2009 (2) TMI 107 - HC - Income Tax

Court affirms authority to amend settlement amount under tax scheme for inaccurate declarations

The court upheld the Department's authority to amend the certificate and correct the settlement amount under the Kar Vivad Samadhan Scheme due to the ... Assessee though given the benefit of the KVSS corrected the settlement amount by including interest which ought to have been included by the petitioner in the declaration - mistake happened due to the wrong declaration filed by the petitioner - but, the learned judge found that the amount has to be corrected in terms of the KVSS taking into consideration that arrears included tax also - no appeal was filed by the Department against that direction – no interference required in the impugned judgment – appeal of assessee dismissed Issues:1. Interpretation of the Kar Vivad Samadhan Scheme, 1998 for settlement of tax arrears.2. Validity of the declaration made by the petitioner under the scheme.3. Authority of the Department to amend the certificate under the scheme.4. Correctness of the assessment and settlement amount under the scheme.Analysis:1. The judgment revolves around the interpretation of the Kar Vivad Samadhan Scheme, 1998 introduced by the Central Government to facilitate the settlement of tax arrears. The scheme allowed assessees to settle their liabilities at a compounded rate with substantial concessions. It was highlighted that an assessee could settle arrears by paying a certain percentage of the tax, interest, and penalty amounts. The petitioner sought benefits under the scheme but failed to include interest payable under section 220(2) of the Income-tax Act, 1961, in the declaration, leading to a defective declaration. The court examined the provisions of the scheme and emphasized that any defect in the declaration could render it invalid, allowing the Department to proceed with the assessment.2. The validity of the declaration made by the petitioner under the Kar Vivad Samadhan Scheme was questioned due to the omission of interest payable under section 220(2). The court noted that the scheme mandated accurate declarations, and any false particulars could result in the declaration being treated as if it was never made. As the petitioner failed to include the interest component, the Department utilized the provision allowing for amendment of the certificate. The court upheld the Department's action in correcting the settlement amount based on the incomplete declaration submitted by the petitioner.3. The judgment delved into the authority of the Department to amend the certificate issued under the Kar Vivad Samadhan Scheme. It was established that the scheme empowered the designated authority to amend the certificate for valid reasons. In this case, the Department amended the certificate due to the petitioner's incorrect declaration, specifically the omission of interest payable under section 220(2). The court affirmed that the Department acted within its competence in amending the certificate under the provisions of the scheme.4. The correctness of the assessment and settlement amount under the Kar Vivad Samadhan Scheme was a crucial aspect of the judgment. Despite the petitioner's contention that no further demands could be made once a claim was settled, the court emphasized that the Department had the right to correct the settlement amount if the initial declaration was defective. The judgment highlighted that the Department's actions were in accordance with the scheme's provisions, and the correction of the settlement amount was justified based on the petitioner's erroneous declaration. Ultimately, the court dismissed the appeal, affirming the Department's authority to amend the certificate and correct the settlement amount under the Kar Vivad Samadhan Scheme.