Digvijaysingh Jadeja Vs. Commissioner of Income Tax, Rajkot  Insc 459 (1 September 2005)
Singh & S.H. Kapadia Kapadia, J.
appeals by special leave have been filed against an additional direction given
by the Gujarat High Court vide judgment dated 25.9.2002 holding the appellant
liable to pay interest under the Kar Vivad Samadhan Scheme, 1998 (for short
"the Scheme") on the tax arrears to be determined by the designated
authority (for short "DA").
appellant filed a writ petition in the Gujarat High Court against the rejection
of the declarations made by the assessee under the said Scheme.
impugned judgment, the High Court held that the declarations filed by the
appellant herein were competent as the assessee's revision applications were
pending on the date of filing of the declarations. The department was,
therefore, directed to entertain the declarations, to determine the amount
payable and to grant a certificate under section 90(1).
decision of the Gujarat High Court dated 25.9.2002 was challenged by the
department before this Court vide Civil Appeal No.4411 of 2003. By judgment
pronounced today by this Court, we have upheld the decision of the Gujarat High
Court in holding that the declarations filed by the assessee under section 88
of the Scheme were competent and that the High Court was right in directing the
DA to determine the amount payable under section 90(1) of the Scheme.
these appeals, the only grievance of the appellant is that the additional direction
given by the impugned judgment making the appellant liable to pay interest on
the amount payable under section 90 was illegal and without authority of law.
M.L. Varma, learned senior counsel appearing on behalf of the appellant
submitted that under the Scheme, there was no provision for charging interest
in cases where the DA wrongly refused to accept the declarations filed by the assessee
under section 88, as found by the High Court. He contended that the appellant
cannot be faulted particularly when it is found that the DA had erred in
rejecting the declarations filed under section 88; that by the impugned
judgment, the DA was required to undertake the assessment under section 90 and
determine the amount payable on the basis whereof the DA was required to issue
a certificate and on that basis the appellant had to pay the amount; that the
appellant cannot be asked to pay interest on the amount which was not
ascertainable at the relevant time for error on the part of the DA and in the
circumstances, the additional direction given by the High Court should be
Finance (No.2) Act, 1998 introduced a Scheme called Kar Vivad Samadhan Scheme,
1998. It was a recovery scheme. Under the Scheme, the tax arrear had to be
outstanding as on 31.3.1998. Under section 87(f), "disputed tax" was
defined to mean total tax determined and payable under the IT Act/Wealth Tax
Act in respect of an assessment year but which remained unpaid as on the date
of making of the declaration from which TDS, self-assessed tax, advanced tax
paid, if any, had to be deducted under section 90; the DA had to determine the
amount payable and for that purpose, he had to determine the tax arrear as well
as the disputed amount as defined under section 87(f). Thus, the DA had to make
an assessment of tax arrears, disputed amount and amount payable for each year
of assessment; that appeal was barred against the order under section 90 (see
section 92); that such determination had to be done within 60 days from the
receipt of the declaration and based thereon the DA had to issue a certificate.
other words, till the completion of the aforestated exercise, the appellant
could not have paid the amount of tax and, therefore, the appellant was not
liable to pay interest as his liability accrued only after the ascertainment of
the amount payable under section 90.
the aforestated reasons, on the facts of this case, we set aside the additional
direction given by the impugned judgment directing the appellant to pay
interest, particularly when the department had wrongly rejected the
declarations filed under section 88.
these appeals are allowed, with no order as to costs.