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TMI Blog1999 (5) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and he found that some interest was payable by the assessee on the basis of such return under ss. 234B and 234C computed thus the amount of tax payable and after adjusting the amount paid by the assessee. The amount so payable was intimated to the assessee as required under cl. (i) of s. 143(1)(a). No other adjustment was made in terms of proviso to s. 143(1)(a). The intimation of the tax due was made on 10th Jan., 1997. That amount was also paid and no objection thereto was raised by the petitioner at any time. However, as to assessee's claim to the exemption from tax in respect of arrears of professional fees received after he ceased to carry on the profession, notice under s. 143(2) was issued fixing the date of hearing on 19th June, 1997. The regular assessment under s' 143(3) ultimately came to be made on 18th Jan., 1999, holding that the arrears of professional fees were taxable receipts and accordingly, demand was raised. The assessee filed an appeal against the said assessment of 25th Jan., 1999. During this period, with the enactment of Finance (No. 2) Act of 1998 which came into affect w.e.f. 1st April, 1998, the provisions popularly known as Kar Vivad Samadhan Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced as a consolidated measure on effecting recovery of outstanding arrears of tax which have been clogged as a result of litigations surrounding it. Moving the Finance Bill, the Finance Minister in his speech explained the object of the scheme in the following terms : "Litigation has been the bane of both direct and indirect taxes. A lot of energy of the Revenue Department is being frittered in pursuing large number of litigations pending at different levels for long periods of time. Considerable revenue also gets locked up in such disputes. Declogging the system will not only incentivise honest tax-payers, enable Government to realize its reasonable dues much earlier but coupled with administrative measures, would also make the system more user-friendly. I therefore, propose to introduce a new Scheme called Samadhan." The scheme is contained in Chapter IV of the Finance Act No. 2 of 1998 and comprising in s. 86 to s. 98. 4. Sec. 88 declares that, subject to the provisions of this Scheme, where any person makes, on or after the 1st day of September, 1998, but on or before the 31st day of December, 1998, a declaration to the designated authority in accordance with the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or reference or reply shall be deemed to have been withdrawn on the date of the order passed under s. 90(2), provided further that where the declarant has filed a writ petition or appeal or reference before any High Court or Supreme Court against any order in respect of the 'tax arrear', the declarant shall file an application before the High Court or the Supreme Court for withdrawing such writ petition, appeal or reference and after withdrawal of such writ petition, appeal or reference with the leave of the Court, furnish proof of such withdrawal along with the intimation referred to in sub-s. (2). On fulfillment of aforesaid conditions, under s, 91, the Designated Authority shall, subject to the conditions provided in s. 90, grant immunity from instituting any proceeding for prosecution for any offence under any direct tax enactment or indirect tax enactment, or from the imposition of penalty under any of such enactments, in respect of matters covered in the declaration under s. 88. Under s. 92, no appellate authority shall proceed to decide any issue relating to the disputed chargeable expenditure, disputed chargeable interest, disputed income, disputed wealth, disputed value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 31st day of March, 1998, under that enactment but remaining unpaid on the date of making a declaration under s. 88 or the amount of duties (including drawback of duty, credit of duty or any amount representing duty), cesses, interest, fine or penalty which constitutes the subject-matter of a demand notice or a show-cause notice issued on or before the 31st day of March, 1998, under that enactment but remaining unpaid on the date of making a declaration under s. 88, but does not include any demand relating to erroneous refund and where a show-cause notice is issued to the declarant in respect of seizure of goods and demand of duties, the tax arrear shall not include the duties on such seized goods where such duties on the seized goods have not been quantified." 6. The KVSS is woven around the thread of unpaid tax in respect of a particular assessment year under direct tax enactment which has been determined on or before the 31st day of March, 1998, and existence of a dispute relating to such 'tax arrear' which has to be pending. The twin object is collection of revenue and end of the dispute by settling the amount payable against such 'tax arrear' on payment of which the pending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds modified as a result of regular assessment under s. 143(3) before the declaration was made, giving rise to demand of tax which was unpaid on the date of declaration. He has also filed an appeal under s. 246 before the CIT(A) and as he has paid the tax as per the return submitted by him, he also fulfils the condition of admitting any appeal under sub-s. (4) of s. 249 of the IT Act which saves him from inhibition of s. 95 of the KVSS. He further contends that the expression 'as modified giving effect to an appellate order' must be construed in the light and context of the object with which the scheme has been Boated and should receive purpose-oriented meaning, in preference to literal meaning. It was urged that in its literal sense, modification in consequence of giving effect to an appellate order will take into account only orders made in appeal and which will leave modification of order even by way of revision out of consideration. In giving such a meaning to 'modification of determination made prior to 31st day of March, 1998' in its literal sense the very purpose of requiring the pendency of a dispute whether by way of reference, writ petition or revision in addition to appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermination on its own. At best, it can be said that such an order can result in modification of intimation under s. 143(1)(a) only and no more. 10. At the centre of entire controversy, key expression is 'determination on or before the 31st day of March, 1998', On the one hand, the view canvassed by the petitioner is that the word 'determination' is of wide connotation and takes within its purview, the determination of tax by way of self-assessment under the IT Act with which we are presently concerned, and the assessment made under s. 143(1)(a). It is not required necessarily that such determination must be by way of final adjudication of any issue. On the other hand, the contention of the Revenue is that, in the context in which the term appears and in the context of the scheme, it can have only meaning to be a determination by application of mind by an authority under the relevant enactment, resulting in final disposal of an issue so far as he is concerned. Anything which has not been so determined by any of the concerned authority before the 31st day of March, 1998, determination of a question for the first time thereafter under any proceedings would not fall within the expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered by such orders shall be reopened under the direct tax enactment or indirect tax enactment or under any other law for the time being in force, That is to say, it would not only draw a curtain on the pending dispute as to the liability of assessee about 'tax arrear', but restrain further proceedings of any nature for existing issues in respect of (sic---matter) relating to the 'tax arrear' which has been settled. So also, it has now been accepted that even in the case where the tax determination prior to the 31st day of March, 1998, stands set aside by an order of superior authority or under any other provisions of the Act, but Revenue intends to challenge that order or in appeal or in any other forum for revising that order, the scheme applies. That is to say, notwithstanding there may not be any tax arrear as per the existing order as on the date of making a declaration, but as per the unmodified determination of tax made prior to the 31st day of March, 1998, amount is due and relief granted in favour of the assessee is under challenge by the Revenue or is intended to be subjected to challenge by the Revenue, still the KVSS operates. 14. The Delhi High Court in All India Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has to be made on that basis. If this meaning is not assigned to it, it would be impossible to compute the amount of tax payable under s. 88 in respect of an assessee who is defendant in the pending dispute at the behest of Revenue where at one stage, his contention has been accepted and the liability is reduced to admitted extent by the assessee. Viewed in this context, the modification of tax determined prior to the 31st day of March, 1998, must necessarily relate to modification of such liability of tax under different provisions of the Act which does not necessarily come in the form of appeal, as ordinarily understood to be distinct from other modes by which any operating order is reviewed or modified, but to proceeding by which such order can be reviewed in accordance with law, resulting in modification of the orders already made. It will not include new orders which instead of review of existing order results in substitution by new order. 16. In this connection, it may further be noticed that, under the scheme of IT Act, liability to pay tax does not necessarily call for an order of adjudication. So also, modification of determination of the liability once quantified by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the amount of tax, penalty or interest determined on or before the 31st day of March, 1998, under any of the remedial provisions of the Act touching the determination of tax made prior to 31st March, 1998, may it be by rectification of the same order or by revisional authority having recourse to powers of revision under ss. 263 and 264 of by way of giving effect to an order in appeal or by way of giving effect to an order passed in any other form which results in modification of such determination, The word 'appellate order' has been used in its wider connotation to an order which has an effect to modify order in relation to issue decided therein by any process of remedies made available to assessee against the original determination made under the enactment and can properly be termed as continuation of original proceedings and not confined to the status of the form by which the original order is effected. However, it does not cover the case where the proceedings are new or de novo like reassessment proceedings or by rectification of an order in relation to a matter which had not been subjected to determination earlier and results in a new order coming into existence. 18. The n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of tax-payer assessee to pay any amount by way of tax, interest or penalty, by deciding any controversy surrounding the same, if any, which he is required to decide under the statute. The determination under s. 87(m) is not divorced from the ingredients of a determination of issue between the assessee and the Revenue by the competent officer under the enactment in the first instance and it must have the colour of a determination which can be subjected to further appeals in the sense is liable to be modified under different methodologies of redressals. Therefore, a self-assessment or an undisputed computation of tax simpliciter when the same is done at a stage when issues are not to be decided, but the duty is cast to act on assumption of correctness of information disclosed, by deferring decision thereon at a later stage, does not amount to determination of tax within the meaning of s. 87(m). But where there is a disposal of any issue by an authority under the relevant enactment designated to quantify the amount of tax, penalty or interest which can be subjected to remedial measures would certainly come within the meaning of determination of tax, penalty or interest envisaged u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or