TaxTMI 
TaxTMI 
2002 (2) TMI 40
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....oner filed a revision petition under section 264 of the Act on April 23, 1998. The Kar Vivad Samadhan Scheme, 1998 (the "KVS Scheme" for short), was brought into force on September 1, 1998, as per Chapter IV of the Finance (No. 2) Act, 1998 ("the Finance Act" for short). The appellant filed a declaration under the said scheme, under section 89 of the said Act Form No. 1A. In the said declaration filed on January 27, 1999, he showed the computation of tax payable under the said scheme as follows: -------------------------------------------------------------------------------- Rs. Rs. Rs. -------------------------------------------------------------------------------- Total income ....
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.... 11,847 Income relatable to tax paid (Rs. 66,993) (Rs. 65,800 + rebate of Rs. 1,193) 2,29,980 ---------- Disputed income (Rs. 2,59,600 - 2,29,980) 29,620 Amount payable under the KVS Scheme -....
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....ns to show how the sum of Rs.65,592 was arrived at: ------------------------------------------------------------------------------------- Rs. Rs. ------------------------------------------------------------------------------------- (1) Total income declared 2,59,030 (2) Advance tax paid ....
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....nbsp; 1,42,868 Working regarding KVS Scheme (8) Taxes paid Nil (9) Rebate 1,193 (10) Undisputed income  ....
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.... (i) in the case of a declarant, being a company or a firm, at the rate of thirty-five per cent. of the disputed income; (ii) in the case of a declarant, being a person other than a company or a firm, at the rate of thirty per cent. of the disputed income; (iii) in the case where tax arrear includes income-tax, interest payable or penalty levied, at the rate of thirty-five per cent. of the disputed income for the persons referred to in clause (i) or thirty per cent. of the disputed income for the persons referred to in clause (ii); (iv) in the case where tax arrear comprises only interest payable or penalty levied, at the rate of fifty per cent. of the tax arrear;" It may be mentioned that the last date for making a declaration was extended from December 31, 1998, to January 31, 1999. The effect of section 88(a)(iii) of the Finance Act is that notwithstanding anything contained in the Income-tax Act, the amount payable under the KVS Scheme by a declarant (other than companies and firms), who files a declaration between September 1, 1998, and January 31, 1999, shall be 30 per cent. of the disputed income, in case where the tax arrears includes income-tax as also interest or p....
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....nbsp; 2,29,980 ---------------------------- Tax remaining unpaid 11,847 29,620 ---------------------------- (e) The disputed income will have to be arrived at by deducting the income corresponding to the aggregate of prepaid taxes from the total income assessed by the Assessing Officer (in this case, the disputed income will there fore be Rs.2,59,600 minus Rs.2,29,980 = Rs.29,620. The tax payable under the scheme by the assessee would be 30 per cent. of Rs.29,620 or Rs.8,886). W....
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....f the Income-tax Act, but with reference to the provisions of the KVS Scheme, as contained in Chapter IV of the Finance (No. 2) Act, 1998. The Explanation to section 140A(1) of the Income-tax Act will not apply for the following two reasons: "(i) The provisions of section 88 of the Finance (No. 2) Act, 1998, prevail over the provisions of section 140A of the Income-tax Act, section 88 specifically states that 'notwithstanding anything contained in any direct tax enactment', the amount payable under the KVS Scheme will be as stated in the scheme. (ii) In view of the pendency of the revision, any payment made by the assessee towards tax arrears will be on account and without prejudice subject to the final decision in the revision." The object and intention of the KVS Scheme has been stated by the Finance Minister in his Budget Speech 1998-99, as follows : "Litigation has been the bane of both direct and indirect taxes. A lot of energy of the Revenue Department is being frittered in pursuing large number of litigations pending at different levels for long periods of time. Considerable revenue also gets locked up in such disputes. Declogging the system will not only incentivise ho....
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....lement resulting in waiver of payment of tax on the remaining portion of the disputed income and waiver of interest as also penalty if any. If any amount paid towards arrears during the pendency of the litigation (by way of appeal, revision, etc.) is to be irreversibly adjusted against the interest under section 140A, that would render infructuous the pending litigation (in this case pending revision petition). Surely that cannot be and in fact is not the intention. As noticed above, if the appellant had succeeded in the revision petition, his liability towards interest would have been deleted/reduced and obviously the sum of Rs.60,000 that has been paid by him towards tax arrears would have been adjusted either against the tax or would have been refunded. Therefore, the Explanation to sub-section (1) of section 140A of the Income-tax Act applies only where the liability has attained finality. This is clarified by the Department itself. The Government of India, Ministry of Finance (Department of Revenue), Central Board of Direct Taxes, issued certain clarifications by circular F.No. 149/145 of 1998/TPL, dated September 3, 1998, under section 96 of the Finance (No. 2) Act, 1998. Th....