2001 (4) TMI 64 - HC - Income Tax

Summary

Issues Involved:
1. Legality of Communication No. CIT.AP.II/KVSS/190 of 1998-99 dated December 17, 1999.
2. Validity of the payment made by the petitioner on March 27, 1999, under the Kar Vivad Samadhan Scheme, 1998 (KVS Scheme).
3. Entitlement of the petitioner to a certificate under the KVS Scheme, 1998.

Detailed Analysis:

1. Legality of Communication No. CIT.AP.II/KVSS/190 of 1998-99 dated December 17, 1999:
The petitioner challenged the communication dated December 17, 1999, issued by the first respondent, claiming it to be illegal and arbitrary. The communication declared the petitioner's declarations for the assessment years 1993-94 and 1994-95 as non est because the payment was not made within the stipulated time.

2. Validity of the Payment Made by the Petitioner on March 27, 1999, under the KVS Scheme:
The petitioner filed a declaration under the KVS Scheme on December 28, 1998, for the assessment years 1993-94 and 1994-95, indicating tax arrears of Rs. 74,390 and Rs. 1,14,598, respectively. The petitioner was required to pay Rs. 27,498 and Rs. 50,462 for the respective years, as per the intimation in Form No. 2-A issued on February 25, 1999. The petitioner presented a cheque for Rs. 77,958 on March 27, 1999, which was cleared on April 12, 1999.

The respondents argued that the payment was not made within the 30-day period as required by section 90(1) of the Finance (No. 2) Act, 1998, and thus, the petitioner was not entitled to the benefits of the KVS Scheme. They contended that the amount was not credited to the Government account within the stipulated time.

The court examined the issue of whether the payment by cheque on March 27, 1999, should be considered as payment on the date of presentation or on the date of realization. The petitioner relied on the Supreme Court's decision in CIT v. Ogale Glass Works Ltd. [1954] 25 ITR 529, which held that a cheque, unless dishonoured, is considered payment on the date of its presentation. The court also referred to the Gujarat High Court's decision in Kangold (India) Ltd. v. CIT [1999] 239 ITR 842, which supported the view that payment by cheque is deemed to have been made on the date of delivery if the cheque is honoured.

The court noted that rule 80 of the Central Treasury Rules states that payment by cheque is deemed to have been made on the date of presentation if the cheque is honoured. Rule 81 allows departments to impose conditions, but no such conditions were imposed in section 90(2) of the Finance (No. 2) Act, 1998.

3. Entitlement of the Petitioner to a Certificate under the KVS Scheme, 1998:
The court concluded that the payment made by the petitioner by cheque on March 27, 1999, should be considered as payment within the time prescribed under the KVS Scheme, 1998, since the cheque was honoured. The court declared the impugned communication of the first respondent as illegal and directed the first respondent to issue the certificate under the KVS Scheme, 1998, treating the payment made by the petitioner as valid.

Conclusion:
The writ petition was allowed, and the court directed the respondents to issue the certificate under the KVS Scheme, 1998, treating the payment made by the petitioner by cheque on March 27, 1999, as within the prescribed time. The court emphasized that payment by cheque, if honoured, is deemed to have been made on the date of presentation, aligning with established legal principles.