Rani Vs. Commissioner of Income Tax & Anr  Insc 59 (4 February 2002)
Babu & Ruma Pal Rajendra Babu, J. :
appellant before us is the widow of the original assessee under the Income Tax
Act, 1961 [hereinafter referred to as 'the Act']. For the assessment year
1988-89, an appeal was pending before the Commissioner of Income Tax [Appeals]
while for assessment years 1989-90 and 1991-92, appeals were pending before the
Income Tax Appellate Tribunal. On 23.1.1999, the appellant set out the details
of the matters in dispute in the said appeals requesting the Department to
indicate or compute the tax arrears as per the Kar Vivad Samadhan Scheme, 1998
[for short 'KVSS'] so that all disputes in relation to these three assessment
years can be resolved. As there was no response from the Department till January 30, 1999, the appellant submitted three
separate declarations under Sections 88 and 89 of the KVSS. The appellant had
also pointed out the mandatory nature of Section 245 of the Act and the
decision of the Allahabad High Court in the case of U.P.State Mineral
Development Corporation Ltd. vs. Additiional CIT, which held that refunds
adjusted without notice to assessee is not valid.
declaration for the assessment year 1989-90, the attention of the Department
was also invited to adjustments of Rs.3,94,503/- and Rs.18,02,409/- by invoking
a bank guarantee which according to the appellant was involuntary and coercive.
Similarly, in the declaration for the assessment year 1991-92, the attention of
the Department was invited to involuntary set off of a refund of Rs.81,869/- in
view of the non-compliance and non-observance of the mandatory provision of
Section 245 of the Act.
No.1 on receipt of the declarations for the three assessment years evaluated
and verified the same in accordance with the provisions of the KVSS and on
being satisfied with the correctness of the declaration in every respect,
issued, on 26.2.1999, a statutory certificate prescribed in Form 2A and Rule
4(a) under the provisions of Section 90(1) of the KVSS. The appellant in all
the three declarations computed that the amount required to be deposited under
the KVSS for these three assessment years would be Rs.13,55,018/- and
respondent No.1 by the certificate issued on 26.2.1999 assessed the amount of
tax payable by the appellant to be Rs.14,40,189/- in place of Rs.13,55,018/- as
claimed by the appellant. On receipt of the said certificate under Section
90(1) of the KVSS from respondent No.1, the appellant deposited the said sum of
Rs. 14,40,189/- under separate challans. On deposit of the entire amount
demanded by respondent No.1 as per the KVSS for these assessment years a
communication was addressed on behalf of the appellant dated 22.3.1999 for
issue of certificate under Section 90(2) of the KVSS and for the deemed
withdrawal of the appeals filed on behalf of the appellant for these three
years which were pending adjudication.
No.1 issued a certificate in Form 3 as required under Rule 5(a) and Section
90(2) of the KVSS on 31.3.1999 in favour of the appellant certifying the
receipt of payments from the appellant towards full and final settlement of the
tax arrears determined in the order dated 26.2.1999 and granting immunity from instituting
any proceeding for prosecution of any offence under the Act or from imposing
any penalty under the said Act. Thereafter on 11.8.1999 certificate was issued
by the Department to the effect that no arrears or demand of any kind is
outstanding against the appellant as per the records of the respondents.
26.10.1999, the appellant submitted a representation requesting the respondents
to refund all the amounts along with interest as per the provisions of the Act
upon the finalisation of the declarations made by the appellant under the
provisions of the KVSS. This claim resulted in the issue of a notice on
23.6.2000 under Section 90(1) of the KVSS calling upon the appellant to explain
as to why, the notice issued under Section 90(1) of the KVSS earlier be not
amended, on the ground that the determination made by the Department for the
three assessment years in question was on the Department's wrong understanding
of the judgment of the Allahabad High Court.
14.7.2000, the appellant filed a writ petition in the High Court challenging
the issuance of the notice dated 23.6.2000 being CWP No.3788/2000 on the ground
that the same is without jurisdiction. The High Court took the view that what
is under challenge in the writ petition is only a show cause notice and it
would be open to the appellant to highlight the question relating to lack of
jurisdiction before the Commissioner when the matter is taken up for further
consideration and it would be proper for the Commissioner to decide the
question as to whether he has jurisdiction under the second proviso to Section
90(1) of the KVSS to act in the manner as proposed by the Commissioner in the
impugned notice. The High Court did not express any opinion on the facts of the
case and disposed of the writ petition. Hence this appeal by special leave.
KVSS was introduced by the Central Government with a view to collect revenues
through direct and indirect taxes by avoiding litigation. In fact the Finance
Minister while explaining the object of the KVSS stated as follows:
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 tax payers, enable Government to realize its reasonable dues much
earlier but coupled with administrative measures, would also make the system
more user-friendly. ..." An examination of the scheme of Sections 89, 90
and 91 of the KVSS would reveal that every person entitled to make a
declaration under the said scheme was obliged to submit the declaration on or
before 31.1.1999; that a period of 60 days has been stipulated under Section
90(1) for the designated authority under the scheme to determine the amount
payable by the declarant and the certificate to this effect under Section 90(1)
has to be granted by the designated authority after determination towards full
and final settlement of the tax arrears within a period of sixty days.
