2010 (1) TMI 192 - HC - Income Tax

Rectification of mistake- The assessee is a partnership firm and was carrying on lottery business. There was a search and seizure operation on October 17, 1994, the assessee filed a return of income disclosing the income of Rs. 18,17,420. Initially the assessment was made under section 143(1)(a) and thereafter a fresh assessment order was passed on December 27/30, 1996, on an income of Rs. 1,43,56,729 in addition to income of Rs. 45,737 from winnings from lottery under section 115BB of the Act. The assessee filed appeal before the first appellate authority disputing the quantum of assessment and also the liability of interest under sections 234B and 234C of the Act. The Commissioner of Income-tax (Appeals) set aside the order and this was upheld by the Tribunal. Held that- dismissing the appeal, that after the issue of the certificate in the Kar Vivad Samadhan Scheme under section 90 of the Act. the assessing authority had no authority to sit over the certificate. The rectification was not permissible.

Summary

Issues:
Appeal under section 260A of the Income-tax Act, 1961 against the Tribunal's order for the assessment year 1993-94. Dispute over quantum of assessment and interest liability under sections 234B and 234C. Validity of order passed under section 154 raising additional demand of interest after issuance of certificate under Kar Vivad Samadhan Scheme, 1998.

Analysis:
The judgment pertains to an appeal filed by the Commissioner of Income-tax against the Tribunal's order for the assessment year 1993-94. The assessee, a partnership firm engaged in a lottery business, initially disclosed an income of Rs. 18,17,420, which was later revised to Rs. 1,43,56,729 along with additional income from lottery winnings. The appeal raised concerns regarding the quantum of assessment and the interest liability under sections 234B and 234C of the Income-tax Act, 1961.

During the appeal process, the Kar Vivad Samadhan Scheme, 1998 was introduced, and the assessee filed a declaration under section 88 of the said Act, which was accepted by the designated authority. Subsequently, the Deputy Commissioner of Income-tax raised an additional demand of interest under section 234B through an order passed under section 154. The Commissioner of Income-tax (Appeals) set aside this order, leading to an appeal by the Deputy Commissioner before the Tribunal.

The Tribunal rejected the appeal, citing the provisions of the Kar Vivad Samadhan Scheme, which deemed the order determining the sum payable under the scheme as conclusive and not subject to reopening in any other proceeding. The Tribunal held that once the designated authority issued the certificate under the scheme, the assessing authority could not pass any order under section 154 to raise further demands.

The High Court upheld the Tribunal's decision, emphasizing that after the issuance of the certificate under the Kar Vivad Samadhan Scheme, the assessing authority had no authority to challenge or modify the certificate. The Court noted that the question of whether the assessing authority could raise fresh demands of interest after the certificate issuance was debatable, making it outside the purview of section 154. Citing precedent, the Court highlighted that in cases where two opinions are possible and the issue is debatable, it cannot be considered a mistake apparent on the face of the record.

In conclusion, the High Court found no error in the Tribunal's order and dismissed the appeal, affirming the validity of the certificate issued under the Kar Vivad Samadhan Scheme and the limitations it imposed on the assessing authority's powers to raise additional demands post-certificate issuance.