S. Shaffi Musaliar and Others vs Commissioner of Income Tax and Another

J.B. Koshy, Actg. C.J.

The predecessor in interest of the appellants was an assessee of the Income Tax. He was doing the business of import and export of cashew. The assessment of Income Tax for the assessment years 1990-91, 1991-92 and 1993-94 was completed and arrears with interest were due for payment. While demands were pending, the Central Government introduced a scheme called the "Kar Vivad Samadhan Scheme, 1998" by the Finance (No. 2) Act of 1998 with a view to provide a chance to the assessee to pay off the arrears at a compounded rate with substantial concessions. It is contended that under the said scheme an assessee who is in arrears of tax, i.e., principal part of tax and interest and penalty as on March 31, 1998, would be able to settle the arrears by paying 35 per cent. of the tax only, to wipe off the whole liability under the heads of tax, interest and penalty. Similarly, an assessee who is in arrears of interest or penalty as on March 31, 1998, can settle the liability by paying 50 per cent. of such arrears. The petitioner approached the first respondent for availing of the benefits under the Kar Vivad Samadhan Scheme. The petitioner claimed only the offer to pay 50 per cent. of the amount as if there was no arrears of tax. The assessment was made and the amount fixed as per exhibit P7 was paid. Thereafter, the settlement amount was modified as interest payable up to March 31, 1998, u/s 220(2) of the Income Tax Act, 1961, which was not included in exhibit P7 demand raised based on the declaration furnished by the assessee. The amount originally fixed and settled was an interest payable u/s 234B and Section 234C of the Income Tax Act for all the above years on the basis of the declaration filed by him. Since the petitioner has admittedly not included the interest u/s 220(2) for settlement under the Kar Vivad Samadhan Scheme, the declaration was defective inasmuch as full liability was not shown there for settlement. Therefore, further demand was issued. It is contended that once a claim is settled, no further demands can be made and also relied on the decision of the Supreme Court in Sushila Rani Vs. Commissioner of Income Tax and Another, . It is further contended that if it is reopened, the entire matter should be reopened under the Kar Vivad Samadhan Scheme. In this connection, we refer to Section 90 of the Finance (No. 2) Act, 1998 (exhibit P1), which reads as follows:

Time and manner of payment of tax arrear.- (1) Within sixty days from the date of receipt of the declaration u/s 88, the designated authority shall, by order, determine the amount payable by the declarant in accordance with the provisions of this Scheme and grant a certificate in such form as may be prescribed to the declarant setting forth therein the particulars of the tax arrear and the sum payable after such determination towards full and final settlement of tax arrears:

Provided that where any material particular furnished in the declaration is found to be false by the designated authority at any stage, it shall be presumed as if the declaration was never made and all the consequences under the direct tax enactment or indirect tax enactment under which the proceedings against the declarant are or were pending shall be deemed to have been revived:

Provided further that the designated authority may amend the certificate for reasons to be recorded in writing.

(2) The declarant shall pay the sum determined by the designated authority within thirty days of the passing of an order by the designated authority and intimate the fact of such payment to the designated authority along with proof thereof and the designated authority shall thereupon issue the certificate to the declarant.

(3) Every order passed under Sub-section (1), determining the sum payable under this Scheme, shall be conclusive as to the matters stated therein and no matter covered by such order shall be reopened in any other proceeding under the direct tax enactment or indirect tax enactment or under any other law for the time being in force.

That shows that if there is any defect in the materials, declaration shall be treated as not a declaration at all. If that be so, even without giving benefit under the Kar Vivad Samadhan Scheme, the Department can proceed with the assessment. Here, admittedly, the petitioner did not include the interest. Therefore, instead of making full assessment rejecting declaration in toto, the second proviso to Section 90 of the Finance (No. 2) Act, 1998, was used and only the amended certificate was issued for the reasons stated. In fact, what was done was that the petitioner though given the benefit of the Kar Vivad Samadhan Scheme corrected the settlement amount by including interest which ought to have been included by the petitioner in the declaration. The mistake happened due to the wrong declaration filed by the petitioner. But, the learned judge found that for 1993-94, the amount has to be corrected in terms of the Kar Vivad Samadhan Scheme taking into consideration that arrears included tax also. No appeal was filed by the Department against that direction. We are of the view that since the mistake happened due to the wrong declaration made by the petitioner, the Department was competent to amend the certificate as provided under the second proviso to Section 90 and no interference is required in the impugned judgment at the instance of the assessee.

The appeal is dismissed.