Full Judgment Text
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CASE NO.:
Appeal (civil) 4411 of 2003
PETITIONER:
Commissioner of Income Tax,Rajkot.
RESPONDENT:
Shatrusailya Digvijaysingh Jadeja
DATE OF JUDGMENT: 01/09/2005
BENCH:
B.P. SINGH & S.H. KAPADIA
JUDGMENT:
J U D G M E N T
KAPADIA, J.
The question which arises for determination in this civil
appeal filed by the department is \026 whether the department was
right in rejecting the Kar Vivad Samadhan Scheme declarations
filed by the respondent-assessee on the ground that the
assessments had become final in the year 1992-93 (when the
assessee’s appeals were dismissed for failure to pre-deposit
self-assessed tax) and that the respondent herein had filed
revisions under the Income Tax Act and Wealth Tax Act in
November/December, 1998 only to obtain the benefit of Kar
Vivad Samadhan Scheme, 1998, which came into force w.e.f.
1.9.1998. According to the department, the revisions filed by
the assessee were time barred and as such they were not
"pending" in terms of section 95(i)(c) of the said Scheme.
The undisputed facts which lie within a very narrow
compass are as follows:
In respect of assessment years 1984-85 to 1991-92, the
assessee was liable to pay tax under assessment orders passed
vide section 143(3) of the Income Tax Act, 1961 and also under
the assessment orders passed under the Wealth Tax Act, 1957.
Being aggrieved by the assessment orders, the assessee
herein, preferred appeals to the Commissioner (A) under
section 246 of the said Act. However, the assessee failed to
pre-deposit the self-assessed tax and consequently, the appeals
came to be dismissed in the year 1992-93.
The Finance (No.2) Act, 1998 introduced a scheme
called Kar Vivad Samadhan Scheme (for short "the Scheme").
The said Scheme was contained in Chapter IV of the Finance
Act and consisted of sections 86 to 98 (both inclusive). The
said scheme came into force w.e.f. 1.9.1998 in respect of tax
arrears outstanding as on 31.3.1998 and was in force up to
31.1.1999.
On 28/29.12.1998, the assessee herein filed appeals and
revisions as mentioned in the statement given herein below:
STATEMENT OF APPEALS AND REVISION PETITION VIS-@-VIS DECLARATIONS
IN RESPECT OF KVSS UNDER INCOME TAX ACT.
Assessment
year
Appeals/
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Revision
Petition
Filed
Date of filing of
Appeal /
Revision
Petition
Date of filing
KVSS
declaration
Date of order
on KVSS
Declarations
Status on
KVSS
declarations
Date of order on
application for
condonation of
delay in filing of
Appeal/
Revision
Status on the
application for
condonation of
delay in filing
Appeal/
Revision
1980-81
Appeal
13/15.01.99
Last Week of
Jan., 1999
15/22/23.2.99 &
5.3.99
Accepted
Delay
condoned
1981-82
Appeal
13/15/01.99
Last Week of
Jan., 1999
15/22/23.2.99 &
5.3.99
Accepted
Delay
condoned
1984-85
Revision
26.11.98 to
8.12.1998
28/29.12.98
9.2.1999
Rejected
31.3.2000
Delay not
condoned
1985-86
Revision
26.11.98 to
8.12.1998
28/29.12.98
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9.2.1999
Rejected
31.3.2000
Delay not
condoned
1986-87
Revision
26.11.98 to
8.12.1998
28/29.12.98
9.2.1999
Rejected
31.3.2000
Delay not
condoned
1987-88
Revision
26.11.98 to
8.12.1998
28/29.12.98
9.2.1999
Rejected
31.3.2000
Delay not
condoned
1988-89
Appeal
13/15.01.99
Last Week of
Jan., 1999
15/22/23.2.99 &
5.3.99
Accepted
Delay
condoned
1988-89
Revision
26.11.98 to
8.12.1998
28/29.12.98
9.2.1999
Rejected
31.3.2000
Delay not
condoned
1989-90
Appeal
13/15.01.99
Last Week of
Jan., 1999
15/22/23.2.99 &
5.3.99
Accepted
Delay
condoned
1989-90
Revision
26.11.98 to
8.12.1998
28/29.12.98
9.2.1999
Rejected
31.3.2000
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Delay not
condoned
1990-91
Appeal
13/15.01.99
Last Week of
Jan., 1999
15/22/23.2.99 &
5.3.99
Accepted
Delay
condoned
1990-91
Revision
26.11.98 to
8.12.1998
28/29.12.98
9.2.1999
Rejected
31.3.2000
Delay not
condoned
1991-92
Appeal
13/15.01.99
Last Week of
Jan., 1999
15/22/23.2.99 &
5.3.99
Accepted
Delay
condoned
1991-92
Revision
26.11.98 to
8.12.1998
28/29.12.98
9.2.1999
Rejected
31.3.2000
Delay not
condoned
1992-93
Appeal
13/15.01.99
Last Week of
Jan., 1999
15/22/23.2.99 &
5.3.99
Accepted
Delay
condoned
1993-94
Appeal
13/15.01.99
Last Week of
Jan., 1999
15/22/23.2.99 &
5.3.99
Accepted
Delay
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condoned
On the above facts, the department’s case before us is
that the scheme was enacted to resolve the pending litigation;
that the purpose of the scheme was not to create artificial
pendency of litigation; that the revisions were not pending on
