2005 (9) TMI 25 - SC - Income Tax

HC hold that the appellant liable to pay interest under the Kar Vivad Samadhan Scheme, 1998 on the tax arrears to be determined by the designated authority - on the facts of this case, we set aside the additional direction given by the impugned judgment directing the appellant to pay interest, particularly when the Department had wrongly rejected the declarations filed under section 88.

Summary

Issues:
- Additional direction to pay interest under the Kar Vivad Samadhan Scheme, 1998
- Competency of declarations filed by the appellant under the Scheme
- Challenge to the decision of the Gujarat High Court
- Provision for charging interest under the Scheme
- Interpretation of the Scheme regarding determination of amount payable
- Liability of the appellant to pay interest on the amount payable

Analysis:

The Supreme Court judgment pertains to appeals against an additional direction issued by the Gujarat High Court under the Kar Vivad Samadhan Scheme, 1998, holding the appellant liable to pay interest on tax arrears. The appellant had filed a writ petition in the High Court against the rejection of declarations made under the Scheme. The High Court found the declarations competent as revision applications were pending on the filing date. The Department challenged this decision, leading to the current appeal.

The Supreme Court upheld the High Court's decision that the declarations were competent under the Scheme and directed the designated authority (DA) to determine the amount payable. However, the appellant contested the additional direction to pay interest, arguing that the Scheme lacked provisions for interest in cases where the DA wrongly rejected declarations. The appellant claimed they should not pay interest when the DA erred in rejecting the declarations, as the amount payable was not ascertainable due to the DA's mistake.

The Court examined the Scheme, emphasizing that the DA had to assess tax arrears, disputed amounts, and the amount payable within 60 days of receiving the declaration. Until this assessment was complete, the appellant's liability to pay only arose after the amount payable was determined under section 90. Therefore, the Court concluded that the appellant should not be liable to pay interest when the Department wrongly rejected the declarations under section 88.

In light of these considerations, the Supreme Court set aside the additional direction for the appellant to pay interest. The appeals were allowed with no order as to costs, providing relief to the appellant based on the interpretation of the Scheme's provisions and the circumstances of the case.