High Court Of Calcutta
Faridabad Investment Company Ltd. vs. CIT
Sections 1998FA(No. 2) 87(e), 1998FA(No. 2) 87(F), 1998FA(No. 2) 93,
Asst. Years 1991-92, 1992-93, 1993-94, 1994-95
Ashim Kumar Banerjee & Sankar Prasad Mitra, JJ.
APO No. 374 of 2006 in Writ Petn. No. 119 of 2000
20th December, 2006
Counsel Appeared
J.P. Khaitan & S. Bhattacharjee, for the Appellant : Dipak Kumar Shome & Nizamuddin, for the Respondent
JUDGMENT
Ashim Kumar Banerjee, J. :
The appellant received substantial sums during the asst. yrs. 1991-92, 1992-93, 1993-94 and 1994-95 in consideration of giving up their rights to carry on business of X-ray medical systems under a non-competition agreement. According to the appellant such receipts were capital receipts and as such not taxable. The AO rejected such contention and assessed those amounts as revenue receipts. The CIT(A) reversed the decision of the AO and gave full exemption for the amounts involved in the said four assessment years to the appellants. The Revenue preferred an appeal before the Tribunal. While the appeal was pending before the Tribunal, the Central Government came up with a scheme called “Kar Vivad Samadhan Scheme, 1998” (hereinafter referred to as the “said Scheme of 1998”). Under the said Scheme of 1998 where disputes remain pending as on the stipulated date where the assessee was litigating before the appropriate forum and because of pendency of such disputes tax was outstanding on that score the assessee was entitled to take benefit of the said Scheme provided he applied for settlement of such disputes upon payment of tax for the disputed amount at the rate prescribed under the said Scheme of 1998. Upon such payment the Revenue authority was obliged to issue a settlement certificate upon verification of the amount and payment thereof. This was prevalent for a certain period.
The Scheme was challenged before the Delhi High Court by the All India Federation of Tax Practitioners on several grounds. One of the grounds was that the defaulting assessees were given benefit to settle the tax disputes whereas the assessees whose dispute was pending although there was no tax arrear, were deprived of such benefit. The Delhi High Court while deciding the issue observed that the pending dispute where the Revenue preferred appeal against the benefit so extended to the assessee those appeal could also be settled by applying the identical procedure. In the said decision in the case of All India Federation of Tax Practitioners vs. Union of India (1999) 151 CTR (Del) 1 : (1999) 236 ITR 1 (Del), the Delhi High Court observed, inter alia, as follows : “To sum up, our conclusions are : (1) the proviso to s. 92 is ultra vires Art. 14 of the Constitution as it results in creating two artificial classes between the same class of assessees, i.e., the litigating assessees in arrears; (2) the definition of ‘tax arrears’ in cl. (m) of s. 87 should be so read as to mean the amount of tax, penalty or interest determined by any competent authority on or before 31st March, 1998, though such determination might have been set aside at a later stage, if such setting aside has not been accepted by the Department and continues to remain under challenge before a Court or Tribunal; (3) the rest of the Scheme is intra vires the Constitution.”The parties accepted the decision of the Delhi High Court. The Revenue issued a Circular dt. 12th Dec., 1998, appearing at p. 129 of the paper book purportedly in terms of the judgment and order of the Delhi High Court. Clause 2(ii) of the said circular is set out below : “(ii) For declaration relating to Departmental appeals also the existing Form No. 1A can be used. In such cases, there are no outstanding taxes and hence the process of working out ‘disputed income’ from outstanding taxes is not involved. The entire income under dispute in various grounds of appeal may constitute ‘disputed income’ on which the sum payable can be determined. In respect of the Departmental appeals, the declaration has to be for the entire income disputed in such appeals.” By the said clause where there was no existing tax arrear the assessee was given liberty to settle the disputes and the Revenue was directed to calculate the outstanding tax working out the disputed income involved in the grounds of appeal and in the case of the Departmental appeals the declaration was to be for the entire income disputed in such appeals.
4. According to the appellant such circular was not in conformity with the decision of the Delhi High Court and was violative of the true spirit of the Scheme of 1998 as also the principles of natural justice. The appellant, however, wanted to take the benefit of the said Scheme. The appellant first applied for payment of the disputed tax. The Department calculated such tax applying the Circular dt. 17th Dec., 1998. The appellant duly paid such tax in February, 1999. Accordingly, the Department issued a settlement certificate and thereafter withdrew the appeal then pending before the Tribunal. After about 8 months in October, 1999, the appellant’s chartered accountant informed them that he gave erroneous legal advice as the Revenue was not entitled to calculate the tax by taking into account the entire disputed income in terms of the said circular as it was not in spirit of the Delhi High Court judgment or the said Scheme of 1998. The appellant waited for about six months thereafter and in April, 2000, filed a writ petition before this Court, inter alia, challenging the said circular as well as for refund of the amount so paid in excess, according to them under the said Scheme of 1998.
