2005 (9) TMI 24 - SC - Income Tax

Whether the Department was right in rejecting the Kar Vivad Samadhan Scheme (KVSS) declarations filed by assessee on the ground that the assessments had become final in the year 1992-93 and that the respondent herein had filed revisions in November/December, 1998 only to obtain the benefit of KVSS 1998 - orders of the designated authority rejecting the declarations filed by the assessee are quashed- revenue appeal dismissed

Issues Involved:
1. Rejection of Kar Vivad Samadhan Scheme (KVSS) declarations by the Department.
2. Interpretation of "pending" under section 95(i)(c) of the KVSS.
3. Bona fide nature of revisions filed by the assessee.
4. Difference between appeals and revisions under the Income-tax Act.
5. Application of the Scheme to artificial pendency of litigation.

Detailed Analysis:

1. Rejection of Kar Vivad Samadhan Scheme (KVSS) Declarations:
The Department rejected the KVSS declarations filed by the respondent-assessee on the grounds that the assessments had become final in 1992-93 when the assessee's appeals were dismissed for failure to pre-deposit self-assessed tax. The revisions filed in November/December 1998 were deemed time-barred and not "pending" as per section 95(i)(c) of the KVSS.

2. Interpretation of "Pending" Under Section 95(i)(c) of the KVSS:
The Supreme Court examined the meaning of "pending" in section 95(i)(c) of the Scheme. The Scheme aimed to settle tax arrears locked in litigation at a discount, offering benefits and immunities from penalties and prosecution. The Court concluded that the Scheme was a recovery mechanism, not a litigation settlement scheme, and aimed to end all pending matters in various forms under the Income-tax Act/Wealth-tax Act. The Court emphasized that appeals, revisions, and references were put on par under section 95(i)(c) to end litigation comprehensively.

3. Bona Fide Nature of Revisions Filed by the Assessee:
The Department argued that the revisions were not bona fide, as they were filed only to benefit from the Scheme, long after the original appeals were dismissed. The revisions were dismissed by the Commissioner for want of sufficient cause to condone the delay. The Court, however, highlighted that the declarations for appeals under section 246 were accepted even though applications for condonation of delay were pending, while those for revisions under section 264 were rejected without waiting for the Commissioner's decision on condonation.

4. Difference Between Appeals and Revisions Under the Income-tax Act:
The Department contended that there was a significant difference between appeals (a matter of right under section 246) and revisions (a discretionary remedy under section 264). The Court noted that while these differences existed under the Income-tax Act, the KVSS obliterated these distinctions, treating appeals, revisions, and references equally to achieve its objective of ending litigation.

5. Application of the Scheme to Artificial Pendency of Litigation:
The Department maintained that the Scheme was not intended to create artificial pendency of litigation. The Court referenced the judgment in Dr. Mrs. Renuka Datla v. CIT, which held that if an appeal or revision is pending on the date of the declaration under the Scheme, the Designated Authority (DA) cannot deem it "sham," "ineffective," or "infructuous." The Court also cited Raja Kulkarni v. State of Bombay and Tirupati Balaji Developers (P) Ltd. v. State of Bihar, affirming that an appeal or revision does not cease to be pending even if it is ultimately found to be incompetent.

Conclusion:
The Supreme Court quashed the orders of the designated authority rejecting the declarations filed by the assessee, finding no infirmity in the High Court's judgment. The appeal was dismissed with no order as to costs. The Court emphasized the Scheme's objective to resolve pending litigation and recover tax arrears, treating all forms of litigation equally under the Scheme.

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