2002 (6) TMI 38 - HC - Income Tax

Kar Vivad Samadhan Scheme, Search And Seizure, Assessment Based Search - The petitioners in these petitions are assessees under the provisions of the Income-tax Act, 1961 - In these petitions they have called in question the correctness of the communication dated March 24, 1999, a copy of which has been produced as annexure D along with the writ petitions wherein the claim of the petitioners that they are liable to pay tax at 30 per cent. and not at 40 per cent. as determined under the Kar Vivad Samadhan Scheme, 1998 (hereinafter refer red to as the Scheme ), came to be rejected. They also prayed for a direction to the respondent to modify the tax demanded in the certificate issued under section 90(1) of the Scheme and to restrict the tax liability of the petitioners only at 30 per cent. - these petitions are liable to be rejected. Accordingly, they are rejected.

Summary

Issues:
1. Challenge to tax liability determination under Kar Vivad Samadhan Scheme, 1998.
2. Dispute over search and seizure proceedings for tax assessment.
3. Validity of tax liability at 40% under the Scheme.

Analysis:
1. The petitioners contested the communication rejecting their claim to pay tax at 30% instead of 40% under the Kar Vivad Samadhan Scheme, 1998. The petitioners argued that the determination of 40% tax liability was erroneous as there was no search of their residential premises as required under section 132 of the Income-tax Act, 1961. They sought a modified certificate and refund of excess tax. The respondent refused the request, leading to the legal challenge. The court examined whether the petitioners were entitled to the relief sought.

2. The dispute revolved around the search and seizure proceedings conducted at the residential and office premises of the petitioners. The petitioners contended that since search warrants were issued only in the names of two petitioners, the imposition of 40% tax liability on all petitioners was legally flawed. The respondent argued that the assessment was based on materials collected during the search, justifying the 40% tax liability. The court analyzed the legal requirements for search procedures and their impact on tax assessments under the Scheme.

3. The court held that the petitioners were not entitled to the relief as sought. It emphasized that the assessment was indeed based on the search of the premises where all petitioners resided, even though warrants were issued in the names of only two petitioners. The court clarified that the absence of warrants for all petitioners did not invalidate the assessment under section 132 of the Act. The court highlighted that the Scheme's provision did not mandate the service of search warrants as a condition for tax liability determination at 40%. Ultimately, the court rejected the petitions, affirming the 40% tax liability and dismissing the challenge based on procedural grounds.