9911796707
TMI Blog2000 (3) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 215 by filing an appeal before the Commissioner of Income-tax (Appeals) but was unsuccessful. The petitioner took the matter in further appeal to the Tribunal. While the appeal was pending, the Government of India introduced the Kar Vivad Samadhan Scheme, contained in Chapter IV of the Finance (No. 2) Act, 1998, with a view to provide a quick and voluntary settlement of tax arrears outstanding as on March 31, 1998. Initially, the scheme was to be in operation up to December 31, 1998, but subsequently it was extended for a further period of one month, i.e., up to January 31, 1999. On September 2, 1998, the petitioner filed a declaration under the said scheme in respect of the interest charged under section 215 of the Act, amounting to Rs. 1,53,31,342. In the said declaration, the tax arrear outstanding as on March 31, 1998, towards interest under section 215 was shown at Rs. 1,35,53,483, which, according to the covering letter filed with the declaration, was arrived at after making adjustments for the amounts recovered/adjusted by the Department up to March 31, 1993. On October 21, 1998, a certificate of intimation was issued to the petitioner under section 90(1) determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-1998, is modified to this extent. Yours faithfully, (Sd.)(P.Saxena), Designated Authority, Commissioner of Income-tax Delhi-III, New Delhi." Vide their letter dated March 8, 1999, the petitioner objected to the raising of the said additional demand on the ground that the final certificate, certifying the payment of the amount determined to be payable as full and final settlement of tax, in terms of the order dated October 21, 1998, having been issued, nothing remained to be due or to be done on the part of the petitioner in the matter. Accordingly, the petitioner did not make payment so demanded. The petitioner received yet another letter dated March 31, 1999, from the designated authority informing them that since in the light of the Board's circular dated January 5, 1999, the benefit of the Kar Vivad Samadhan Scheme, 1998, was limited to interest under section 215 only and the benefit under the said scheme was not applicable to interest under section 220, a sum of Rs. 75,82,304, was still outstanding against the petitioner, which was required to be paid by the petitioner. It is this action of the designated authority which is sought to be challenged in this petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the demand is paid and, therefore, because interest under the section is not determinable as due or payable as on March 31, 1998, it cannot form part of the tax arrear as defined under section 87(m)(i) of the Finance (No. 2) Act, and (b) since it is now accepted by the Department that interest under section 220(2) is a part of the tax arrear, but the tax payable under the Kar Vivad Samadhan Scheme on this amount having not been demanded as payable in the initial order/certificate made under section 90(1), the same cannot be recovered now by amending the certificate already issued for full and final settlement as the scheme does not vest the designated authority with power to rectify the final certificate. It is urged that since the law envisages a period of sixty days from the date of receipt of declaration for the designated authority to determine the sum payable under the Kar Vivad Samadhan Scheme and provides for a period of thirty days for payment of the said sum, only the certificate issued under sub-section (1) of section 90 could be amended under the second proviso to the said sub-section and that too for reasons to be recorded in writing, before a final certificate under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a schedule thereto. Section 88 provides that subject to the provisions of this Scheme, where any person makes, on or after September 1, 1998, but on or before December 31, 1998 (later extended up to January 31, 1999), a declaration to the designated authority in accordance with the provisions of section 89 in respect of "tax arrear", then, notwithstanding anything contained in any direct tax enactment or indirect tax enactment or any other provision of any law for the time being in force, the amount payable under this Scheme by the declarant shall be determined at the rates specified thereunder. Section 89 prescribes the manner in which declaration has to be made to the designated authority. Section 90 stipulates the time and manner for payment of "tax arrear" and the consequences that follow, Since a lot of emphasis is laid by learned counsel for the petitioner on the provisions of law contained in section 90, the relevant clauses of the section are reproduced hereunder : "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 provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der sub-section (1), of determination of the sum payable under this Scheme, shall be conclusive as to the matters covered by such order and no matter covered by such order shall be reopened in any other proceeding under the direct tax enactment or indirect tax enactment or under any other law for the time being in force. Section 91 provides that on fulfilment of certain conditions stipulated in section 90, the designated authority shall grant immunity from instituting any proceedings for prosecution for any offence under any direct tax enactment or indirect tax enactment, or from the imposition of penalty under