2014 (3) TMI 621 - HC - Income Tax

High Court rules in favor of Private Limited Company in Kar Vivad Samadhan Scheme case.

Radha Vinyl Pvt. Ltd. Versus The Commissioner of Income-tax And Another

Radha Vinyl Pvt. Ltd. Versus The Commissioner of Income-tax And Another - 2014 (310) E.L.T. 490 (A. P.) , [2014] 364 ITR 199 (AP) Issues:1. Rejection of declarations filed by the assessee under the Kar Vivad Samadhan Scheme, 1998.2. Validity of appeal filed by the petitioner before the appropriate appellate authority.3. Interpretation of the provisions of the Kar Vivad Samadhan Scheme, 1998.4. Justifiability of the order rejecting the declaration under the Scheme.Issue 1: Rejection of Declarations under the SchemeThe petitioner, a Private Limited Company, challenged the order rejecting its declarations under the Kar Vivad Samadhan Scheme, 1998. The Commissioner of Income-tax had intimated the petitioner that the declarations were rejected as there was no valid appeal filed by the petitioner before the appropriate appellate authority. The petitioner argued that the rejection was arbitrary, unjust, and illegal as the appeal was filed within the prescribed time limit under the Gift Tax Act.Issue 2: Validity of AppealThe appeal in question was initially addressed to the Commissioner of Gift Tax (Appeals-II) but later appeared to have been changed to Deputy Commissioner of Gift Tax (Appeals-II) in the covering letter. The authorities received the appeal papers on 14.07.1993, and the appeals were pending as of 31.03.1998. The contention was raised that since there was no Deputy Commissioner of Gift Tax (Appeals-II) for companies, the appeal filed by the petitioner was not valid. However, the court noted that there was no denial of the fact that the appeal was filed, and the delay in disposing of the appeal was not attributable to the petitioner.Issue 3: Interpretation of Scheme ProvisionsThe Kar Vivad Samadhan Scheme, 1998 was introduced to settle tax arrears locked in litigation. The petitioner made a declaration under the Scheme to settle tax dues related to a pending gift tax appeal. The authorities rejected the declaration on the grounds of no valid appeal being filed. The court emphasized that technical errors in addressing the appeal should not invalidate the submission, especially when the petitioner was not informed of any deficiencies in the appeal filing process.Issue 4: Justifiability of Rejection OrderThe court found that the rejection of the declaration by the authorities was not justified. It was observed that the petitioner had made efforts to comply with the Scheme requirements, including depositing the tax arrears. As a result, the court allowed the writ petition, set aside the rejection order, and directed the Commissioner of Income-tax to process the petitioner's declaration under the Kar Vivad Samadhan Scheme, 1998. The court also instructed that if tax arrears were deposited, they should be credited accordingly in the decision-making process under the Scheme.In conclusion, the High Court of Andhra Pradesh ruled in favor of the petitioner, emphasizing procedural fairness and the petitioner's efforts to adhere to the Scheme's requirements. The judgment highlighted the importance of considering the merits of declarations under the Kar Vivad Samadhan Scheme, 1998, and ensuring that technical discrepancies do not impede legitimate attempts to settle tax arrears through the Scheme.