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TMI Blog2009 (12) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner Counsel :- S.D. Singh Respondent Counsel :- Bharat Ji Agarwal,Shambhu Chopra JUDGEMENT Prakash Krishna - The Challenge in the present writ petition is the order dated 25-2-1999 passed by the Commissioner of Income Tax and Designated Authority, under Kar Vivad Samadhan Scheme, 1998 (hereinafter referred to as as KVSS) whereby a sum of Rs. 13,75,133/- has been determined as amount payable at the rate of 35% by the petitioner in view of declaration filed by it under KVSS. The said order has been passed under Section 90(1) of KVSS. 2. The Facts of the case lie in a narrow compass Raising a short controversy as to whether the amount deposited by the petitioner before the date of declaration in pursuance of the assessment order, which is subject matter of appeal, is liable to be adjusted towards the tax due first or towards the accrued interest, the present petition has been filed. 3. The petitioner was a partnership firm till 30-9-1996 and it was converted into a joint stock company under part IX of the Companies Act w.e.f. 1-10-1996 and was incorporated under the Indian Companies Act. It returned the income for the assessment year 1994-95, relevant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Before proceeding further, it may be noted that it is not disputed even by the petitioner that through two challans, both dated 28-4-1997, the petitioner deposited Rs. 25,73,069/- towards income tax and Rs. 17,50,291/- towards interest under Sections 234B and 234C of the Income Tax Act. Photostat copies of these challans are on record as Annexure-3 to the writ petition. Main thrust of the argument of the learned counsel for the petitioner is that the aforesaid two amounts should be adjusted against the tax due. In other words, he submits that the department was not justified in adjusting the sum of Rs. 17,50,291/-, which according to the petitioner, were deposited in the interest account under Sections 234B and 234C of the Income Tax Act, but this amount should also have been adjusted against the tax due. In support of the above argument, reference was made to Explanation to Section 140A of the Income Tax Act which provides that where the amount paid by the assessee under this section falls short of the aggregate of the tax and interest as aforesaid, the amount so paid shall first be adjusted towards the interest payable as aforesaid and the balance, if any, shall be adjusted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by clauses (e) and (f) which are reproduced below:- "87. In this Scheme, unless the context otherwise requires- (e) 'disputed income', in relation to an assessment year, means the whole or so much of the total income as is relatable to the disputed tax; (f) 'disputed tax' 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." 'Disputed tax' referred to above, means the whole or so much of the total income as is relatable to the disputed tax. 'Disputed tax' means following two things:- (1) the total tax determined and payable; (2) but which remains unpaid as on the date of making the declaration under section 88. 13. It may be noticed that 'disputed tax' has been given a specific meaning different from the meaning as it is understood generally. One of the ingredients of the disputed tax is the amount which remains unpaid on the date of making the declaration. A declarant is required to pay at the specified rate with reference to the disputed income. The 'disputed income' has been defined with reference to the 'disputed tax'. 'Disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed CBDT who is the best authority to elucidate its clarification; directed it to file an affidavit of a responsible senior officer from CBDT, giving the meaning of the clarification by way of question No.4, its purpose and reasons, and if necessary supported by extracts of relevant notings which led to the issue of the clarification in the form of question No.4. In pursuance thereof, a supplementary affidavit of Sri Arun Kumar Gurjar, under Secretary (ITJ) in the Central Board of Direct Taxes has been filed. In the said affidavit, the deponent, has reproduced the notings in the relevant file no. 149/145/98-TPL, containing a set of clarification relating to question no. 4 on FAQs and stated that clarification at question no. 4 has been issued in line with the existing instruction No. 1936 issued by the Board dated 31-3-1996. It has been stated in paragraph 3(c) that for the sake of uniformity, the CBDT decided that part payment received from the assessee should first be adjusted towards the tax due and not the interest calculated U/s 220(2) of the Income Tax Act. Clauses (c) and (d) of paragraph-3 of the said affidavit are reproduced below:- "(c) The said instruction was is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt by raising a composite demand of Rs. 30,27,434/-. We find that the said argument of the learned counsel for the petitioner has no merit in as much as the said demand is a composite demand which comprises tax and the interest due thereon. It is well settled that a debtor should seek the creditor. 19. In Venkatadri Appa Row Vs. Parthasarathi Appa Row, AIR 1922 PC 233 it has been held that ordinary rule with regard payments by the debtor unappropriated either to principal or interest is that they are first to be applied to the discharge of the interest. The said principle was reiterated by the Apex Court in Meghraj Vs. Baybai(1969) 2 SCC 274 wherein it was held that normal rule in the case of a debt due with interest is that any payment made by the debtor was in the first instance to be applied towards satisfaction of interest and thereafter to the principal. It is for the debtor to plead and prove the agreement, if any, that the amounts paid or deposited in the Court by him were accepted by the creditor/decree-holder subject to the condition imposed by him. 20. The aforesaid two decisions have been referred and relied upon in Industrial Credit Development Vs. Syndicate Now c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted by the learned counsel for the petitioner that the instructions given by the petitioner are not relevant as in case the appeal or revision succeeds, the demand comprising the tax and interest has to be recalculated to give effect the appellate order. We do not think it proper to address the said issue for the simple reason that it does not fall for our consideration in the present writ petition. After declaration having been filed under KVSS, the appeal preferred by the petitioner loses its efficacy and it shall be treated to have been decided in terms of KVSS. The other aspect of the case is that KVSS is a special scheme. It talks about the disputed tax which means the tax unpaid as on the date of making the declaration under Section 88. It thus contemplates an accomplished fact and does not contemplate a situation which may take place in future. The tax which remains unpaid on the date of making of declaration under Section 88 is an accomplished fact which has to be taken into consideration for the purposes of the said scheme and not any other figure which might or ought to have remained unpaid. There being no dispute that the adjustments in the record were made as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein the Apex Court, while considering similar scheme under the Excise Act, has observed that where two views are possible, one in favour of the assessee must be adopted. There cannot possibly be any quarrel to the said proposition. Learned counsel for the petitioner has also referred the following cases, but we find theirs no application to the issue involved herein. 1- Union of India and another Vs. Azadi Bachao Andolan and another, (2003)263 ITR 706. 2- Sankappa and others Vs. ITO and others,(1968) 68 ITR 760. 3- Kalavati Devi Harlalka Vs CIT, (1967) 66 ITR 680. 4- S. Arthanari Vs. First Income Tax Officer and another, (1972)83 ITR 888 5- Amritsar Vs. Strawboard Mfg. Co. Ltd., (1989)177 ITR 431. 6- CIT Vs. Indian Molasses Co. (P) Ltd. (1989)176 ITR 473. 27. Viewed as above, we find that on the facts of the present case, the impugned order does not suffer from any illegality or legal infirmity. There is no merit in the writ petition. 28. At the end, the learned counsel for the petitioner prayed that some reasonable time may be granted to the petitioner to make the deposit as was required under the impugned order. It is provided that if the petitioner makes the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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