) of the Income-tax Act in the certificate of intimation on the ground that under the Samadhan Scheme, the respondent has no power to levy interest under section 220(2) of the Income-tax Act. According to the petitioners, the Samadhan Scheme has been introduced to avoid litigation and what is contemplated under the Samadhan Scheme is to be given effect to and what is not contemplated under the Samadhan Scheme cannot be taken into consideration. In other words, it is stated that the designated authority under the Samadhan Scheme has no right to levy interest under the Samadhan Scheme and in all the cases, the petitioners are questioning the levy of interest under the Samadhan Scheme on the ground that the levy of interest under section 220(2) of the Income-tax Act cannot be a part of the order determining the amount payable under the Samadhan Scheme. In some of the writ petitions, it is also stated that the Samadhan Scheme does not contemplate the demand of interest under section 220(2) of the Income-tax Act and section 88(a)(iv) of the Samadhan Scheme does not authorise levy of both interest and penalty. It is also state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circular issued by the Central Board of Direct Taxes (CBDT), and submitted that to a question posed whether the interest determined under section 220 after final payment of tax demanded, not forming part of the tax arrears determined on or before March 31, 1998, would be open for waiver, the Central Board of Direct Taxes has given an affirmative answer indicating that the interest does not form part of tax arrears determined on or before March 31, 1998. Learned counsel also submitted that as the interest has been demanded under the Samadhan Scheme, the petitioners have lost their right of approaching the Commissioner of Income-tax for waiver of entire interest under section 220(2A) of the Income-tax Act. It is also stated that in the forms of declaration, the petitioners have not included the interest under section 220(2) of the Income-tax Act as part of the tax arrears and the certificates of intimation also state that the declarants are required to pay the amount payable towards tax arrears covered by the said declarations under the Samadhan Scheme and since the declarations filed by the declarants have not included the interest under section 220(2) of the Income-tax Act, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Delhi High Court, has upheld the validity of the Samadhan Scheme, subject to some of the provisions of the said Scheme being read down to make them valid and the learned judge, after noticing the Memorandum of the Finance (No. 2) Bill, 1998, explained the Scheme and held as under : " The Kar Vivad Samadhan Scheme seeks to provide a quick and voluntary settlement of tax dues outstanding as on 31-3-1998, both in various direct tax enactments as well as indirect taxes enactments by offering waiver of a part of the arrear taxes and interest and providing immunity against institution of prosecution and imposition of penalty. The assessee on his part shall seek to withdraw appeals pending before various appellate authorities and courts. The Scheme comes into force on the first day of September, 1998, and ends on the 31st day of December, 1998. It will have the following salient features. 2. The Scheme is applicable to tax arrears outstanding as on 31-3-98 under various direct tax enactments and indirect tax enactments. The amount payable by the applicants termed as declarants shall be determined as under : (a) Direct taxes: (i) The declarant shall be required to pay tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount payable shall be 50 per cent. of the tax arrear and including interest payable, fine or penalty levied. 3. A person desiring to avail of the Scheme is required to file a declaration in the prescribed form before the designated authority notified for this purpose. The designated authority shall pass an order within sixty days of the declaration determining the amount payable in accordance with the provisions of the Scheme and grant a certificate indicating the particulars of tax arrears and the sum payable and intimate the same to the declarant. The declarant will pay the sum payable as determined by the designated authority within thirty days of the passing of such order. The order passed by the designated authority shall be conclusive and shall not be reopened in any other proceedings or under any law for the time being in force. Where the declarant has filed an appeal or reference before any authority, tribunal or court, notwithstanding anything contained in any other provision of law for the time being in force, such appeal, reference or reply shall be deemed to have been withdrawn. Where writ petitions have been filed before the High Court or the Supreme Court the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in respect of any assessment year under any direct tax enactment which remains unpaid as on the date of making the declaration under section 88 of the Samadhan Scheme. The expression, "tax arrear" is also defined to mean in relation to a direct tax enactment, the amount of tax, penalty, or interest determined on or before March 31, 1998, under that enactment in respect of an assessment year subject to the modifications in consequence of giving effect to an appellate order, but remaining unpaid on the date of declaration. Section 88(a)(iii) of the Samadhan Scheme provides that where tax arrears include income-tax, interest payable or penalty levied, the declarant is required