5. It was contended on behalf of the appellant before the learned Single Judge that the Revenue while calculating the disputed outstanding tax should have taken into account the original order passed by the AO and not the entire amount involved in the grounds of appeal applying the said Circular dt. 17th Dec., 1998. It was further contended that originally when the appellant applied for settlement of the disputes under the said Scheme of 1998 they calculated the outstanding tax taking into account the order of the AO and offered the same to pay to settle the disputes. The Revenue, however, by their letter dt. 29th Jan., 1999, recalculated the disputed tax on the basis of the entire disputed income involved in the grounds of appeal filed by the Revenue. The appellant was compelled to pay the said tax to avail of the benefit of the said Scheme of 1998 as the same was a time bound one. It was further contended that there was no rationale behind differentiation between two sets of the assessees who were otherwise equally circumstanced being the assessees who were in default in view of a pending appeal and the assessees who did not have any tax arrear although the dispute was pending in appeal.
6. The learned Judge accepted such submission of the appellant by observing that such argument had substance. The learned Judge, however, dismissed the writ petition by accepting the contention of the Revenue that the said Scheme of 1998 was a voluntary one and it was open to the appellant to offer settlement of the disputes in terms of the said Scheme of 1998 or to wait till adjudication was made by the appellate authority in the Revenue’s appeal. The learned Judge put emphasis on the fact that the tax calculated and intimated to the appellants on 28th Jan., 1999, was paid without any protest by the appellants and certificates were issued accordingly on 18th Feb., 1999. The learned Judge in this regard relied upon the decision of the apex Court in the case of Smt. Sushila Rani vs. CIT (2002) 172 CTR (SC) 665 : (2002) 253 ITR 775 (SC). Relying on the said decision his Lordship ultimately held that the determination of tax under s. 90(1) once accepted by the assessee, could not be questioned either by the assessee or by the Department in the absence of any false declaration. His Lordship held that settlement was conclusive and binding upon all concerned.
7. Being aggrieved by and dissatisfied with the judgment and order of the learned Single Judge, the appellant filed the present appeal.
8. Mr. J.P. Khaitan, the learned senior counsel appearing in support of the appeal, reiterated his submissions which were advanced before the learned Single Judge. In addition, Mr. Khaitan contended before us that assuming the appellant made a mistake while accepting the calculation of the Revenue so intimated to the assessee by communication dt. 29th Jan., 1999, and paid tax without any protest under misconception, such mistake ormisconception could not be fatal if such calculation was ultimately found wrong or de hors the statutory provision. Mr. Khaitan further contended that there could be no estoppel against a statutory provision and a mistake so committed by the appellant could not be used against the appellant by which the Revenue was allowed to enjoy unjust gain. Mr. Khaitan, further contended that when the learned Judge found that the appellant’s contention had substance, his Lordship should not have denied relief only on the ground that no contemporaneous protest was made by the appellant. Mr. Khaitan drew our attention to paras 16 and 23 of the writ petition wherein the appellant contended that on mistaken advice of the chartered accountant the appellant paid the tax. However, such mistake could be located only in October, 1999, that a differential treatment was meted out by the said circular to the assessees similarly circumstanced. Mr. Khaitan contended that these two paras were not properly dealt with by the Revenue and in this regard paras 10 and 16 of the affidavit-in-opposition were referred to wherein the Revenue insisted that the said circular was issued strictly in accordance with the decision of the Delhi High Court. In support of his contention Mr. Khatian relied upon the following decisions : (i) CIT vs. V.MR.P. Firm (1965) 56 ITR 67 (SC); (ii) Onkar S. Kanwar vs. Union of India (2001) 168 CTR (Ker) 352 : (2001) 249 ITR 258 (Ker); (iii) Omkar S. Kanwar vs. Union of India (2001) 170 CTR (Guj) 354 : (2002) 254 ITR 337 (Guj) ; (iv) Union of India vs. Onkar S. Kanwar (2002) 177 CTR (SC) 281 : (2002) 258 ITR 761 (SC); (v) Marigold Engineers (P) Ltd. vs. Union of India (2004) 191 CTR (P&H) 103 : (2005) 274 ITR 17 (P&H); (vi) Basheshar Nath vs. CIT AIR 1959 SC 149; (vii) Shri Vallabh Glass Works Ltd. vs. Union of India (1984) 40 CTR (SC) 184 : AIR 1984 SC 971; (viii) P. Nallammal vs. State represented by Inspector of Police (1999) 5 JT 410 (SC) (ix) Nar Singh Pal vs. Union of India (2000) 3 SCC 588 : (2000) 96 FJR 502 (SC).
