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Judgment
H.L. Dattu, C.J.—Appellant before us is the legal representative of late M.S. Viswambharan. During his lifetime, Viswambharan had called in question Exhibit P5 order passed by the Designated Authority under a scheme, known as "Kar Vivad Samadhan Scheme, 1998". The other relief that was sought in the writ petition was to quash Exhibit P3 order passed by the assessing authority for the asst. yr. 1984-85 in exercise of his powers u/s 155 of the IT Act, 1961 ("IT Act" for short). The last relief that was sought was to direct the first respondent, viz., the Designated Authority, to pass fresh orders on Exhibit P4 declaration in accordance with the provisions of Kar Vivad Samadhan Scheme, 1998, treating the petitioner as an assessee in default of payment of tax as if no adjustment of refund is made towards the demand for the asst. yr. 1982-83.
Late Viswambharan was an assessee under the provisions of the IT Act. He is borne on the files of the 2nd respondent. The assessing authority had completed the assessments for the asst. yr. 1982-83. Subsequently, he has passed an order for the said assessment year u/s 155 of the IT Act, dt. 24th Nov., 1995 (Exhibit P2), and on the same day, he has passed yet another order for the asst. yr. 1984-85 (Exhibit P3) and in the said order, he has adjusted the refunds that were due to the petitioner for the asst. yr. 1984-85 towards the tax liability for the asst. yr. 1982-83. The adjustments so made, according to the petitioner/assessee, was without informing the petitioner, as required u/s 245 of the IT Act.
Petitioner, in order to take the benefit under the provisions of the Kar Vivad Samadhan Scheme, 1998, had filed an application before the Designated Authority on 30th Dec, 1998. The Designated Authority has passed Exhibit P5 order dt. 26th Feb., 1999, granting relief only to the interest payable by the petitioner.
Aggrieved by Exhibit P5 order passed by the Designated Authority and Exhibit P3 order passed by the assessing authority, the petitioner was before this Court in O.P. No. 7467 of 1999.
During the pendency of the Original Petition, the assessee expired. With the permission of the Court, his son has come on record to prosecute the Original Petition filed by his father.
The learned Single Judge, by his order dt. 14th March, 2008, has rejected the writ petition. That is how the assessee is before us in this appeal.
Sri K.M.V. Pandalai, learned Counsel appearing for the appellant/ assessee, would contend, firstly, that the order passed by the Designated Authority is contrary to the provisions of Kar Vivad Samadhan Scheme and, secondly, it is contended that the assessing authority was not justified in adjusting the refunds due to the appellant for the asst. yr. 1984-85 towards the tax arrears for the asst. yr. 1982-83.
In order to resolve the controversy that is canvassed by the assessee''s learned Counsel before us, the provisions of Kar Vivad Samadhan Scheme, 1998 ("Scheme" for short), requires to be noticed.
The Scheme has come into existence on 1st Sept., 1998. The definition clauses contained in Section 87 of the Finance (No. 2) Act, 1998 ("Finance Act" for short), would define the words "declarant", "designated authority", "disputed chargeable interest", "disputed income", "disputed tax" and "tax arrear" of the Scheme.
The "declarant" means, a person making a declaration u/s 88 of the Finance Act. The "Designated Authority" means, for the purpose of direct tax, viz., the IT Act, WT Act and GT Act, an officer not below the rank of CIT and notified by the Chief CIT for the purposes of the Scheme. Section 87(d) of the Finance Act provides for the meaning of the expression "disputed chargeable interest" in relation to an assessment year. It means, the whole or so much of the chargeable interest as is relatable to the disputed tax. Section 87(e) of the Finance Act provides for the meaning of the expression "disputed income", in relation to an assessment year, as, the whole or so much of the total income as is relatable to the disputed tax. Section 87(f) of the Finance Act defines "disputed tax" to mean, 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 u/s 88 of the Finance Act. The expression "tax arrear", for the purpose of direct tax, means, the amount of tax, penalty or interest determined on or before 31st March, 1998 under the direct tax enactments in respect of the assessment year as modified consequent to an order passed by an appellate authority, but remaining unpaid by the assessee on the date of declaration.
