2000 (12) TMI 86 - HC - Income Tax

Assessing Officer can determine pending income heads post-KVSS; settlement doesn't cover unadjudicated heads.

Killick Nixson Ltd. Versus Deputy Commissioner Of Income-Tax And Another

The court held that the Assessing Officer was authorized to proceed with the determination of pending heads of income even after an order under the Kar ... Kar Vivad Samadhan Scheme Issues Involved:1. Authority of the Assessing Officer to proceed under section 142(1) of the Income-tax Act, 1961, after an order under the Kar Vivad Samadhan Scheme (KVSS).2. Scope and interpretation of the Kar Vivad Samadhan Scheme.3. Determination of 'disputed income' and 'disputed tax' under the KVSS.4. Finality and conclusiveness of the designated authority's order under the KVSS.5. Impact of pending determinations on the KVSS settlement.Detailed Analysis:1. Authority of the Assessing Officer to Proceed Under Section 142(1):The primary issue is whether the Assessing Officer was authorized to proceed under section 142(1) of the Income-tax Act, 1961, for the assessment year 1992-93 after an order was passed under the KVSS on January 19, 1999, determining the total income of the assessee-petitioner at Rs. 33,65,298. The court had to consider the scope of the Kar Vivad Samadhan Scheme in this context.2. Scope and Interpretation of the Kar Vivad Samadhan Scheme:The court examined various sections of the KVSS, particularly sections 87, 88, 90, and 94, to understand the scheme's scope. The scheme is primarily a recovery-based initiative aimed at unlocking large amounts locked up in litigation and addressing the fiscal deficit. The court noted that the scheme involves two stages: the initial stage to ascertain the maintainability of a declaration and the second stage to calculate the disputed income and the amount payable.3. Determination of 'Disputed Income' and 'Disputed Tax':The court analyzed the definitions of 'disputed income' and 'disputed tax' under sections 87(e) and 87(f). 'Disputed income' is defined as the whole or part of the total income relatable to the disputed tax, while 'disputed tax' refers to the total tax determined and payable but remaining unpaid as of the declaration date. The court emphasized the importance of the words 'determined' and 'payable' in section 87(f) and the phrase 'so much of the total income' in section 87(e).4. Finality and Conclusiveness of the Designated Authority's Order:The petitioner argued that once the designated authority determined the disputed income and the amount payable under the KVSS, the assessment for the entire year was settled, making the order conclusive. However, the court found that the designated authority's order was limited to the scope of the KVSS and did not cover heads of income that were not adjudicated upon by the Assessing Officer.5. Impact of Pending Determinations on the KVSS Settlement:The court noted that certain heads of income, including bad debts, income from house property, capital gains, and disallowance under rule 6D, were still pending determination by the Assessing Officer. The court concluded that the KVSS settlement did not cover these heads, and the Assessing Officer was entitled to proceed with their determination. The court rejected the petitioner's contention that the scheme would become unworkable if the Department's view was accepted.Conclusion:The court found merit in the Department's contentions and held that the Assessing Officer was authorized to proceed with the determination of the pending heads of income. The court emphasized that the KVSS was a recovery-based scheme aimed at settling tax disputes quickly and that the designated authority's order under the scheme was limited to the heads of income that were determined and payable as of the declaration date. The writ petition was dismissed, and the rule was discharged with no order as to costs.