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TMI Blog2008 (4) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... DGMENT:- PER : Anand Byrareddy These appeals are by assessees who belong to the same family. Being aggrieved by a common order, they have preferred these separate appeals. As the issues and questions of law that arise for consideration are identical, the appeals are disposed of by this common judgment. 2. The facts as are relevant for consideration of these appeals are as follows : The appellants had, as co-owners of a commercial complex, carried out construction thereof and had declared a total cost of construction in their respective returns of income for the assessment year 1993-94 at Rs. 42,68,642, whereas the estimation framed by the Departmental Valuation Officer was at Rs. 62,27,795. Therefore, Rs. 19,59,150 was treated as unexplained income, equally in the hands of the three appellants. 3. And further, the appellants had received a sum of Rs. 16,85,000 as co-owners from their tenant who had occupied two shop units separated by a common wall - the above amount was paid as consideration for permitting the tenant to create an opening in the wall for the tenant's convenience. This amount was treated as a revenue receipt and one-third share of each of the appellants was as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to maintainability of the same. The objection was to the effect that the dispute relating to the income-tax for the impugned assessment years having been settled under the scheme and the payment of the taxes as determined having been certified - the appeals by the revenue, pertaining to the very assessment year would also be infructuous. 8. The Tribunal, however, has opined that the settlement preferred by an assessee, in relation to its own appeal will not have any bearing on the cross-appeal filed by the revenue as long as the assessee does not opt to settle the issue under the scheme even in respect of such other cross-appeal of the revenue. And accordingly rejected the said preliminary objection of the assessees. And proceeding to consider the appeals of the revenue on merits has reversed the order of the first appellate authority to the effect that any consideration received by an owner of property in return for the occupation and permission for usage of the property is taxable as rent receipts under the Income-tax Act and cannot be taken to be capital in nature. While rejecting the other contention regarding the computation of estimated cost of construction as being erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India [1999] 236 ITR 11 wherein the Constitutional validity of the scheme was challenged by way of a public interest petition and a Division Bench of the Delhi High Court having held that the proviso to section 92 of the Act was ultra vires article 14 of the Constitution of India. This has been accepted by the Central Government. The Tribunal has failed to appreciate the effect of the said decision. And further on merits contends that the Tribunal was in error in holding that the receipt of Rs. 16.85 lakh as being a revenue receipt, since the same was a lump-sum payment for a convenience provided to the tenant and was in the nature of a capital receipt. 11. The counsel would place reliance on the following authorities in support of the appeals. (a)A clarification issued by the Central Board of Direct Taxes bearing No. 149/145 98-TPL (See: 233 ITR (st.) 50 wherein it has been clarified that the Department understands the scheme to be a .......... "Package for settlement of tax arrears of a particular assessment year in entirety......" And that an assessee could not seek settlement of part of arrears towards interest, under the scheme while reserving a right of appeal against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue seeks to justify the view taken by the Tribunal and would submit that any other being taken insofar as the declaration of the assessee under the scheme pertaining to his own appeals, also applying to the appeals of the revenue, would have far-reaching consequences that would adversely affect the revenue. He seeks to rely on the following authorities : (a)CBDFs clarification No. 149/152/98-TPL, dated 17-12-1998; (b) Union of India v. Onkar S. Kanwar [2002] 258 ITR 7612 (SC) wherein on the following facts it was held as follows : "A & T Limited, company, was clearing, for purposes of excise duty, certain tyres on the basis that the tyres were for use in trailers. It was found that these tyres were being fitted to light commercial vehicles. The Commissioner of Central Excise issued show-cause notices to the company as to why excise duty and penalty should not be levied. In the same show-cause notices the directors/officers of the company were also called upon to show cause as to why penalty be not imposed on them. The company and its directors/officers replied to the show-cause notices. The Commissioner adjudicated the show-cause notices and called upon the company to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances of the present case. The Scheme has come into force on 1-9-1998. From a reading of the definitions under section 87 of the Act, it follows that in relation to an assessment year, whether it is chargeable expenditure, chargeable interest or income which is in dispute, it would be construed as the whole of such disputed chargeable expenditure, disputed chargeable interest or disputed income as is relatable to the disputed tax which is contemplated; -'Disputed tax' is defined as follows : "(It) means the total tax determined and payable in respect of an assessment year under any direct tax enactment but which remains unpaid as on the date of making the declaration under section 88." -'Tax arrears' is defined as :-- "(i )In relation to direct tax enactment, the amount of tax, penalty or interest determined on or before 31-3-1998, under that enactment in respect of an assessment year as modified in consequence of giving, effect to an appellate order but remaining unpaid on the date of declaration;" Under the scheme, where any person makes a declaration, after 1-9-1998 but on or before 31-12-1998, in respect of his tax arrears--the amount payable under the scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prises only penalty, fine or interest), the appellate authority shall decide the appeal irrespective of such declaration." 