to pay 35 per cent. or 30 per cent. as the case may be of the disputed income. We are not actually concerned with that provision, as none of the cases relates to one falling under section 88(a)(iii) of the Samadhan Scheme. Section 88(a)(iv) of the Samadhan Scheme provides that in case tax arrear comprises only interest payable or penalty levied, the amount payable under the Samadhan Scheme would be 50 per cent. of the tax arrears. A close reading of various sections of the Samadhan Scheme shows that once th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrears means an amount payable or an amount that remains unpaid, and it is not necessary that there should be a separate notice of demand for the amount to be classified as arrears to be payable and the arrears can also arise by virtue of the statutory provisions without an order of adjudication and there would be determination of tax arrears under the direct tax enactment. The interest under section 220 of the Income-tax Act is a statutory levy and the amount payable is determined under the Income-tax Act itself. In my view, it is not necessary to issue a separate notice for the determination of interest on the defaulting assessee, as the form of demand notice issued for the payment of amount under section 156 of the Income-tax Act also specifies that the assessee would be liable to pay interest, if the required amount is not paid within the stipulated time. In other words, there is no necessity or requirement for the Income-tax Officer to issue a separate order determining the interest payable by the defaulting assessee as on March 31, 1998, and, therefore, the submission of learned counsel for the petitioners that interest has not been determined is not correct. Further, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the declaration filed by the declarant has not included the interest, the demand for interest is not legal. A careful reading of the certificate of intimation shows that the designated authority has determined the amount payable by the declarant in full and final settlement of the tax arrears covered in the declaration filed by the declarant. Therefore, the fact that the declarant has not included the interest portion payable in the declaration is of no consequence when the designated authority has determined the amount payable under the Samadhan Scheme in full and final settlement of the tax arrears. The designated authority by the said certificate of intimation has not stated or even admitted that the amount covered in the declaration would alone be the subject-matter of settlement of tax arrears. As already held by me, under the Samadhan Scheme, if a declarant desires to avail of the benefits of the said Scheme, it is neither open to him, nor is it open to the Department to go behind or act contrary to the provisions of the Samadhan Scheme. Therefore, a reference to the certificate of intimation as if the designated authority has accepted that it is only the amount specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Samadhan Scheme and once he claims the benefit under the Samadhan Scheme the Scheme will operate notwithstanding the provisions contained in the Income-tax Act. Therefore, the contention that the petitioner has lost the right of waiver of interest is not a material consideration. If the petitioners with open eyes have opted and claimed the benefits of the Samadhan Scheme, it will not be open to them to contend that they have lost their right to approach the Commissioner of Income-tax for waiver of interest and this argument would apply not only with reference to levy of interest under section 220(2) of the Income-tax Act but would equally apply to other levies for which there are provisions for the waiver of the same under some other provisions of the Income-tax Act. Therefore, I am unable to accept the submission of learned counsel for the petitioners that the petitioners have lost their right of waiver and, hence, the designated authority has no right to include interest under the provisions of the Samadhan Scheme. Moreover, in the letter issued by the Central Board of Direct Taxes to all the Chief Commissioners of Income-tax dated January 5, 1999, it has been clarified that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the time stipulated and the order of intimation was issued on February 24, 1999, and it is not clear when it was received by the petitioner. However, when this matter came up for admission, this court has granted interim stay of collection of interest alone under section 220(2) of the Income-tax Act and if the petitioner has not paid the penalty amount as demanded in the certificate of intimation for the necessary consequences, the petitioner would be liable. In so far as W. P. Nos. 4531 and 4532 of 1999 are concerned, the writ petitions are filed by the partner and it is stated that once the firm has opted for the Samadhan Scheme, the partners need not opt separately for the Samadhan Scheme and the benefits of the Samadhan Scheme would be given to the partners as well. A reference has been made to a press release issued by the Central Board of Direct Taxes wherein it is stated that the firm is required to pay only 35 per cent. of the disputed income and the partners are not required to pay any further tax on the disputed income of the firm. However, in the counter affidavit filed in W. P. No. 4532 of 1999, it is stated that the clarification issued by the Central Board o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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