Interest under Kar Vivad Samadhan Scheme cannot run before statutory determination of payable amount is completed.

Under the Kar Vivad Samadhan Scheme, 1998, interest could not be levied on the amount payable under section 90(1) before the designated authority determined the tax arrears and issued the certificate. Until that statutory determination was completed, the amount payable was not ascertainable and the assessee could not be treated as being in default for an unquantified sum. Where the authority wrongly refused to accept a declaration under section 88, the assessee could not be penalised with interest for the period during which the scheme process itself had not been completed.

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Issues: Whether interest could be levied under the Kar Vivad Samadhan Scheme, 1998 on the amount payable under section 90(1) when the designated authority had wrongly rejected the declaration filed under section 88.

Analysis: The Scheme was a recovery mechanism for tax arrears and required the designated authority to determine the tax arrears, disputed tax and the amount payable under section 90(1) after receipt of the declaration. Until that determination was completed and the certificate issued, the amount payable was not ascertainable and the assessee could not be said to be in default in respect of an unquantified sum. Where the declaration was wrongly refused by the authority, the assessee could not be saddled with interest for the period during which the statutory determination itself had not been made.

Conclusion: The direction to pay interest was unsustainable and was set aside; the issue is decided in favour of the assessee.

Ratio Decidendi: Under the Kar Vivad Samadhan Scheme, 1998, interest cannot be imposed on the amount payable under section 90(1) until the designated authority has determined that amount, and the assessee is not to be penalised for the authority's wrongful refusal to accept a declaration under section 88.

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