1.9.1998 when the scheme came into force as the revisions were
filed in November and December, 1998 along with applications
for condonation of delay and consequently, such revisions did
not come within the meaning of the word "pendency" as
mentioned in section 95(i)(c) of the said Scheme. On behalf of
the department, it was further pleaded that under the IT Act,
there was a difference between an appeal and a revision; that
the remedy of filing an appeal is available to an assessee under
section 246 as a matter of right whereas the remedy of filing
revision under section 264 was a discretionary remedy. On
facts, it was pleaded that the revisions filed by the assessee
were not bonafide as the appeals under section 246 stood
dismissed in the year 1992-93 for failure to pre-deposit self-
assessed tax; that the revisions filed were also not bona fide as
they were filed only to obtain the benefit of the said scheme;
that the revisions were filed under section 264 before the
commissioner after a long delay and they were rightly
dismissed by the commissioner subsequently for want of
sufficient cause to condone the delay.
Shri K.P. Pathak, learned ASG appearing on behalf of the
department would submit that the scheme was a self-contained
Code; that it stood on its own force different from the Income
Tax Act/Wealth Tax Act; that the intention of the Scheme as
reflected in the speech of former finance minister indicated that
the purpose of the Scheme was to bring to an end pending
litigation and not to create an artificial litigation in respect of
assessments which had attained finality. In this connection,
learned counsel pointed out that in the present case the
department had in fact resorted to execution proceedings and a
part of the arrears was also realized through the auction sale of
the lands of the assessee and, therefore, there was no bona fide
pendency of litigation on the date when the assessee filed his
declarations under the Scheme. The learned counsel submitted
that there was a difference between an appeal under section 246
and revisions under section 264 of the IT Act; that under the
proviso to section 264, the commissioner was empowered to
condone the delay in filing of revision if he was satisfied that
the assessee was prevented by sufficient cause from preferring
the revision within the prescribed time. It was submitted that
the revision petition was not pending in terms of section
95(i)(c) of the Scheme; that the delay in filing the revisions was
not condoned and, consequently, the assessee was not eligible
to take the benefit of the scheme. In this connection, learned
counsel placed reliance on the judgment of this Court in the
case of Computwel Systems P. Ltd v. W. Hasan & Another
reported in (2003) 260 ITR 86.
Per contra, Shri M.L.Varma, learned senior counsel
appearing on behalf of the assessee submitted that revisions and
appeals were filed by the assessee along with the condonation
applications; that, however, declarations pertaining to the
assessment years covered by the appeals under sections 246
were accepted by the designated authority (for short "DA")
under the Scheme though the applications for condonation of
delay were pending decision whereas the DA rejected the
declarations filed by the assessee covered by the revisions
without waiting for the commissioner to exercise his authority
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to condone the delay under the proviso to section 264 of the IT
Act. Learned counsel made the grievance that no reason has
been given by the department for rejecting one set of
declarations concerning revisions under section 264 while
accepting declarations concerning appeals under section 246 of
the IT Act, though in both the cases, applications for
condonation of delay were filed and pending.
On the question of law, learned counsel invited our
attention to section 95(i)(c) and submitted that the scheme was
a Code by itself; that the object of the scheme was to recover
the taxes locked in the pending litigation and for the purposes
of the applicability of the scheme, appeals, references,
revisions, writ petitions pertaining to the tax cases were all put
at par under section 95(i)(c) of the Scheme. It was urged on
behalf of the assessee that if a revision or an appeal was
pending on the date of the filing of the declaration under the
Scheme, it was not open to the DA to hold that the
appeals/revisions were sham, ineffective or infructuous. In this
connection, reliance was placed on the judgment of this Court
in the case of Dr. Mrs. Renuka Datla & Others v.
