9911796707
TMI Blog2003 (5) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... Kalyana Mantapa" at Bannerghatta Road, Arakere Village. The construction period was from the middle of 1991 to the end of September 1994. The cost of construction according to the appellant's registered valuer was Rs. 60,68,000 but as per the Income-tax Departmental Valuer it was Rs. 1,03,96,000 as on September 30, 1994. The appellant estimated the cost of construction up to Mardi 31, 1994 (previous year ending date for the assessment year 1994-95), at Rs. 30,00,000 and after claiming the sources of funds to the extent of Rs. 10,25,000, he made voluntary disclosure of income at Rs. 19,57,000 under section 69B of the Income-tax Act, 1961 (for short "the Act") plus the income from business at Rs. 90,000 and filed a return of income declaring a total income of Rs. 20,65,000 for the assessment year 1994-95. The Assessing Officer adopted the valuation made by the Departmental Valuer at Rs. 1,03,96,936 and determined the total income at Rs. 45,54,965 in his assessment order dated March 21, 1997, passed under section 143(3) and demanded the following taxes and interests: Rs. Rs. (a) Income-tax 18,00,986 (b) Surcharge 2,16,118 (c) Interest under section 234A 2,01,710 (d) Interest under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent set off the self assessment tax paid by the appellant under section 140A on December 26, 1994, against the interest demand of Rs. 16,32,514, the appellant being aggrieved by the said action of the first respondent, filed an application under section 96(2) of the Scheme on January 1, 1999, to the Central Board of Direct Taxes (the "CBDT"). Before the Central Board of Direct Taxes, the appellant contended, inter alia, that the Scheme is independent of the Act and was intended to waive all interests and penalties when an assessee undertakes to pay 30 per cent. of the disputed income, as tax, and, therefore, the first respondent was not justified in setting off the self-assessment tax against the interests. The appellant contended that such prepaid or part-paid taxes should be adjusted against only the "taxes" and not against the "interests". The appellant received an endorsement dated January 18, 1999, communicating the following interpretation of the Central Board of Direct Taxes: "The Scheme is different from section 140A". According to the appellant, since the above interpretation of the Central Board of Direct Taxes was in his favour, he again approached the first responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal by the aggrieved assessee. We have heard Sri S. Ganesh Rao, learned counsel for the appellant, and learned standing counsel for the Income-tax Department. Sri Ganesh Rao contended that it is quite apparent and clear from the statements made by the Finance Minister with regard to the Scheme on the floor of the House in his Budget Speech to which reference is made by the learned single judge in the impugned order, under the Scheme in prepaid or part-paid taxes are required to be adjusted only against the interests. Sri Ganesh Rao would submit that that is the only reasonable fair way of interpreting the provisions of the Scheme, if one were to keep in mind the very objectives of the Scheme. Sri Ganesh Rao, also contended that since the provisions of the Scheme have overriding effect on the provisions of the Act, the Department cannot place reliance on the Explanation to sub-section (1) of section 140A. Sri Ganesh Rao contended that since the Scheme is a special enactment, it should prevail over the provisions of the Act which includes section 140A. Sri Ganesh Rao would also point out that even the Central Board of Direct Taxes itself had issued clarification that the Scheme i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income; (iii) in the case where tax arrear includes income-tax, interest payable or penalty levied, at the rate of thirty-five per cent. of the disputed income for the persons referred to in clause (i) or thirty per cent. of the disputed income for the persons referred to in clause (ii); (iv) in the case where tax arrear comprises only interest payable or penalty levied, at the rate of fifty per cent. of the tax arrear." The last date for making a declaration under the Scheme was extended from December 31, 1998, to January 31, 1999. The effect of section 88(a)(iii) of the Finance Act is that notwithstanding anything contained in the Act, the amount payable under the Scheme by a declarant (other than companies and firms), who files a declaration between September 1, 1998, and January 31, 1999, shall be 30 per cent. of the disputed income, in a case where the tax arrear includes income-tax as also interest or penalty. Therefore, it becomes necessary for us to decide what was the "disputed income" when the declaration was filed by the appellant. "Disputed income" in relation to an assessment year, is defined in clause (e) of section 87 of the Finance Act as "whole or so much of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 