9. Mr. D.K. Shome, learned counsel appearing for the Revenue, contended that there was no ambiguity in the Circular dt. 17th Dec., 1998. Explaining the circular, Mr. Shome took us to the facts of the instant case. According to Mr. Shome, during those four assessment years substantial sums were received by the assessee/appellant. They claimed full tax exemption by treating those receipts as capital receipt. The AO rejected their claim and assessed the tax accordingly. On appeal, the CIT(A) gave them full exemption of tax in respect of the amounts so received by them purportedly as capital receipts. The Departmental appeal was pending. The Delhi High Court judgment according to Mr. Shome removed discrimination between two groups of assessees and held, inter alia, that the Departmental appeals should also be allowed to be settled by the assessees. In deference to the desire of the Delhi High Court and in terms of the said decision the Government issued the said circular to guide the appropriate authority to calculate the disputed tax in the Departmental appeals. According to Mr. Shome, in the instant case, the disputed tax could only be the tax which would be ultimately payable by the assessee in case the Departmental appeals succeeded meaning thereby the disputed income being those amounts which were given full tax exemption by the CIT(A), by treating those amounts as capital receipts, could be brought within the mischief of taxable income in case the Department succeeded in their appeal. The Revenue accordingly calculated tax on the said amounts and informed the assessee accordingly. It was open for the assessee either to accept such calculation or to reject the same. The assessee duly paid the said amount without any protest as a result whereof such tax disputes stood resolved by issuance of the said certificates and withdrawal of the Departmental appeal. Hence, the learned Judge was right in denying relief to the assessee as it would amount to undue hardship upon the Revenue as it would not be in a position to proceed with their appeal which stood disposed of by the order of withdrawal. Mr. Shome heavily relied on the decision in the case of Smt. Sushila Rani (supra). Mr. Shome in support of his contention relied on a recent Supreme Court decision in the case of Jai Narain Parasrampuria (Decd.) vs. Pushpa Devi Saraf (2006) 7 SCC 756.
10. In reply, Mr. Khaitan tried to distinguish the apex Court decision in the case of Smt. Sushila Rani (supra). According to him, in the said case the Revenue attempted to withdraw and/or cancel the settlement certificate so issued by them under the Scheme of 1998. Considering such controversy the apex Court was of the view that when the entire basis of the notice was only that adjustments already made had not been taken note of, the Department could have considered such issue before issuance of certificate as those were already on record. According to Mr. Khaitan considering such aspect, the apex Court held that the settlement under the Scheme once done could not be recalled unless there was any error of clerical or arithmetical nature. Such ratio could not be applied in the instant case.
11. Before going into the controversy one has to read the entire Scheme of 1998 to find out the true purport. Sec. 87(e) defines “disputed income” being income in relation to an assessment year being the whole or so much of the total income relatable to the disputed tax. Clause (f) defines “disputed tax” as the total tax determined and payable in respect of an assessment year which remains unpaid as on the date of making of the declaration. Clause (m) defines “tax arrears” which, inter alia, means the amount of tax, penalty or interest determined on or before 31st March, 1998, in respect of an assessment year as modified consequent to giving effect to an appellate order but remaining unpaid on the date of declaration.
12. Giving a total meaning of the disputes covered under the Scheme, the Delhi High Court removed discrimination, if any, under the said Scheme by giving a harmonious construction to the same by observing that even where no tax was in arrear if the disputes continued and remained pending in appeal such dispute could also be settled under the said Scheme.
13. Sec. 90, sub-s. (1), provides that designated authority must pass order upon receipt of a declaration under s. 88 within 60 days by determining the amount payable by the declarant under the said Scheme. In sub-s. (3) every order passed under sub-s. (1) shall be conclusive and no matter covered by such order could be reopened in any other proceeding. Sec. 92 bars the appellate authority to proceed in pending appeal where the disputes stood resolved under s. 90. Sec. 93 bars any refund of any amount paid in pursuance of a declaration “under any circumstances”.