interest is due from him : Provided also that an intimation under this clause shall not be sent after the expiry of two years from the end of the assessment year in which the income was first assessable. (1A)(b) (2) (3) (4) (5) (6) Explanation : An intimation sent to the assessee under sub-s. (1) or sub-s. (1B) shall be deemed to be an order for the purposes of ss. 246 and 264. " 24. Not only that the AO is authorised to make these adjustments which has an effect either of raising a demand or granting a refund, apart from the fact that computation made in the return itself, such intimation as per Explanation to s. 143, inserted w.e.f. 1st Dec., 1991, is further considered to be an order for the purpose of ss. 246 and 264. That is to say, it can be appealed against or the petition for revision can be filed by the aggrieved assessee. Therefore, to the extent the AO applies his mind to the facts and makes adjustments as are permissible under cls. (i), (ii) and (iii) to the proviso, prima facie at best he has to decide, ex parte and tentatively which may be deemed an order for the purpose of appeal. If that be so, it can at best be said that an intimation under s. 143(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a facie of the opinion on the available material without travelling outside the available information about its admissibility or inadmissibility, its truthfulness or otherwise, he can make that adjustment for the purpose of computing the tax or interest. However, where he is not able to make such prima facie opinion, there is no ground to presume that he holds prima facie opinion otherwise, which can be considered as 'determination' by him of any claims made by the assessee, by prima facie holding the same admissible or inadmissible, as the case may be. Such claims are all in the realm of question yet to be determined on which no expression of opinion has been made by the AO. Therefore, any claims to relief made by the assessee in his return, but not adjusted at the time of determination under s. 143(1)(a) cannot be said to be prima facie determination in favour of the assessee. If there is no determination of any fact or question, the question of its modification later on by any decision would not arise. The later decision, if any, would be an independent determination of the issue for the first time not affecting the quantification made earlier by way of modification. In our view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermined anything even provisionally, yet it will tantamount to determination of tax on the date of intimation. Such an interpretation will be contrary to very object and purpose of the Scheme. That line in fairness, learned counsel has not adopted and candidly stated that in such event, there cannot be any question of modification because intimation itself cannot be considered a determination. 29. This affirms the conclusion to which we reach firstly that in order to come within the term 'determination' of tax liability or penalty, there has to be a conscious determination of that liability with some application of mind. Secondly, more importantly for the present purpose, the tax, interest or penalty determined prior to 31st March, 1998, as modified in consequence of giving effect to an appellate order can only relate to such modification which results in altering the determination earlier made through conscious application of mind and not by subsequent determination of any liability of tax, interest or penalty on new and undetermined issues. 30. In this connection, it becomes relevant to notice the consequence that flow from the order made under s. 91 and order made under s. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermination' under s. 87(m) can have is that it relates to any determination made by an authority under the relevant Act consciously prior to the 31st day of March, 1998, and pendency of a dispute relating to such conscious determination at any level of remedial forums, in the context, must also lead to conclusion that modification by giving effect to appellate order must have direct connection with the matters determined on or before the 31st day of March, 1998, and alterations in an amount of tax, penalty or interest as a result of first time determination of any issue after the 31st day of March, 1998, is not envisaged. 34. It is right to say that there are three steps in levy of tax. Firstly, liability to tax is determined ex hypothesi at the close of previous year by operation of the charging provision under the statute. Obviously, determination under s. 87(m) does not refer to such ex hypothesi determination of tax. Secondly, the quantification of that liability which ex hypothesi stand determined, takes place at later stage through machinery provided under the relevant enactment and the third stage of assessment is about recovering the amount so determined. Though in broad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can only relate to the orders which had the effect of modification in respect of matters already determined prior to the 31st day of March, 1998, but not in respect of matters which are yet awaiting determination. Under the scheme of s. 143(1) while issuing the intimation, the AO does not decide any issue of contest. His task is only to compute the tax and interest, if any leviable as per the information submitted in the return by the assessee, assuming the same to be correct and after adjusting the amounts already paid by the assessee, to find out whether any amount is payable by the assessee or refund that is due to the assessee and intimate such results to the assessee. In the process, he has been authorised to make certain adjustments where he is able to form a prima facie opinion about the admissibility of any claim made by the assessee or inadmissibility of any claim, though not made by any assessee, but is liable to deductions or not liable to be taxed or likewise any claim made by the assessee is found to be inadmissible relief. However, at that stage, nothing beyond formation of prima facie opinion about admissibility or inadmissibility of any claim or relief is envisaged. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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