2005 (9) TMI 362 - SC - Income Tax

Supreme Court quashes rejection of declarations under tax scheme, emphasizes pending appeals, benefits, immunities

The Supreme Court quashed the Designated Authority's orders rejecting the declarations filed by the assessee under the Kar Vivad Samadhan Scheme. The ... Whether the department was right in rejecting the Kar Vivad Samadhan Scheme declarations filed by the respondent-assessee on the ground that the assessments had become final in the year 1992-93 (when the assessee’s appeals were dismissed for failure to pre-deposit self-assessed tax) and that the respondent herein had filed revisions under the Income Tax Act and Wealth Tax Act in November/December, 1998 only to obtain the benefit of Kar Vivad Samadhan Scheme, 1998, which came into force w.e.f. 1-9-1998? Held that:- Appeal dismissed. The object behind Section 95(i)(c) in putting on par appeals, references and revisions was to put an end to litigation in various forms and at various stages under the I.T. Act/Wealth Tax Act and, therefore, the rulings on the scope of appeals and revisions under the I.T. Act or on Voluntary Disclosure Scheme, will not apply to this case. Orders of the designated authority rejecting the declarations filed by the assessee are quashed. We do not find any No infirmity, to this extent, in the impugned judgment of the High Court. Issues Involved:1. Whether the department was right in rejecting the Kar Vivad Samadhan Scheme (KVSS) declarations filed by the respondent-assessee on the ground that the assessments had become final in the year 1992-93.2. Whether the revisions filed by the assessee in November/December 1998 were time-barred and not 'pending' in terms of Section 95(i)(c) of the KVSS.3. Whether the Designated Authority (DA) was correct in rejecting the declarations filed by the assessee under the KVSS without waiting for the Commissioner to exercise his authority to condone the delay under Section 264 of the Income Tax Act.Detailed Analysis:1. Finality of Assessments in 1992-93:The department argued that the assessments for the years 1984-85 to 1991-92 had become final in 1992-93 when the assessee's appeals were dismissed for failure to pre-deposit self-assessed tax. The assessee filed revisions under the Income Tax Act and Wealth Tax Act in November/December 1998 to obtain the benefit of the KVSS, which came into force on 1-9-1998. The department contended that these revisions were time-barred and thus not 'pending' as per Section 95(i)(c) of the KVSS.2. Time-Barred Revisions and 'Pending' Status:The department's case was that the KVSS aimed to resolve pending litigation and not to create artificial pendency. Since the revisions were filed along with applications for condonation of delay in November/December 1998, they were not pending when the scheme came into force. The department emphasized the distinction between an appeal (a matter of right) and a revision (a discretionary remedy) under the Income Tax Act. The revisions were deemed not bona fide as they were filed only to gain the scheme's benefits and were rightly dismissed for want of sufficient cause to condone the delay.3. DA's Rejection of Declarations Without Condonation Decision:The assessee argued that the DA accepted declarations for appeals under Section 246 but rejected those for revisions under Section 264 without waiting for the Commissioner to decide on the applications for condonation of delay. The assessee contended that the scheme aimed to recover taxes locked in pending litigation, and appeals, references, revisions, and writ petitions were all put on par under Section 95(i)(c). The DA was not authorized to deem appeals/revisions as sham, ineffective, or infructuous if they were pending on the date of filing the declaration.Legal Interpretation and Judgment:The Supreme Court focused on the meaning of 'pending' in Section 95(i)(c) of the KVSS. The scheme aimed to settle tax arrears locked in litigation by declaring them and paying the prescribed amount, offering benefits and immunities from penalties and prosecution. The Court noted that the scheme was a recovery mechanism, not similar to the earlier Voluntary Disclosure Scheme, and was a complete code by itself.The Court emphasized that the object of Section 95(i)(c) was to end litigation in various forms and stages under the Income Tax Act/Wealth Tax Act. The Court referred to precedents, including Dr. Mrs. Renuka Datla's case, which held that if an appeal or revision was pending on the date of filing the declaration, the DA could not deem it sham or ineffective. The Court also cited Raja Kulkarni v. The State of Bombay, which stated that an appeal is considered pending regardless of its validity or competence until decided by the appellate court.Conclusion:The Supreme Court quashed the orders of the DA rejecting the declarations filed by the assessee. The Court upheld the High Court's judgment to the extent that the declarations were wrongly rejected. The appeal was dismissed with no order as to costs.