2021 (12) TMI 663 - HC - Income Tax

Advantage of Kar Vivad Samadhan Scheme, 1998 (KVSS) - Petitioners case as submitted that Respondent No.2 concluded that amount payable would be covered under Clause (iv) of Section 88 (A) of the said Act because the tax payable by Petitioner had already been adjusted against refund to be given by the Revenue to one of the partners of Petitioner No.1 firm - HELD THAT - The reason why we are not going into details is because Respondents, in its reply opposing the Petition, have averred that Petitioners Chartered Accountant, by a letter dated 5th August, 1998, has informed the Revenue that refund of ₹ 2,21,995/- that was due to a partner of the Firm late Shri Kanhaiyalal Jain be adjusted against demand for Assessment Year 1987-88 against M/s. Anand Nagar Company, i.e., Petitioner No.1. A copy of the said letter is also annexed at Ex. C to the affidavit in reply. In the rejoinder, there is no denial of addressing this letter. Even in the Petition, Petitioner is totally silent about having addressed the said communication dated 5th August, 1998. Petitioner No.2 is a partner of Petitioner No.1-Firm and he ought to have disclosed to the Court and been truthful to the Court and not suppressed that such a communication was so addressed and the adjustment was made at the request of Petitioner No.1 firm. That was a material fact that has been suppressed. Courts have consistently deprecated parties or litigants who are economical with truth and who resort to falsehood and unethical means for achieving their goals. If clever drafting has created the illusion of a cause of action, the Court must nip it in the bud at the first hearing by examining the party searchingly In Dalip Singh V/s. State of Uttar Pradesh 2009 (12) TMI 847 - SUPREME COURT the Court bemoaned that a new creed of litigants has cropped up who do not have any respect for truth and they shamelessly resort to falsehood and unethical means for achieving their goals. Such a litigant who attempts to pollute the stream of justice or who touches the pure fountain of justice with tainted hands, is not entitled to any relief. The Apex Court and this Court have, on many occasions, stated that if a party comes to the Court with unclean hands, which in this case petitioner have, the party should be dealt with very strongly and substantial costs also should be imposed on the party. The conduct of petitioner in suppressing a material fact intends to impede and prejudice the administration of justice. Judiciary is the bedrock and handmaid of orderly life and civilized society - In the circumstances, we are not inclined to entertain the Petition.

Summary

Issues:
1. Interpretation of the Kar Vivad Samadhan Scheme, 1998 (KVSS) provisions.
2. Determination of tax payable under Section 88 (A) of the Finance Act.
3. Alleged conversion of declaration from clause (iii) to clause (iv) of Section 88(A).
4. Disputed adjustment of tax refund against the tax payable.
5. Suppression of material facts by the petitioner.
6. Judicial view on litigants resorting to falsehood and unethical means.
7. Application of legal principles regarding filing of false affidavits and concealment of facts.

1. Interpretation of KVSS provisions:
The petitioners sought to settle tax dues under the Kar Vivad Samadhan Scheme, 1998 (KVSS) by filing a declaration. The scheme aimed to provide a voluntary settlement of tax dues outstanding as of March 31, 1998, offering waivers and insulation against prosecution and penalties.

2. Determination of tax payable under Section 88 (A):
The respondents issued an 'order to pay' determining the amount payable under Section 88 (A) of the Finance Act. The dispute arose regarding the conversion of the declaration from clause (iii) to clause (iv) of Section 88(A), leading to a disagreement on the amount payable under the scheme.

3. Alleged conversion of declaration:
The petitioners contended that the tax arrears included income tax and interest, making only 35% payable under clause (iii) of Section 88(A), contrary to the 50% claimed by the respondents under clause (iv).

4. Disputed adjustment of tax refund:
The adjustment of tax payable against a partner's refund was challenged, with the petitioners arguing that the adjustment was deemed illegal by the Commissioner of Income Tax and the Income Tax Appellate Tribunal (ITAT), reviving the firm's liability to pay the tax.

5. Suppression of material facts:
The court noted the petitioner's suppression of a material fact regarding the communication addressing the adjustment of the tax refund, emphasizing the importance of truthfulness and disclosure in legal proceedings.

6. Judicial view on litigants' conduct:
Citing judicial precedents, the court condemned litigants resorting to falsehood and unethical means, emphasizing the significance of truth and integrity in the justice system to prevent abuse of legal processes.

7. Application of legal principles:
The court referred to legal principles regarding the filing of false affidavits and concealment of material facts, highlighting the duty of the court to deny relief to those found guilty of such actions. The dismissal of the petition was based on the petitioner's conduct and the principles of justice and integrity in legal proceedings.