Maharashtra State Seeds Corporation Limited vs Union of India and Others

V.A. Naik, J—The petitioner-company dealing in the business of processing of seeds and sale and distribution thereof has challenged the order of the Commissioner of Income Tax, Nagpur rejecting the declaration filed by the petitioner under the Kar Vivad Samadhan Scheme, 1998 on the ground that there were no arrears of tax payable by the petitioner on 31.3.1998 or on the date of making of the declaration on 28.1.1999.

Under the Kar Vivad Samadhan Scheme, 1998 any person-assessee was permitted to make a declaration on or after 1st September, 1998 but on or before 31st day of December, 1998 to the designated authority in accordance with the provisions of Section 92 of the Finance Act in respect of tax arrears so that the amount payable under the Scheme by the declarant-assessee would be determined at the rate of 35% of the disputed income. It is not in dispute that the petitioner-company was in arrears of tax dues to the extent of 1,57,12,100/- and a notice of demand in respect of the same was issued to the petitioner. An appeal filed by the petitioner against the demand was pending before the Commissioner of Income Tax (Appeals II), Nagpur and after the same was partly allowed the petitioner had preferred a Second Appeal before the Income tax Appellate Tribunal, that was pending, when the Kar Vivad Samadhan Scheme, 1998 for quicker realization of tax arrears locked up in appeal was brought into force. The petitioner submitted the declaration in pursuance of the Scheme of 1998 on 28.1.1999 as the date for making the declaration was extended. The declaration made by the petitioner was, however, rejected by the Commissioner of Income Tax, Nagpur by the impugned order on the ground that on the date of declaration they were no tax arrears payable by the petitioner.

Shri S.G. Jagtap, the learned counsel for the petitioner submitted that the Commissioner of Income Tax was not justified in rejecting the declaration filed by the petitioner as the petitioner had neither paid the amount voluntarily nor had paid the amount under protest. It is stated that it could not have been held by the Commissioner of Income Tax in the facts of the case, when the authority had forcibly secured the arrears of tax from the petitioner in installments that the petitioner was not in arrears of tax on 31.3.1998. It is stated that the respondent authority had demanded the tax in installments and the petitioner had paid the same and some part of the arrears were recovered by the Department from the amount that was liable to be paid to the petitioner towards the refund without issuing any notice as required under Section 245 of the Income Tax Act. By placing reliance on the judgment reported in 1999 Income Tax Reports 669 it is submitted that the observation of the Commissioner of Income Tax that there were no arrears of tax payable by the petitioner on 31st March, 1998 is incorrect.

Shri Anand Parchure, the learned counsel for the Department supported the order of the Commissioner of Income Tax and submitted that admittedly, on 31st March, 1998 nothing was due and payable by the petitioner to the Department towards income tax. It is stated that the Department had not forcibly seized the arrears of tax from the bank account of the petitioner and the petitioner had voluntarily paid the same to the Department in installment. It is stated that only a part of the arrears of tax was recovered by adjusting the same towards the amount that was liable to be paid to the petitioner towards refund after issuance of notice. It is stated that the judgment relied on by the learned counsel for the petitioner is distinguishable on facts and the same cannot be made applicable to the facts of this case.

On hearing the learned counsel for the parties and on a perusal of the provisions of Kar Vivad Samadhan Scheme, 1998, it appears that the declaration submitted by the petitioner on 28.1.1999 was rightly rejected by the Commissioner of Income Tax as nothing was due and payable by the petitioner to the Department towards arrears of tax on 31.3.1998. Admittedly, the notice of demand for an amount of arrears of 1,57,12,100/- was challenged by the petitioner in an appeal before the Commissioner and during the pendency of the second appeal before the Tribunal, on the request made by the petitioner the arrears of tax were recovered from the petitioner in installments. A part of the arrears of tax were adjusted by the Department towards the amount payable to the petitioner as refund after issuance of notice. The explanation to the definition of the term "tax arrears" under the Scheme of 1998 clearly stipulates that the arrears of tax paid either voluntarily or under protest would not be considered to be the amount unpaid for the purpose of determining the tax arrears. In the instant case, it appears that the petitioner had voluntarily paid the arrears of tax after seeking the payment of the same in installments and a part of the arrears were adjusted towards the amount due and payable to the petitioner as refund. On a reading of the definition of the term "tax arrears" along with the explanation thereto, it is clear that the petitioner was not in arrears of tax as on 31st March, 1998 and hence the petitioner could not have made a declaration as provided under Section 91 of the Finance Act under the Kar Vivad Samadhan Scheme, 1998. The submission made on behalf of the petitioner that some amount towards the arrears of tax was adjusted by the Department towards the arrears due and payable without issuance of the notice under Section 245 of the Income Tax Act and, therefore, the declaration ought not have been rejected by the Commissioner of Income Tax is liable to be rejected as it is clear from the affidavit filed on behalf of the respondent that the petitioner was served with the notice under Section 245 of the Income Tax Act. The Judgment of Allahabad High Court reported in 1999 Income Tax Reports 669 and relied on by the counsel for the petitioner cannot be made applicable to the facts of this case. In the case before the Allahabad High Court, the Income Tax Department had recovered the amount payable by the petitioner therein towards the arrears of tax by attaching the bank account of the petitioner. Since the amount was recovered by attaching the bank account of the petitioner therein, the Allahabad High Court held that it cannot be said that the petitioner therein had paid the arrears of tax voluntarily or under protest. Such is not the case here.

Since we find that the impugned order is just and proper, the writ petition is dismissed with no order as to costs. Rule stands discharged.