2014 (8) TMI 386 - HC - Income Tax

Rejection of declaration of settlement of disputes Object of the KVS Scheme - Held that - The object of the KVS Scheme 1998 was to settle tax arrears locked in litigation at a substantial discount - any tax arrears could be settled by declaring them and paying the prescribed amount of tax arrears and it offered benefits and immunities from penalty and prosecution to the assessee who opted for it - The object of the scheme was to put an end to all the pending disputes in the form of appeals, reference, revisions and writ petitions under the Act - Following the decision in Commissioner of Income-Tax Versus Shatrushailya Digvijaysingh Jadeja 2005 (9) TMI 24 - SUPREME Court - there is nothing to prevent a party from filing an appeal which may ultimately be found to be time barred - the mere fact that it may finally be concluded that the appeal is not maintainable, would not prior to such a finding, lead to a conclusion that no appeal was pending - Designated Authority under the KVS Scheme 1998 is directed to accept the assessee s declaration filed for AY 1989-90 to 1993-94 under KVS Scheme 1998 Decided in favour of Assessee.

Summary

Issues:
Challenge to rejection of declarations under the Kar Vivad Samadhan Scheme, 1998 for Assessment Years 1989-90 to 1993-94 due to pending appeals.

Analysis:
1. Challenge to Rejection of Declarations:
The petitioner challenged the rejection of its declarations for Assessment Years 1989-90 to 1993-94 under the Kar Vivad Samadhan Scheme, 1998. The impugned orders dated 19 February 1999 and 30 March 2004 were based on the ground that no appeal regarding tax arrears for the mentioned assessment years was pending at the time of filing the declarations. The Designated Authority under the KVS Scheme, 1998 rejected the declarations citing Section 95(i)(c) of the Finance (No.2) Act, 1998, which required pending appeals for the declarations to be entertained.

2. Factual Background and Legal Proceedings:
The petitioner had a tax dispute for the mentioned assessment years and was in arrears. Despite filing appeals and subsequent condonation of delays, the Designated Authority rejected the declarations due to the absence of pending appeals at the time of filing. The petitioner argued that the meaning of pending appeal under Section 95(i)(c) was clarified by the Supreme Court in a previous case, emphasizing that the objective of the KVS Scheme was to settle tax arrears in litigation at a discount.

3. Supreme Court Precedent and Decision:
The Court referred to the Supreme Court judgment in CIT vs. Shatrushilya Digvijaysingh Jadeja, which highlighted that the purpose of the KVS Scheme was to resolve tax disputes by allowing declarations and payments of tax arrears. The Court held that the mere possibility of an appeal being time-barred did not preclude it from being considered pending until a final decision. Relying on this precedent, the Court quashed the impugned orders and directed the Designated Authority to accept the petitioner's declarations for the mentioned assessment years under the KVS Scheme, 1998.

4. Conclusion:
In conclusion, the High Court ruled in favor of the petitioner, allowing the petition and setting aside the orders rejecting the declarations. The Court's decision was based on the interpretation of pending appeals under the KVS Scheme, 1998 as clarified by the Supreme Court precedent, emphasizing the scheme's objective of settling tax arrears through declarations and payments. No costs were awarded in the judgment.