Thereafter, except on ground of false declaration made by the declarant, every
order passed under sub-section (1) of Section 90 determining the sum payable
under the scheme, is absolutely conclusive as to the matters stated thereunder
and no matter covered by such order can be reopened in any other proceeding
under any law for the time being in force. After this determination under
Section 90(1) of the KVSS, another certificate is issued under Section 91 of
the KVSS on the basis of which immunity is granted to the declarant from
instituting any proceeding for prosecution for any offence under any direct tax
enactment or indirect tax enactment.
basis upon which the notice dated 23.6.2000 impugned in these proceedings is as
noticed in order u/s 90(1) dt. 26.2.99, the tax arrears have been determined on
disputed income for the assessment years 1988-89, 89-90 and 91-92 without
considering the collections already adjusted against demands raised. The
adjustments already made should have been taken into account when calculating
the tax arrears. As such there is a mistake in calculation which needs
correct position for the various assessment years is as under:
Year 1988-89 Since no tax arrears are outstanding as on 31.3.1998, benefit of
KVSS allowed vide order dt. 31.3.1999 u/s 90 (2) is to be withdrawn.
Year 89-90 As per the information furnished by the Assessing Officer, tax
arrears amounting to Rs.27,60,655/-, comprising of interest only are
outstanding. Amount payable under KVSS on these arrears comes to Rs.13,80,328/-,
which is 50% of the tax arrears.
Year 1991-92 As per the information furnished by the Assessing Officer, tax
arrears amounting to Rs.2,31,091/-, comprising of interest only are
outstanding. On this, the amount payable under KVSS comes to Rs.1,15,545/-,
which is 50% of the tax arrears.
are hereby given this show cause notice so as to explain why the order
dt.26.2.99 u/s 90(1) in F.No.2A be not amended as mentioned above, under the
second proviso to Sec 90(1) of the Finance (No.2) Act, 1998 of KVSS." We
may notice that a certificate issued under Section 90(1) of the KVSS making a
determination as to the sum payable under the KVSS, is conclusive as to the
matters stated therein and cannot be reopened in any proceedings under any law
for the time being in force, except on the ground of false declaration by any declarant.
Therefore, before issue of a notice, there should be satisfaction that the declarant
has made a false declaration. There is no such allegation in the course of the
notice issued. All that is stated is that "adjustments already made should
have been taken into account when calculating the tax arrears. As such there is
a mistake in calculation, which needs rectification". The whole basis of
the notice is only that adjustments already made had not been taken note of. If
this is the basis of the issuance of the notice and not the false declaration
and that information was available with the Department even at the time of the finalisation
of the proceedings under Section 90 of the KVSS, we fail to understand as to
how the matter could be reopened at this stage. That information was already
available with them and there is no false declaration in that regard. In that
view of the matter, the notice issued is without jurisdiction.
this regard, it is relevant to point out that in the counter affidavit filed by
the Department, it is stated as follows:
declaration of the assessee was processed by taking the taxes outstanding at
the figures as claimed by the assessee despite the fact that as per the records
of the department, substantial portion of the demand stood paid up by way of
adjustment of refund and revocation of bank guarantee as early as in the years
1993, 1994, 1996 and 1997. The decision of Hon'ble Allahabad High Court was
neither specifically relied upon nor was the claim of assessee specifically
rejected by the designated Authority i.e., Commissioner of Income Tax.
settlement under the Kar Vivad Samadhan the Commissioner of Income Tax
Delhi-VII ordered scheme was considering Rs. 53,80,335/- as disputed taxes in
arrears for all the three years and as per the provisions of the scheme, the amount
payable for settlement was determined at Rs. 14,40,188/- u/s 90(1) of the said
Act (Copy enclosed as Annexure-A). The assessee paid the said amount and
accordingly certificate under the said scheme for settlement u/s 90(2) of the
said Act dt. 31.03.99 was issued. (Copy enclosed as Annexure-B)." The
appellant in the course of the declarations filed specifically stated that any
adjustment of refunds towards tax arrears of the appellant by the Department in
the earlier years without following the mandatory procedure of Section 245 of
the Act would still remain as tax arrears for the purpose of the KVSS and it is
on that basis the declarations were accepted by the Department. Having accepted
the claim of the appellant on that basis, it will not be permissible for the
respondents now to turn around and take a different stand.
assuming that the authorities under KVSS have inherent powers to correct an
error of clerical or arithmetical nature, the same should be so obvious,
apparent or patent as not to admit of any debate or discussion. In this case,
the respondents have to establish adjustment of refund, which had been made
against arrears after due notice to the appellant and which is denied by her,
and hence admits of investigation of facts and serious debate on the question.
Such an error cannot be stated to be an inadvertent error of clerical or
arithmetical nature, so plain as to be rectified without much ado.
that view of the matter, we allow this appeal, set aside the order made by the
High Court by allowing the writ petition filed by the appellant and quash the
notice issued on 23.6.2000 by the Department calling upon the appellant to
explain as to why the order issued earlier under Section 90(1) of the KVSS be
not amended. No order as to costs.
RAJENDRA BABU ] ...J.
PAL] FEBRUARY 04, 2002.