15. The entire Scheme was challenged as falling foul of Article 14 and Entry 82 in List-I of the VII Schedule to the Constitution, in the case of All India Federation of Tax Practitioners (supra ) with particular reference to the Proviso to section 92, the Court has, by way of an example, explained the unfairness of the classification made in the class of litigating assessees where the litigating assessee is in arrears merely by reference to the fact whether they are prosecuting the litigation, or defending themselves, as follows :-- "There are two assessees A and B identically situated in all respects in the matter of nature of income, quantum of taxable income and the category of tax but they are situated at two different places, say X and Y, respectively. Two Assessing Officers finalising their assessments at X and Y find their incomes and taxable incomes identical and levy an identical amount of tax on the two. Both file appeals before the Commissioner (Appeals). The legal plea raised by A before the Commissioner at X finds favour with him and the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d too rigid a meaning on 'arrears' which does not fit in the context. The term 'arrears' means an amount or quantity which still needs to be paid. If refers to money that is owed. Wharton's Law Lexicon (Fourteenth edition) defines 'arrears' to mean - 'money unpaid at the due time : as spent behind; ...money in the hands of an accounting party'. It is true that 'tax arrears' has been defined as the amount of tax, penalty or interest 'determined' on or before 31-3-1998, under clause (m) of section 87. Still it cannot be denied in the illustration given hereinabove that at one point of time the tax was determined though such determination was reversed in appeal by the Commissioner (Appeals). The determination is sought to be restored in the appeal preferred by the Department before the Tribunal. Once the appeal is allowed, the determination would relate back to the date of originating the same. Under the scheme of the Income-tax Act, it is well known that a determination of liability to pay tax does not necessarily call for an order of adjudication. Take the cases of self-assessment, payment of advance tax, deduction of tax at source and so on. Several provisions, prescribe for penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decision has issued instructions to implement the Scheme subject to the above decision in its Clarification bearing No. 149/152/98 TPL, dated 17-12-1998, with reference to the declarations filed by the assessees under the Scheme and the manner in which they shall be regulated, as under :-- "(i)The assessee has the option of filing declaration either in respect of arrears disputed in his appeal or of taxes involved in Departmental appeal or for both independently of each other. (ii)For declaration relating to Departmental appeals also the existing Form No. IA can be used. In such cases, there are no outstanding taxes and hence the process of working out "disputed income" from outstanding taxes is not involved. The entire income under dispute in various grounds of appeal may constitute "disputed income" on which the sum payable can be determined. In respect of Departmental appeals, the declaration has to be for the entire income disputed in such appeals. (iii)Where the declaration in respect of Departmental appeals are accepted by the designated authority, the CIT may proceed to withdraw such appeals on passing of the order under section 90(2). (iv)In the event of cross-app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, it would include such arrears, which after determination have been set aside, but such setting aside has not been accepted by the department and continues to remain under challenge before a Court or Tribunal. Section 90 requires the designated authority to determine the amount payable by the declarant in accordance with the provisions of the Scheme and grant a Certificate setting forth the particulars of the tax arrears and the sum payable after such determination towards full and final settlement tax arrears. And upon payment of such amount determined and on an order having been passed under sub-section (1) of section 9, it is conclusive and shall not be reopened. In the instant case, the Designated Authority having issued such a Certificate, the same attains finality. The contention sought to be put forth that there ought to be an independent declaration insofar as the tax arrears that are subject-matter of the appeals by the department is, therefore, not tenable. The decision of the Delhi High Court having categorically laid down that there cannot be a classification of the litigating assessees in arrears, merely by reference to the fact whether they are prosecuting liti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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