any such enactment, in respect of matters covered in the declaration under section 88. The term "tax arrear", is defined in clause (m) of section 87. So far as it relates to the direct tax enactment, it reads as under : "(m) 'tax arrear' means,--- (i) in relation to direct tax enactment, the amount of tax, penalty or interest determined on or before the 31st day of March, 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." According to the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the rate prescribed in sub-section (2) is automatic and unconditional. The liability to pay interest under the said section is fixed under the direct tax enactment and is absolute, though the quantification of the amount payable is made later when the amount reflected in the notice of demand is ultimately paid. In All India Federation of Tax Practitioners v. Union of India [1999] 236 ITR 1 (Delhi), the Kar Vivad Samadhan Scheme was examined threadbare by a Division Bench of this court. While upholding the validity of the Kar Vivad Samadhan Scheme by reading down some of its provisions, speaking for the Bench, R. C. Lahoti J. (as his Lordship then was), very succinctly explained the scope of the Scheme. It was observed, though in a different context, that "a determination of liability to pay tax does not necessarily call for an order of adjudication ... Several provisions prescribe for penalty or interest, which liability is incurred automatically and by operation of law. . .". It is also not in dispute that on account of non-payment of interest under section 215 of the Act, the petitioner had incurred liability to pay interest under section 220(2), unless the demand on that acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner's counsel. Besides, in the letter dated January 5, 1999, issued by the Central Board of Direct Taxes to all Chief Commissioners to which reference was also made by learned counsel for the petitioner, it his been clarified that where the tax arrear comprises only the interest payable, as in the present case, or penalty levied, the interest under section 220 may be worked out till March 31, 1998, and the declarant would be entitled to a waiver of 50 per cent. thereof. In view of the provisions contained in section 88(a)(iv) and the definition of "tax arrear" appearing in section 87(m), no interest under section 220(2) can be charged in such cases beyond March 31, 1998. The said clarification leaves little room for doubt that interest under section 220(2) constitutes "tax arrears", thus, subject to the Kar Vivad Samadhan Scheme. We now take up the second question, namely, whether after the issue of certificate under section 90(2), the designated authority could demand under the KVSS, 50 per cent. of the amount of interest payable under section 220(2) on the interest charged under section 215 of the Act and determined to be payable as on March 31, 1998. The Scheme is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax at the rate(s) specified under the Scheme in respect of the entire 'tax arrear" pertaining to a particular assessment year irrespective of the fact whether the declarant has made a declaration in respect of the entire tax arrear or not. In the instant case, as noted above, the petitioner did not include in its declaration the amount payable as interest under section 220(2) of the Act and if the provisions of the Scheme were to be construed strictly, the designated authority ought to have rejected outright the declaration as being incomplete and in that event the petitioner would not have been entitled to any immunity under section 91. But the basic issue is whether the designated authority having chosen not to adopt the said course, which undoubtedly would have been detrimental to the petitioner, and having determined the amount payable by the petitioner only on the basis of its declaration, the amount now determined to be payable under the Scheme could be recovered ? Section 90 of the Finance (No. 2) Act vests jurisdiction in the designated authority to "determine" the amount payable by the declarant under the scheme. According to Black's Law Dictionary, the term "dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed authority is not competent to do. As noticed above, the initial order and the certificate issued to the petitioner under section 90(1) of the Act was in respect of the amount declared by the petitioner, which did not include the interest under section 220(2) of the Act and, therefore, the question of amendment of the certificate already issued in terms of the second proviso to section 90 does not arise in the instant case. Similarly, the interest under section 220(2) having been neither declared in the declaration nor included in the determination of the amount payable, the provisions of sub-section (3) will not be attracted in so far as the said interest is concerned. During the course of hearing, we pointedly asked learned counsel for the Revenue to clarify as to why and the circumstances in which the letter dated March 31, 1999, was issued informing the petitioner that the benefit under the Scheme was not applicable to interest under section 220 amounting to Rs. 75,82,304. The explanation given was the failure of the petitioner to deposit within the stipulated time the amount demanded vide letter dated February 10, 1999, and that the stand of the respondents continues to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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