2008 (7) TMI 542 - HC - Income Tax

Kar Vividh Samadhan Scheme (KVSS) - The designated authority has rejected an application made under KVSS by the petitioner on January 29, 1999, by stating that the application for settlement in respect of assessment cannot be entertained because the petitioner had filed the application under section 264 of the Act on January 28, 1999. The said revision application under section 264 of the Act was a belated one. Under the KVSS, only a case where a dispute was existing and the case was pending on the date of declaration under the KVSS could be entertained. Held that- it is not open to designated authority to decide the proceedings under the scheme whether the revision application was barred by limitation or not, whether the delay condoned or not. Thus petition allowed.

Issues involved:
Challenge to communication/order under Kar Vivad Samadhan Scheme ("KVSS") - rejection of application for settlement in respect of assessment - belated revision application under section 264 of the Income-tax Act, 1961 - rejection of declaration under KVSS for assessment - acceptance of declaration for penalty - interpretation of 'pending' under KVSS - applicability of previous judgments.

Analysis:

1. Challenge to Communication/Order under KVSS:
The petitioner challenged the communication/order dated February 15, 1999, issued by the respondent, the designated authority under the KVSS. The rejection of the application for settlement in respect of assessment was based on the petitioner filing a belated revision application under section 264 of the Income-tax Act, 1961, on January 28, 1999. The respondent held that only cases with existing disputes pending on the date of declaration under the KVSS could be entertained.

2. Belated Revision Application and Assessment Dispute:
The petitioner sought set off of loss for the assessment year 1994-95 but withdrew the claim as books of account could not be produced. The Assessing Officer disallowed the claim and initiated penalty proceedings for concealment of income. The petitioner filed a revision application under section 264 of the Act on January 23, 1999, and made a declaration under KVSS during the pendency of the revision application. The designated authority accepted the declaration for penalty but rejected it for assessment, citing lack of pending proceedings.

3. Interpretation of 'Pending' under KVSS:
The petitioner relied on a previous High Court judgment to argue that the initiation of proceedings within the limitation period or with an application for condonation of delay should not affect the eligibility under KVSS. The Supreme Court's analysis of the KVSS scheme emphasized putting an end to pending matters and treating appeals, revisions, and references equally. The court concluded that the designated authority could not consider the revision application's timeliness or the need for condonation under the KVSS.

4. Applicability of Previous Judgments:
The respondent argued that the belated filing of the revision application indicated an intention to avail benefits under the KVSS improperly. Reference was made to decisions from the Kerala High Court and the Supreme Court to support the rejection of the petitioner's claim under KVSS. However, the court found that the apex court's ruling on the scheme of KVSS favored the petitioner's position, rendering the rejection of the declaration for assessment incorrect.

5. Final Decision:
In light of the above analysis, the court quashed and set aside the communication rejecting the petitioner's declaration for income-tax liability for the assessment year 1994-95. The designated authority was directed to issue a fresh order under the KVSS, including the income-tax liability from the said assessment year. The petition was allowed, and no costs were awarded.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, the legal interpretations applied, and the final decision rendered by the court.

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