14. By taking a sum total of the situation it appears that the said Scheme was propounded to collect disputed tax arrears. At the same time opportunity was given to the assessees to settle longstanding tax disputes. It was absolutely a voluntary scheme. If an assessee was of the view that he would be benefited by the said Scheme by resolving the pending tax dispute once for all he was free to make a declaration under s. 88. Once such declaration was made it was incumbent upon the designated authority to calculate the tax payable under the said Scheme and intimate the same to the assessee. Here the assessee got a second scope either to go ahead or to withdraw himself from such settlement. Once such payment was made as so assessed by the designated authority under s. 90 the said amount could not be refunded under any circumstances under s. 93. At the same time the appellate authority was also debarred from proceeding with the pending appeal. Hence, such settlement was a conclusive one and could not be reopened, in our view, under any circumstances. The exceptional circumstances so considered by the apex Court in the case of Smt. Sushila Rani (supra) was a clerical or arithmetical mistake or a false declaration which was not in the knowledge of the Revenue. Even any declaration and/or misdeclaration which escaped the attention of the Revenue could not be reopened in view of the decision of the apex Court in the case of Smt. Sushila Rani (supra). Mr. Khaitan relied upon several decisions of the apex Court to show that there was no estoppel in respect of any statutory provision or that no benefit could be allowed to be enjoyed by the Revenue because of an erroneous act on the part of the assessee based on misconception of law. Such proposition, in our view, could not be applied in the instant case. The decision of the Punjab & Haryana High Court in the case of Marigold Engineers (P) Ltd. (supra) in our view should be read together with the decision of Smt. Sushila Rani (supra). In any event, in the said case, the assessee paid the excess amount under protest. The High Court found that there was a mistake in calculation and hence directed refund of the amount. Mr. Khaitan tried to contend that ignorance of law could not debar a citizen of the country to ventilate his grievance when there was violation of principles of natural justice and such contention was made relying upon the case of Basheshar Nath (supra). We are unable to accept such contention. Here there was neither any mistake of law committed by the assessee nor was there any violation of fundamental right which could be ventilated in a writ proceeding. The discrimination under the said Scheme was removed by the Delhi High Court and accepted by the Revenue. Mr. Shome successfully demonstrated from the facts so referred to above that the calculation was made strictly in terms of the Scheme after applying the ratio laid down by the Delhi High Court. Hence, there could be no violation of principles of natural justice so that we could apply the ratio decided in Basheshar Nath (supra).
In the case of Union of India vs. Onkar S. Kanwar (supra), the apex Court while dealing with an identical dispute relating to excise upheld the view of the Kerala High Court in the case of Onkar S. Kanwar (supra) and rejected the view of the Gujarat High Court. In those three decisions, the issue of refund was the subject-matter. The apex Court while dealing with the issue held that where a declaration had been made in respect of a tax arrear under a show-cause notice the settlement in favour of the declarant should be deemed to be full and final in respect of other persons on whom show-cause notices had been issued. There also show-cause notices were issued to the company as well as individuals. Once it was settled at the instance of one noticee, the apex Court held that the Department was not entitled to proceed in respect of the self-same notices. Even holding as such the apex Court in the concluding portion held that even though the amount was paid under protest the assessee was not entitled to refund because of the stringent provision of s. 93. Taking a sum total of the situation and on a combined reading of the apex Court decision in the case of Union of India vs. Onkar S. Kanwar (supra) and Smt. Sushila Rani (supra), we are of the view that the issue once resolved under the said Scheme of 1998 could not be reopened except under exceptional circumstances as discussed in the case of Smt. Sushila Rani (supra). In the instant case, such exceptional circumstances were not involved. Even if we hold that the learned Judge was wrong in denying the relief by holding that it was a conclusive settlement we would not be in a position to give any relief to the assessee in view of the stringent provision of s. 93.
19. We once again reiterate that the appellant keeping their eyes wide open volunteered to come within the scope of the Scheme of 1998 by submitting a declaration under s. 88. They could have backed out after they were intimated by the Revenue the amount of tax so calculated by them applying the Circular dt. 17th Dec., 1998. They did not do so. They paid the amount without any protest. The said certificates were issued in February, 1999. The Departmental appeal was consequently withdrawn. Writ petition after about 14 months making a grievance that such circular was violative of principles of natural justice and the appellants were entitled to refund of all the amount purportedly paid in excess by them, was rightly not entertained by the learned Single Judge. The appeal fails and is hereby dismissed. There would be no order as to costs.
Sankar Prasad Mitra, J. :
I agree.
[Citation : 289 ITR 273]