Section 88 of the Finance Act provides for settlement of tax payable. Omitting what is not necessary for the case, we would only refer to Sub-clauses (ii), (iii) and (iv) of Section 88(a) of the Finance Act. The said sub-clauses read as under:
(ii) in the case of a declarant, being a person other than a company or a firm, at the rate of thirty per cent of the disputed income;
(iii) in the case where tax arrear includes Income Tax, interest payable or penalty levied, at the rate of thirty-five per cent of the disputed income for the persons referred to in Clause (i) or thirty per cent of the disputed income for the persons referred to in Clause (ii);
(iv) in the case where tax arrear comprises only interest payable or penalty levied, at the rate of fifty per cent of the tax arrear.
Sub-clause (i) of Section 88(a) of the Finance Act would not apply to the appellant, since the declarant is not a company or a firm. Sub-clause (ii) of Section 88(a) would apply to the appellant, because, he is a person other than a company or a firm. Sub-clause (iii) provides for the procedure that requires to be followed by the Designated Authority for considering the application filed u/s 88 of the Finance Act. In the case of tax arrears payable under the provisions of the IT Act, where the tax arrear includes Income Tax, interest payable or penalty levied, the assessee would be entitled to pay only thirty per cent of the disputed income. Sub-clause (iv) speaks of interest remaining unpaid. In such cases, the Designated Authority can grant benefit under the Scheme by directing the assessee to pay fifty per cent of the undisputed interest or penalty.
Having seen the different clauses of the Scheme, now let us come back to the fact situation in the instant case.
The assessment in the assessee''s case has been completed by the assessing authority for the asst. yr. 1982-83.
The assessing authority, thereafter, has invoked his powers u/s 155 of the IT Act to modify the orders of assessment for the asst. yr. 1982-83 and after such modification, has quantified the tax payable by the assessee.
Subsequently, the assessing authority has also passed an order, in exercise of his powers u/s 155 of the IT Act, dt. 24th Nov., 1995. In the said order, the assessing authority has arrived at a conclusion that the assessee is entitled for refund of a sum of Rs. 87,232 for the asst. yr. 1984-85. The assessing authority, after such quantification, has adjusted the refund that is due to the assessee for the asst. yr. 1984-85 towards the tax payable for the asst. yr. 1982-83. The said order passed by the assessing authority was communicated to the assessee. Though the appellant has a contention that he had questioned the correctness or otherwise of the adjustment so made by the assessing authority for the asst. yr. 1982-83 from the refunds for the asst. yr. 1984-85 before the Designated Authority in the year 1999, it is seen that the appellant has not produced any order passed by the said authority. Therefore, the only inference that is possible is, that, the order passed by the assessing authority has become final.
As required under the Scheme, the assessee had filed an application u/s 88 of the Finance Act before the Designated Authority. On the date of filing of the application, what was payable by the assessee was only the interest portion towards the tax, for the reason that whatever tax that was payable by the assessee has already been adjusted by the assessing authority while passing the order u/s 155 of the IT Act for the asst. yr. 1982-83. In a situation of this nature, the Designated Authority was justified in placing reliance on Sub-clause (iv) of Section 88(a) of the Finance Act.
However, Sri K.M.V. Pandalai, learned Counsel appearing for the appellant/assessee, would submit that the adjustment that was made by the assessing authority while passing orders u/s 155 of the IT Act, dt. 24th Nov., 1995, for the asst. yr. 1984-85 is contrary to the statutory provisions, in particular, Section 245 of the IT Act. If that is so, the assessee ought to have questioned the said order before the appropriate forum. Though a copy of the application dt. 8th March, 1999, challenging the correctness or otherwise of the order making adjustment by the assessing authority was produced in the writ petition as Exhibit P7 along with an affidavit dt. 6th March, 2008, it would appear that the appellant has not taken any steps to get that application disposed of by the concerned authority till this date. That only means, the order passed by the assessing authority has become final. The orders so passed by the assessing authority u/s 155 of the IT Act, at best, can be an illegal order or an irregular order, but it cannot be a void order. Further, it cannot be said that the orders passed by the assessing authority is a nullity in the eye of law.
In the above view of the matter, in our view, the Designated Authority was justified in granting relief only under Sub-clause (iv) of Section 88(a) of the Finance Act.
Keeping all these aspects of the matter in view, in our opinion, the learned Single Judge has rightly rejected the writ petition. Therefore, interference with the said order is not called for by us in this appeal. Accordingly, the appeal requires to be rejected and it is rejected.
Ordered accordingly.