886 but the Commissioner did not accept that computation and issued a certificate of information where it showed the tax arrear as Rs. 89,028. The assessee sent a representation and requested the Commissioner to verify the certificate. The Commissioner rejected the representation stating that there was no error in the certificate. On a writ petition to quash the certificate and direct the Commissioner to grant relief, the learned single judge of this court dismissed the writ petition. On appeal, the Division Bench, while setting aside the order of the learned single judge held that the claim of interest as also the claim in regard to tax were in dispute as on the date of declaration and they were not admitted or undisputed tax arrears. The Division Bench ruled that any payment made towards tax arrears after the date of assessment and before the date of declaration filed under the Scheme would have to be taken as part payment towards tax in regard to declarations validly falling under the Scheme. The court also held that the rule that payments would first be adjusted towards interest and then towards principal (income-tax) based on the Explanation to section 140A(1) of the Act and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of Rs. 78,010 and Rs. 76,190, respectively, under section 140A of the Act and paid tax in respect of the income. The Income-tax Officer determined the income of the petitioner-firm at Rs. 1,26,360 for the assessment year 1975-76 and Rs. 1,04,838 for the assessment year 1976-77. The Commissioner of Income-tax set aside the additions made by the Income-tax Officer. Since fresh assessments were not made pursuant to the order of the Commissioner of Income-tax, the petitioner filed a representation before the Commissioner. Thereafter, the Income-tax Officer passed an order on the basis of the direction issued by the Commissioner of Income-tax. Against the order of the Income-tax Officer, the petitioner filed a revision petition before the Commissioner and the Commissioner finally passed the order under section 264 of the Act. On a writ petition filed by the petitioner to quash the order of the Commissioner and also for a direction to refund the amount paid for the assessment years 1975-76 and 1976-77, the Kerala High Court held thus: "What is contemplated under section 140A is payment of tax on the admitted income furnished in the self-assessment and the payment of tax on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of declaration. The refund due under the Income-tax Act to the tune of Rs. 2,59,445 was already adjusted before March 31, 1998, against the interest-tax due and the said adjustment was never challenged. On a writ petition to declare that the petitioner was entitled to the benefit of the Scheme, the Division Bench of the Andhra Pradesh High Court, while dismissing the writ petition, held that since the demand under the Interest-tax Act was adjusted while finalising the assessment therein under section 143(1)(a) of the Act and the said intimation under section 143(1)(a) had become final and the petitioner had not challenged the same, there is no provision in the Scheme empowering the designated authority to go into the legality of the adjustment made or sit in judgment over the intimation order made under section 143(1)(a) of the Act. As there were no tax arrears remaining unpaid on the date of declaration as required under section 87(m) of the Finance (No. 2) Act, 1998, the petitioner was not entitled to the benefit under the Scheme. P. Venkatarama Reddi J., as he then was, in his separate, but concurring judgment held thus: "...the designated authority (hereinafter referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Instead of doing that, he has resorted to the mode of recovery by way of adjustment which did not evoke any sort of protest from the assessee. At best, it is a procedural irregularity. In fact, there is every reason to think that the adjustment was done with the implied consent of the assessee. The long silence of the assessee coupled with the fact that learned counsel for the assessee made it clear that the assessee did not have any grievance against the adjustment till the Scheme came into existence, reasonably gives rise to an inference that the adjustment made by the Assessing Officer had the nod from the petitioner. The adjustment suited both the parties. In this situation, it cannot be contended that the adjustment must be ignored by treating it as an act of nullity. If at all, it was voidable, but the assessee having consented or at any rate acquiesced in the act of adjustment, it is not open to the petitioner to question the same in a collateral proceeding. At any rate, he cannot request the designated authority to reopen the issue of adjustment at the stage of processing his declaration. I am unable to agree with the view expressed by the learned single judge of the Calc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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