Commissioner of Income-Tax & Another reported in (2003)
259 ITR 258.
The basic point which we are required to consider in this
case is the meaning of the word "pending" in section 95(i)(c) of
the said Scheme.
The object of the scheme was to make an offer by the
Government to settle tax arrears locked in litigation at a
substantial discount. It provided that any tax arrears could be
settled by declaring them and paying the prescribed amount of
tax arrears, and it offered benefits and immunities from penalty
and prosecution. In several matters, Government found that
large number of cases were pending at the recovery stage and,
therefore, the Government came out with the said Scheme
under which it was able to unlock the frozen assets and recover
the tax arrears.
In our view, the Scheme was in substance a recovery
scheme though it was nomenclatured as a "litigation settlement
scheme" and was not similar to the earlier Voluntary Disclosure
Scheme. As stated above, the said Scheme was a complete
Code by itself. Its object was to put an end to all pending
matters in the form of appeals, reference, revisions and writ
petitions under the IT Act/WT Act. Keeping in mind the above
object, we have to examine section 95(i)(c) of the Scheme,
which was different from appeals under section 246, revisions
under section 264, appeals under section 260A etc. of the IT
Act and similar provisions under the W.T. Act. Under the I.T.
Act, there is a difference between appeals, revisions and
references. However, those differences were obliterated and
appeals, revisions and references were put on par under section
95(i)(c) of the Scheme. The object behind section 95(i)(c) in
putting on par appeals, references and revisions was to put an
end to litigation in various forms and at various stages under the
IT Act/Wealth Tax Act and, therefore, the rulings on the scope
of appeals and revisions under the IT Act or on Voluntary
Disclosure Scheme, will not apply to this case.
One more aspect needs to be looked into. The Finance
(No.2) Act, 1998 introduced a Scheme called Kar Vivad
Samadhan Scheme, 1998. It was a recovery scheme. Under the
Scheme, the tax arrear had to be outstanding as on 31.3.1998.
Under section 87(f), "disputed tax" was defined to mean total
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tax determined and payable under the IT Act/Wealth Tax Act in
respect of an assessment year but which remained unpaid as on
the date of making of the declaration from which TDS, self-
assessed tax, advanced tax paid, if any, had to be deducted
under section 90; the DA had to determine the amount payable
and for that purpose, he had to determine the tax arrear as well
as the disputed amount as defined under section 87(f). Thus, the
DA had to make an assessment of tax arrears, disputed amount
and amount payable for each year of assessment; that appeal
was barred against the order under section 90 (see section 92);
that such determination had to be done within 60 days from the
receipt of the declaration and based thereon the DA had to issue
a certificate. In other words, till the completion of the
aforestated exercise, the appellant could not have paid the
amount of tax and, therefore, the appellant was not liable to pay
interest as his liability accrued only after the ascertainment of
the amount payable under section 90. In the present matter, that
exercise has been completed; that taxes have been recovered by
sale of lands; that amounts have been paid pursuant to the
determination by the DA, may be under the orders of the High
Court and, therefore, we do not wish to reopen the matter.
In the case of Dr. Mrs. Renuka Delta (supra), this Court
has held on interpretation of section 95(i)(c) that if the appeal or
revision is pending on the date of the filing of the declaration
under section 88 of the Scheme, it is not for the DA to hold that
the appeal/revision was "sham", "ineffective" or "infructuous"
as it has.
In the case of Raja Kulkarni v. The State of Bombay
reported in AIR 1954 SC 73, this Court laid down that when a
section contemplates pendency of an appeal, what is required
for its application is that an appeal should be pending and in
such a case there is no need to introduce the qualification that it
should be valid or competent. Whether an appeal is valid or
competent is a question entirely for the appellate court before
whom the appeal is filed to decide and this determination is
possible only after the appeal is heard but there is nothing to
prevent a party from filing an appeal which may ultimately be
found to be incompetent, e.g., when it is held to be barred by
limitation. From the mere fact that such an appeal is held to be
unmaintainable on any ground whatsoever, it does not follow
that there was no appeal pending before the Court.
To the same effect is the law laid down by the judgment
of this Court in the case of Tirupati Balaji Developers (P) Ltd.
v. State of Bihar & Others reported in (2004) 5 SCC 1, in
which it has been held that an appeal does not cease to be an
appeal though irregular and incompetent.
For the aforestated reasons, orders of the designated
authority rejecting the declarations filed by the assessee are
quashed. We do not find any infirmity, to this extent, in the
impugned judgment of the High Court. The appeal is
accordingly dismissed, with no order as to costs.