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TMI Blog2016 (10) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of such assessment year. This provision would have two purposes; first, it makes it abundantly clear that if other conditions are satisfied, a person can make a declaration in terms of Section 88 of the KVSS,1998 so long as the order has not been passed by the Settlement Commission under sub-section (4) of Section 245D of the Act and secondly, this provision also puts the controversy beyond any debate, whether if a tax assessed by the Commissioner had remained unpaid, for the purpose of KVSS,1998 could it take a shape of the tax arrear and in respect of which an offer for settlement could be made under the KVSS,1998. Once therefore the Settlement Commission passes an order under sub-section (4) of Section 245D of the Act, it would not be open for an assessee to then approach the designated authority under the KVSS,1998 and seek any adjustment in the tax arrear. Till then, however, the issue would be wide open and the assessee, as in the present case, could approach the designated authority under the KVSS,1998. The Settlement Commission therefore, committed a serious error in holding to the contrary. The Supreme Court in case of Smt. Sushila Rani (2002 (2) TMI 7 - SUPREME Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Section 245D(1) of the Act. 4. While these proceedings were, thus pending before the Settlement Commission, the Parliament enacted the Kar Vivad Samadhan Scheme,1998 (hereinafter to be referred as 'the KVSS,1998') under Chapter-IV of the Finance Act of 1998. The petitioner therefore, filed an application on 26.11.1998 before the authority under Section 90(1) of the KVSS,1998. In such application, the petitioner offered to pay tax as per the said Scheme of ₹ 4808/-, ₹ 22720/- and ₹ 231466/- for Assessment Years 1987-88, 1988-89 and 1989-90 respectively on the disputed income of ₹ 12,020/-, ₹ 56,800/- and ₹ 5,78,665/- for the said 3 years. 5. On 13.11.1998, the Commissioner of Income-Tax, to whom such application was made by the petitioner, asked him to withdraw the petition before the Settlement Commission only after which the benefits under KVSS,1998 would be granted. The petitioner thereupon applied to the Settlement Commission for withdrawal of the settlement application. The Settlement Commission, however, rejected such application by an order dated 16.11.1998 primarily on the ground that the provisions of the settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tlement Commission by the impugned order dated 25.6.1999 rejected the application, proceeded to decide the petitioner's application for settlement. The Commissioner passed an order under Section 245D(4) of the Act and determined the petitioner's gross total income at ₹ 56,952/-, ₹ 56,517/- and ₹ 5,29.467/- for the Assessment Years 1987-88, 1988-89 and 1989-90 respectively. 8. Subsequently, the Settlement Commission passed an order on 19.3.2004 exercising suo-motu powers under Section 154 of the Act providing for interest in terms of the judgment of the Supreme Court in case of Anjum M.H. Ghaswala Ors., reported in 252 ITR 1 , on the unpaid tax. The petitioner thereafter filed an application for rectification on 30.11.2009 and again requested the Commission to drop the entire proceedings which was rejected by the Commission. The petitioner has therefore, filed this petition challenging the order of Settlement Commission dated 25.6.1999 under Section 245D(4) of the Act and the subsequent orders of rectification. 9. In brief, the case of the counsel for the petitioner is that once the proceedings were entertained by the competent authority under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 245C of the Act, is made. Thus, in terms of the provisions of Chapter- XIXA, as they stood at the relevant time, an assessee could make an application for settlement in connection with any proceedings pending for assessment or reassessment or any appeal or revision in connection with such assessment or reassessment. 14. On such an application being filed, the same would be processed by the Settlement Commission as per the procedure laid down in Section 245D of the Act. As per the provisions of sub-section (1) of Section 245D, the Settlement Commission would first decide, whether such application should be allowed to proceed further or that the same should be rejected at that very stage. If allowed to proceed further, the application would pass through various stages envisaged under Section 245D of the Act and finally, the Settlement Commission would pass under sub-section (4) thereof such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application but, refer to in the report of the Commissioner. Section 245H of the Act envisages the power of Settlement Commission to grant immunity from prosecution an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only interest payable or penalty levied, at the rate of fifty per cent of the tax arrear; (v) where the tax arrear includes the tax, interest or penalty determined in any assessment on the basis of search and seizure proceedings under section 132 or section 132A of the Income-Tax Act,1961 (43 of 1961),- (A) in the case of a declarant, being a company or a firm, at the rate of forty-five per cent of the disputed income; (B) in the case of a declarant, being a person other than a company or a firm, at the rate of forty percent of the disputed income. 19. Section 89 pertains to particulars to be furnished in declaration. Section 90 pertains to time and manner of payment of tax arrear, which reads as under : Time and manner of payment of tax arrear. 90. - (1) Within sixty days from the date of receipt of the declaration under Section 88, the designated authority shall, by order, determine the amount payable by the declarant in accordance with the provisions of this Scheme and grant a certificate in such form as may be prescribed to the declarant setting forth therein the particulars of the tax arrear and the sum payable after such determination towards full and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfied. Section 92 provides, inter-alia, that no appellate authority shall proceed to decide any issue relating to the disputed chargeable expenditure, interest, income, wealth etc. in respect of which an order has been made under Section 90 by the designated authority. 21. Section 95 of the KVSS,1998 pertains to scheme not to apply in certain cases, relevant portion of which reads as under: 95. The provision of this Scheme shall not appl y- (i) in respect of tax arrear under any direct tax enactment,- (a)xxx xxx xxx (b)in a case where an order has been passed by the Settlement Commission under sub-section (4) of Section 245D of the Income-Tax Act or sub-section (4) of section 22D of Wealth Tax Act, as the case may be, for any assessment year, to any tax arrear in respect of such assessment year under such direct tax enactment. 22. It can thus be seen that the KVSS,1998 made comprehensive provisions for settlement of tax arrear. Under Section 88 of the KVSS,1998, a person could make an application within the time prescribed making a declaration to the designated authority in respect of tax arrears. The term tax arrear in relation to direct tax enactments is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings for settlement; first under Chapter-XIXA of the Act and the second, under KVSS,1998. This could lead to incongruent results and a possible clash between orders by two separate authorities, a consequence legislature would ordinarily not be expected to bring about. 25. Whatever doubt one may have, would disappear when we look at the relevant portion of Section 95 of the KVSS,1998. To make the matters abundantly clear, this section provides that the provision of the section would not apply in case where an order was passed by the Settlement Commission under sub-section (4) of Section 245D of the Act or similar such provision for settlement under the Wealth Tax Act to any tax arrear in respect of such assessment year. In plain terms therefore, the provisions of the KVSS,1998 would be ousted in a case where the Settlement Commission has passed an order under sub-section (4) of Section 245D, to any tax arrear in respect of such assessment year. This provision would have two purposes; first, it makes it abundantly clear that if other conditions are satisfied, a person can make a declaration in terms of Section 88 of the KVSS,1998 so long as the order has not been passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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