2006 (7) TMI 140 - HC - Income Tax

Appeal - When the appeal was pending before the Tribunal, the Kar Vivad Samadhan Scheme, 1998 was introduced by the Finance (No. 2) Act, 1998 - order under s.s. (2) of section 90 of the KVSS, 1998 tribunal held that since the assessee had given his consent to the assessment order, it had lost the right to appeal against the said assessment order and hence the appeal filed by the assessee was not competent and void ab initio. In the said order Tribunal also observed that the assessee had no right to appeal and thus, the appeal shall be treated to have never been filed and the Department is free to take action against the assessee - whether the appeal of the assessee before the Tribunal against the assessment order was said to be pending at the time the order under s.s. (2) of section 90, was issued by the designated authority and if so, whether such an appeal stood withdrawn when such an order was issued - held that Tribunal erred in law in hearing and deciding the appeal on the merits even when an order under sub-section (2) of section 90 of the KVSS, 1998, was passed as the appeal in that situation shall be deemed to have been withdrawn as provided under s.s. (4) of section 90

Summary

Issues Involved:
1. Whether the appeal before the Tribunal should be deemed withdrawn under section 90(4) of the Kar Vivad Samadhan Scheme, 1998.
2. Whether the Tribunal erred in considering the validity or correctness of the certificate issued by the Commissioner under section 90(2) of the Kar Vivad Samadhan Scheme, 1998.

Issue-wise Detailed Analysis:

1. Deemed Withdrawal of Appeal under Section 90(4) of the Kar Vivad Samadhan Scheme, 1998:

The main contention revolves around whether the appeal filed by the assessee before the Tribunal should be deemed withdrawn under section 90(4) of the Finance (No. 2) Act, 1998, once the order under section 90(2) was passed by the designated authority. The assessee argued that as per section 90(4), any appeal pending before a Tribunal is deemed to be withdrawn on the day the order under section 90(2) is passed. The Tribunal initially held that the appeal was void ab initio because the assessment order was a consent order. However, the court highlighted the Supreme Court's interpretation in cases like Dr. Mrs. Renuka Datla and CIT v. Shatrusailya Digvijaysingh Jadeja, which established that the pendency of an appeal is sufficient for the application of section 90(4), regardless of its validity or competency. Therefore, the court concluded that the appeal was pending and deemed withdrawn on April 28, 1999, the date when the designated authority issued the certificate.

2. Validity or Correctness of the Certificate Issued by the Commissioner:

The second issue pertained to whether the Tribunal erred in considering the validity or correctness of the certificate issued by the Commissioner under section 90(2) of the Finance (No. 2) Act, 1998. The Department argued that the assessee's appeal was void because the assessment order was based on the assessee's consent. The court noted that the Tribunal's jurisdiction under section 254(2) of the Act is limited to rectifying mistakes apparent from the record and does not extend to reassessing the validity of the certificate issued under section 90(2). The court refrained from pronouncing any opinion on the correctness of the certificate, emphasizing that the appeal's pendency and subsequent withdrawal under section 90(4) were the primary considerations.

Conclusion:

The court concluded that the appeal was deemed withdrawn as per section 90(4) of the Finance (No. 2) Act, 1998, on April 28, 1999, when the designated authority issued the certificate under section 90(2). The court answered both substantial questions of law in favor of the assessee, allowing the appeal.