2014 (8) TMI 38 - HC - Income Tax

Kar Vivad Samadhan Scheme u/s 90 Addition of interest u/s 220(2) for settlement of dispute Held that - The designated authority is within his powers in adding up the interest though not quantified at earlier point of time while processing the application under the Scheme as the levy of interest is terminable to the date of payment, which date in the case of KVSS is 31.03.1998 - the interest has been added only upto 31.03.1998 for the purpose of computation and thereafter by giving necessary deduction as envisaged in the Act, the order has been passed there was no reason to interfere with the demands which have been issued and interest being the natural corollary in terms of the provisions as existing then, there was no infirmity in the orders of the designated authority in including the interest for the period 1988-89, 1989-90 and 1991- 92 while processing the declaration under the Scheme Decided against Assesee.

Summary

Issues:
1. Challenge to orders passed under the Kar Vivad Samadhan Scheme for adding interest under Section 220(2) of the Income Tax Act.
2. Questioning the addition of interest for certain assessment years despite demands being paid.
3. Dispute over the determination of interest payable and the legality of adding interest under Section 220(2) of the Act.
4. Interpretation of the statutory scheme regarding the authority's power to add interest during processing of the declaration under the Scheme.
5. Whether the orders of the designated authority in including interest for specific years were justified.
6. Clarification on the treatment of demands for certain assessment years and the authority's discretion to take appropriate proceedings.

Analysis:
1. The petitioner challenged the orders passed under the Kar Vivad Samadhan Scheme for adding interest under Section 220(2) of the Income Tax Act. The petitioner contended that there were no tax arrears for certain assessment years as the demands were already paid. The petitioner specifically requested the designated authority to ignore the application for those years. The principal contention was the lack of determination of interest payable and the unjust addition of interest under Section 220(2) of the Act during processing of the declaration under the Scheme.

2. The department argued that penalties were imposed for specific assessment years, and demand notices with challans were issued, satisfying the requirements under Section 156 read with Section 220 of the Act. Therefore, the addition of interest during the processing of the declaration under the Scheme was deemed appropriate.

3. The court, after considering the submissions, found that the designated authority was within their powers to add interest, especially since the levy of interest is terminable to the date of payment under the statutory scheme. The court observed that the interest was added only up to a specific date for computation purposes. The court also noted that the petitioner's assertion regarding the payment of penalty amounts for certain years was not specifically denied.

4. The court concluded that there was no legal infirmity in the order passed by the designated authority. The court upheld the inclusion of interest for certain years while processing the declaration under the Scheme. The order was confined to those specific years, and the demands for other years were treated as not considered, leaving open the possibility for appropriate proceedings in accordance with the Act.

5. In light of the respective submissions, the court found no reason to interfere with the demands issued and upheld the inclusion of interest for the specified years. The court clarified the treatment of demands for certain assessment years and affirmed the designated authority's discretion to take appropriate proceedings within the limitations and provisions of the Act.

6. With the above observations, the writ petition was disposed of, with no order as to costs.