2008 (2) TMI 307 - HC - Income Tax

Assessee availed the Kar Vivad Samadhan Scheme - If assessee has been issued certificate under the Kar Vivad Samadhan Scheme, there is no justification for the Assessing Officer to reopen the assessment by a notice under section 143 - it is not the case of the Revenue that any material particular furnished by the appellant-assessee in the declaration was found to be false. Consequently, the Assessing Officer could not have reopened the assessment by a notice under section 143

Issues:
1. Reopening of assessment under Section 155 of the Income Tax Act, 1961 after availing the Kar Vivad Samadhan Scheme.
2. Interpretation of provisions of the Finance (No.2) Act, 1998 regarding the Kar Vivad Samadhan Scheme.
3. Immunity from reopening assessment under the Kar Vivad Samadhan Scheme.
4. Applicability of Supreme Court judgments in similar cases.

Analysis:

Issue 1: Reopening of assessment under Section 155 of the Income Tax Act
The appellant, an income tax assessee, availed the Kar Vivad Samadhan Scheme for the Assessment Year 1985-86, paid the determined tax arrears, and obtained a certificate. Subsequently, authorities reopened the assessment and directed the appellant to pay a further sum. The appellant challenged this in a writ petition, arguing that the Assessing Officer had no power to reopen the assessment under Section 155 of the Income Tax Act, 1961. The counsel for the appellant relied on the Supreme Court judgment in Duncans Agro Industries Ltd. v. Commissioner of Central Excise, emphasizing that once the amount is settled under the Kar Vivad Samadhan Scheme, there is no scope for further review. The High Court found merit in this argument and set aside the order of the Single Judge, allowing the writ petition.

Issue 2: Interpretation of provisions of the Finance (No.2) Act, 1998
The appellant contended that under Clause 90(3) and Clause 92 of the Finance (No.2) Act, 1998, any issue opted for under the Kar Vivad Samadhan Scheme cannot be reopened in other proceedings under Direct Tax enactment. The counsel for the respondent argued that the Department had the power to reopen the assessment under Section 155 of the Income Tax Act, 1961. However, the High Court, after considering the provisions and the Supreme Court judgment in Killick Nixon Ltd. v. Deputy Commissioner of Income Tax, held that once the tax arrears are settled under the Kar Vivad Samadhan Scheme, there is no justification for reopening the assessment unless false particulars were furnished, which was not the case here.

Issue 3: Immunity from reopening assessment under the Kar Vivad Samadhan Scheme
The High Court analyzed the immunity provided under the Kar Vivad Samadhan Scheme, emphasizing that upon settlement and payment of the determined amount, no further proceedings could be initiated for the same period. The court referred to various Supreme Court judgments supporting this interpretation and concluded that the Assessing Officer could not reopen the assessment without valid reasons, as in the present case.

Issue 4: Applicability of Supreme Court judgments in similar cases
Both parties relied on Supreme Court judgments to support their arguments. The appellant cited cases where the Supreme Court held that once the dispute is settled under the Kar Vivad Samadhan Scheme, no further proceedings can be initiated. On the other hand, the respondent referred to a judgment emphasizing the power of the Department to reopen assessments under certain circumstances. The High Court, after analyzing these judgments, found that the appellant's position was supported by the legal precedents and ruled in favor of setting aside the Single Judge's order.

In conclusion, the High Court allowed the writ petition, setting aside the order of the Single Judge, and emphasized the immunity provided under the Kar Vivad Samadhan Scheme against reopening assessments without valid reasons.

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