S. Jagannathan and Another vs Asstt. Commissioner of Income Tax and Another

Aravind Kumar, J.—This appeal is filed by writ petitioner challenging the order of dismissal passed by the learned Single Judge of this Court in Writ Petn. Nos. 10603-604 of 1999, dated 8-1-2004.

The facts leading to the filing of the appeal are:

The appellants herein were assessed on protective basis by order dated 31-3-1998 and the block assessment order has been passed on 28-8-1998. The said block assessment order having been set aside by the Tribunal, the same is now pending in an appeal before this Court in IT Appeal No. 1029 of 2006. A scheme known as Kar Vivad Samadhan Scheme, 1998 (hereinafter referred to as "KVSS") came to be introduced by Government of India under which the appellants herein filed a declaration u/s 88 of Finance Act (No. 2) of 1998 on 22-12-1998. The said applications came to be considered by the Commissioner, Karnataka (Central), Bangalore and it was rejected on 19-2-1999 as per Annexs. "E" and "J" respectively holding that the assessee would not be entitled to the benefits accruing under the scheme on the ground that protective assessment order passed is not final and substantive assessment has been completed after 3.1st March, 1998 and hence it is not covered by the scheme. The said order was challenged before this Court in Writ Petn. No. 10603-604 of 1999. The learned Single Judge dismissed the writ petition by observing that Hon''ble Supreme Court in AIR 1961 SC 387 has held that protective amendment is in the nature of precautionary assessment and is not recognized in law and accordingly dismissed the writ petition. Challenging the said order writ petitioners have filed this appeal.

We have heard the learned senior counsel Sri Sarangan for appellants and Sri M.V. Seshachala, learned senior standing counsel for respondents and we have perused the records.

The object with which the scheme has come into force reads as follows:

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 taxpayers, 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.

Keeping the objects of the scheme in mind, it is to be noted by us that admittedly appellants herein filed a declaration on 22-12-1998 as per Annexures "C" and "H" respectively to settle the dispute. It is contended by the learned senior counsel appearing for the appellants that protective assessment orders have been passed on 31-3-1998 whereunder the demand has also been raised and it has attained the finality and hence the department is not justified in rejecting the declaration filed by appellants under the scheme. Per contra, the learned senior standing counsel appearing for the revenue Sri K.V. Seshachala contends that the regular assessment order amount passed u/s 158BC(C) read with 143(3) on 28-8-1998 for the block assessment period, which has bean dismissed by the Tribunal is now pending in an appeal before this Court in IT Appeal No. 1029 of 2006 to consider the substantial questions of law raised in the said appeal.

It is to be seen that as per definition. Under scheme the word "tax arrear" is defined u/s 87(m) of the scheme, which reads as follows:

87(m) tax arrear means,--

(i) in relation to direct tax enactment, the amount of tax, penalty or interest determined on or before the 31-3-1998 under that enactment in respect of an assessment year as modified in consequence of giving effect to an appellate order but remaining unpaid on the date of declaration.

The "disputed income" as defined u/s 87(e) reads as follows:

(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;

Further "disputed tax" is also defined u/s 87(f) of the scheme, which reads as follows:

(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 u/s 88.

The learned Counsel for the department has also brought to our notices Section 88 of the scheme, which reads as follows:

Subject to the provisions of this scheme, where any person makes, on or after the 1-9-1998 but on or before the 31-12-1998, a declaration to the designated authority in accordance with the provisions of Section 89 in respect of tax arrear, then, notwithstanding anything contained in any direct tax enactment or indirect tax enactment or any other provision of any law for the time being in force, the amount payable under this scheme by the declarant shall be determined at the rates specified hereunder, namely:

(i) .....

In the background of the provisions of this scheme it is to be noticed that admittedly the assessees have made declaration before the designated authority seeking benefit under the scheme. In the event the block assessment orders dated 28-8-1998 of both appellants which is the subject-matter of appeal before this Court in IT Appeal No. 1029 of2006 is allowed and the contention of the revenue is upheld, then protective assessment which has been made on 31-3-1998 becomes inoperative and the demand raised in the said protective assessment order will also not be enforceable. On the other hand, if the appeal of the revenue, i.e., IT Appeal No. 1029 of 2006 is dismissed by this Court the demand made in the protective assessment order on 31-3-1998 becomes operative and demand raised thereunder will also be enforceable. Consequently the declaration made by the assessees under the scheme on 22-12-1998 would be required to be considered by the authorities since the benefit flowing from the scheme would be applicable to the assessees. Hence, we pass the following:

ORDER

The above appeal is disposed of without answering the question of law by holding that the assessee/appellant would be entitled to claim the benefit accruing under the KVSS only in the event of IT Appeal No. 1029 of 2006 pending before this Court is dismissed and reaches finality, in as much as the protective assessment order passed on 31-3-1998 and demand raised thereunder would get revived. In such an event the designated authority would consider the declarations filed by the appellants u/s 88 of the Finance Act dated 22-12-1998 Annexures C and H respectively in accordance with law subject to the assessees satisfying all other conditions under the scheme. It is also made clear that, in the event the revenue succeeds in the appeal, i.e., IT Appeal No. 1029 of 2006, the question of considering the declaration dated 22-12-1998 as per Annexures C and H would not arise.

With these observations, this writ appeal is disposed of.