A.M. Sainalabdeen Musaliar vs Commissioner of Income Tax and Another

C.N. Ramachandran Nair, J.—The petitioner is challenging Ext. P11(a) issued by the first respondent demanding differential amount payable by the petitioner under Kar Vivad Samadhan Scheme, 1998 for the asst. yrs. 1990-91, 1991-92 and 1992-93. According to the petitioner, first respondent issued Ext. P7 u/s 90(2) r/w Section 91 of the Finance (No. 2) Act, 1998, demanding a total amount of Rs. 3,31,120 which was paid by the petitioner in full and final settlement of liability for the three asst. yrs. 1990-91, 1991-92 and 1992-93. The petitioner''s case is that the first respondent has no authority to modify Ext. P7 which was accepted by the petitioner by making payment. The petitioner has relied on the decision of the Supreme Court in Sushila Rani Vs. Commissioner of Income Tax and Another, and contended that the CIT has no power to modify Ext. P7 issued under the KVSS.

I heard counsel for the petitioner and standing counsel for the IT Department. Ext. P11(a) is issued by the first respondent demanding 50 per cent of the interest that was payable upto 31st March, 1998 u/s 222 [sic-220(2)] of the IT Act which was not included in Ext: P7 demand raised based on declaration furnished by the petitioner. Under Ext. P4 declaration furnished by the petitioner under the KVSS interest payable was only for the asst. yrs. 1990-91, 1991-92 and 1992-93 as, according to the petitioner, there was demand of tax only for the year .1993-94. However, strangely it is seen from Ext. P7 that the Department has not recognised any demand of Income Tax due as on 31st March, 1998 for the asst. yr. 1993-94 because the demand raised therein for all the three years is only towards interest. Neither in Ext. P4 declaration furnished by the petitioner nor in Ext. P7 order issued by the first respondent under the scheme, there is any statement as to the nature of interest offered for settlement and accepted by the Department. However, it is seen from the revised proceeding namely, Ext. P11(a) that the demand originally settled was interest payable u/s 234B and Section 234C of the IT Act for all the years and for the year 1993-94 demand settled included interest payable u/s 234C also. The petitioner has no dispute that besides liability for interest payable under ss. 234B and 234C for all the years and interest payable u/s 234A for the year 1993-94, interest was in fact payable as on 31st March, 1998 also u/s 220(2) of the IT Act for all the years which was also amount payable under the KVSS. Since the petitioner has admittedly not included interest u/s 220(2) for settlement under KVSS, the declaration was defective inasmuch as full liability was not shown there for settlement. Even though the Department is stated to have accepted Ext. P4 declaration by issuing Ext. P7, it is not known why tax is not demanded for the asst. yr. 1993-94 in spite of the petitioner declaring tax liability of Rs. 79,068 for that year. Obviously the Department does not accept existence of any tax liability for 1993-94 because under Ext. P7 demand shown under settlement is only interest. Therefore, the demand shown and payable under the KVSS under Ext. P4 declaration furnished by the petitioner for the year 1993-94 and accepted by the Department is not consistent with the scheme which provides for settlement of tax liability by remittance of 35 per cent. It is not clarified even as of now as to whether there was any tax liability due for 1993-94 as declared by the petitioner, in Ext. P4. Even though the demand shown in Ext. P7 for 1993-94 is not consistent with Ext. P4 declaration furnished by the petitioner, he does not appear to have raised any objection against Ext. P7 but remitted the amount in terms of the demand. From the figures shown in Exts. P4, P7 and P11(a), it is clear that neither the declaration furnished by the petitioner nor the first order issued by the first respondent accepting settlement therein are consistent with actual liability disclosed by records inasmuch as complete interest liability u/s 220(2) due upto 31st March, 1998 was not reckoned by the petitioner in the declaration and the Department in their order. The actual position with regard to tax liability for the year 1993-94 is not known even as of today. Even though counsel for the petitioner based on the above decision of the Supreme Court submitted that no order under the scheme is liable for modification by first respondent. I am unable to accept such a vague proposition canvassed by the petitioner because Supreme Court in the very same decision referred above has taken into account requirement of rectification of mistakes and errors in the interest of justice. The case allowed by the Supreme Court is one where the Department had wrongly adjusted refund against demands which were not accepted by the assessee. This is not a case of any wrong adjustment of refunds against demands. This is a case where petitioner committed error in filing declaration by omitting to include interest payable u/s 220(2) upto 31st March, 1998 without the inclusion of which liability cannot be settled under the KVSS and what the Department has now done vide Ext. P11(a) is to correct their order which is issued based on declaration furnished by the petitioner. Even though standing counsel for respondents opposed the challenge raised against Ext. P7 for the year 1993-94.I am unable to accept the argument of the standing counsel because mistake in regard to non-inclusion of interest u/s 220(2) of the IT Act can be corrected. The mistakes if any in regard to demand under the scheme for the year 1993-94 also calls for correction. Since apparent or patent mistakes can be corrected by virtue of Section 154 of the IT Act even in proceedings issued under the KVSS as approved by the Supreme Court in the very same decision cited above, I uphold the demand of interest u/s 220(2) under Ext. Pll(a) for the years 1990-91 and 1991-92. So far as 1993-94 is concerned, in view of the controversy as to whether there was tax liability as on 31st March, 1998, I direct the first respondent to verify records and to settle actual liability under the scheme. There will be direction to the first respondent to revise the demand for 1993-94 in accordance with the KVSS granting eligible benefit to the petitioner, adjust reduction, if any, granted against demand for other years and issue fresh demand notice for all the years. The revision will be made within a period of six weeks from the date of production of copy of this judgment.

The original petition is disposed off as above.