2014 (9) TMI 430 - HC - Income Tax

Validity to grant refund u/s 93 of KVSS Correctness of depreciation - Whether the Tribunal was right in not holding that correct depreciation allowed by the AO dates back to the original Assessment Held that - Once an assessee voluntarily invokes the KVSS, 1998 and had paid the tax liability in terms of the provisions of the KVSS, 1998, he should abide by the provisions of the KVSS, 1998 - He is not entitled to resile from such determination and seek refund it runs counter to Section 93 of the KVSS, 1998, which emphatically states that amount paid shall not be refundable under any circumstances - assessee claims refund of the amount, which claim is barred - assessee proceeded to opt for the KVSS, 1998 and paid the tax as determined to conclude the lis between the assessee and the department - it will not lie in the mouth of the assessee to turn around and claim refund referring to earlier assessment years - in terms of Section 93 of the KVSS, 1998, the assessee cannot seek refund of amount paid under the KVSS, 1998 Decided against assessee. Revision u/s 263 Requirement to fulfill conditions Held that - As it has been already held that u/s 93 of the KVSS, 1998, the assessee cannot seek refund of amount voluntarily paid under the KVSS, 1998, the order passed u/s 154 of the Act by the AO is erroneous and prejudicial to the interest of the Revenue - The twin conditions stipulated u/s 263 of the Act for invocation of provision by the Commissioner are fulfilled as the order of the AO is erroneous and prejudicial to the interests of the Revenue, as it runs counter to Section 93 of the KVSS, 1998 Decided against assessee.

Summary

Issues:
1. Challenge to the order of the Income Tax Appellate Tribunal regarding the treatment of expenditure on replacement of machinery parts as revenue or capital expenditure for the assessment year 1994-1995.
2. Dispute over the refund of tax paid voluntarily under the Kar Vivad Samadhan Scheme, 1998 (KVSS, 1998) as per Section 93 of the scheme.
3. Justification of invoking power under Section 263 of the Income Tax Act by the Commissioner of Income Tax regarding the refund issue under the KVSS, 1998.

Issue 1:
The appeal filed by the Revenue challenges the order of the Income Tax Appellate Tribunal regarding the treatment of expenditure on replacement of machinery parts as revenue or capital expenditure for the assessment year 1994-1995. The Tribunal held that the amount paid under the KVSS, 1998 is not refundable under any circumstances as per Section 93 of the scheme. The Tribunal found the order of the Assessing Officer directing the refund of tax paid under the KVSS, 1998 to be erroneous and prejudicial to the interests of the Revenue. The Tribunal concluded that the twin conditions required for invoking power under Section 263 of the Act were satisfied in this case.

Issue 2:
The dispute revolves around the refund of tax paid voluntarily under the KVSS, 1998. The Commissioner of Income Tax-II held that the amount paid under the KVSS, 1998 cannot be refunded as per Section 93 of the scheme. The Tribunal upheld this decision, emphasizing that once an assessee voluntarily pays the tax liability under the KVSS, 1998, it cannot be refunded under any circumstances. The Tribunal found that the provisions of Section 93 of the KVSS, 1998 clearly state that any amount paid in pursuance of a declaration under the scheme shall not be refundable under any circumstances. Therefore, the assessee's claim for a refund of the tax paid under the KVSS, 1998 was rejected.

Issue 3:
Regarding the justification of invoking power under Section 263 of the Income Tax Act by the Commissioner of Income Tax, the Tribunal found that the order of the Assessing Officer directing the refund of tax paid under the KVSS, 1998 was erroneous and prejudicial to the interests of the Revenue. The Tribunal concluded that the twin conditions required for invoking power under Section 263 were satisfied in this case, as the order of the Assessing Officer contradicted Section 93 of the KVSS, 1998. Therefore, the Tribunal upheld the Commissioner's decision and dismissed the appeal, ruling against the assessee and in favor of the Revenue.

This detailed analysis of the judgment highlights the key issues involved and the legal reasoning behind the decisions made by the Income Tax Appellate Tribunal and the Commissioner of Income Tax.