Gujarat H.C : the application for settlement in respect of assessment cannot be entertained because the petitioner had filed the application under s. 264

High Court Of Gujarat

Sheela Ashokkumar Goenka vs. Designated Authority

Section FA (No. 2), 1998, 95(i)(c)

Asst. Year 1994-95

D.A. Mehta & H.B. Antani, JJ.

Special Civil Appln. No. 1888 of 1999

1st July, 2008

Counsel appeared :

Ms. Vaibhavi Parikh with S.N. Soparkar, for the Petitioner : Mrs. Mauna M. Bhatt, for the Respondent

JUDGMENT

D.A. MEHTA, J. :

This petition has been preferred challenging communication/order dt. 15th Feb., 1999 issued by the respondent, Designated Authority under the Kar Vivad Samadhan Scheme (“KVSS”). The Designated Authority has rejected an application made by the petitioner on 29th Jan., 1999 by stating that the application for settlement in respect of assessment cannot be entertained because the petitioner had filed the application under s. 264 of the IT Act, 1961 (“the Act”) on 28th Jan., 1999. The said revision application under s. 264 of the Act was a belated one. Under KVSS, only a case where a dispute was existing and the case was pending on the date of declaration under KVSS could be entertained. The facts which are not in dispute are that for the asst. yr. 1994-95, the petitioner-assessee sought set off of loss suffered in a proprietary business against other income as per return of income filed. However, as the books of account of the proprietary business could not be produced before the AO, the petitioner agreed to withdraw the claim of loss. Accordingly, in the assessment order made on 31st March, 1997, the claim of loss was disallowed by the AO, and while doing so, the AO held that the withdrawal of claim of loss by the petitioner could not be considered to be voluntary and bona fide. The AO initiated penalty proceedings for concealment/furnishing of inaccurate particulars of income under s. 271(1)(c) of the Act and levied penalty vide order dt. 26th Sept., 1997. The petitioner preferred revision application under s. 264 of Act against the assessment order and such revision application was preferred on 23rd Jan., 1999 (the date, according to the respondent, being 28th Jan., 1999). The petitioner also preferred an application seeking condonation of delay. During the pendency of the revision application and the accompanying application for condonation of delay, the petitioner made a declaration under KVSS for settling the dispute, both in relation to the tax and the penalty levied.

It is in this aforesaid background of facts that the Designated Authority has, while accepting the declaration insofar as penalty is concerned, rejected the declaration in relation to assessment by observing that in absence of any proceedings pending, the petitioner was not entitled to seek benefit under KVSS. On behalf of the petitioner, it was submitted by the learned senior advocate that the issue was no longer res integra, as, in almost similar set of circumstances, this High Court in case of Shatrushailya Digvijaysingh Jadeja vs. CIT (2002) 177 CTR (Guj) 508 : (2003) 259 ITR 149 (Guj) came to the conclusion that there was no distinction between a proceeding which is pending, whether the proceeding has been initiated within a period of limitation, or beyond the period of limitation accompanied by an application seeking condonation of delay. That, the aforesaid view expressed by this High Court has been confirmed by the apex Court in case of CIT vs. Shatrusailya Digvijaysingh Jadeja (2005) 197 CTR (SC) 590 : (2005) 277 ITR 435 (SC). As against that, the learned standing counsel appearing on behalf of the respondent authority submitted that in this case, the assessment order for the asst. yr. 1994-95 was passed on 31st March, 1997 and the order was served on the assessee on 7th April, 1997. Under s. 264, the assessee may file a revision petition under s. 264 within the time period ending on 7th April, 1998, i.e., within one year from the date on which the order in question was communicated to the assessee. However, the assessee chose to file the application under s. 264 on 28th Jan., 1999 just a day prior to filing of application under KVSS 98 after expiry of approximately 9 months. The aforesaid sequence of events clearly prove the intention of the assessee to file a belated application under s. 264, i.e., to avail the benefit of the scheme though she was not eligible for the same by filing a belated petition under s. 264 of the Act. That there was no sufficient cause which has prevented the assessee to file application under s. 264 within the prescribed period of time. If the assessee had any grievance against the assessment order of the AO, she must have filed appeal or revision petition against the said order in financial year 1997-98 on or after 7th April, 1997, not a day before filing application under KVSS 98. The claim of the assessee under KVSS 98 was therefore, rightly disallowed. In support of the submissions made, reliance has been placed on the decision of the Kerala High Court in case of E.J. Thomas vs. Asstt. CIT & Anr. (2005) 199 CTR (Ker) 83 : (2006) 281 ITR 40 (Ker) and Supreme Court decision in case of Computwel Systems (P) Ltd. vs. W. Hasan & Anr. (2003) 184 CTR (SC) 92 : (2003) 260 ITR 86 (SC).

6. In case of CIT vs. Shatrusailya Digvijaysingh Jadeja (supra), the apex Court has, while upholding the judgment of this High Court, after analysing the scheme of KVSS observed as under : “The basic point which we are required to consider in this case is the meaning of the word ‘pending’ in s. 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, the Government found that a 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 nomeclatured 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 s. 95(i)(c) of the Scheme, which was different from appeals under s. 246, revisions under s. 264, appeals under s. 260A, etc., of the IT Act and similar provisions under the WT Act. Under the IT 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 s. 95(i)(c) of the Scheme. The object behind s. 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/WT 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.” Furthermore, after referring to two earlier decisions rendered by the Supreme Court, it has been held : “….. 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. vs. State of Bihar (2004) 5 SCC 1 (supra), in which it has been held that an appeal does not cease to be an appeal though irregular and incompetent.”

The issue raised by the present petition, therefore, stands concluded in favour of the petitioner by virtue of ratio enunciated by the apex Court on analysing the scheme of KVSS. It was not open to the Designated Authority to decide in the proceedings under KVSS whether the revision application was barred by limitation or not; or whether the delay was required to be condoned or not. The petitioner is, therefore, justified in claiming that the assessment also is required to be covered under KVSS and the declaration made by the petitioner in relation to disputed amount of tax is required to be accepted. Insofar as the judgment of the Kerala High Court is concerned, suffice it to State that firstly, on the date Kerala High Court pronounced the judgment, the apex Court decision in case of CIT vs. Shatrusailya Digvijaysingh Jadeja (supra), was not available; and, secondly, in the aforesaid circumstances, there is no question of giving preference to High Court judgment when Supreme Court judgment on the issue is available. Furthermore, the Supreme Court judgment in case of Computwel Systems (P) Ltd. vs. W. Hasan & Anr. (supra) also cannot be applied to the facts of the case, because in case before the Supreme Court on the date declaration was filed under KVSS, revision application was not pending because the delay had not been condoned by the CIT who had rejected the application for condonation of delay. In the aforesaid set of facts and circumstances of the case, the communication dt. 15th Feb., 1999 insofar as it rejects the declaration filed by the petitioner in relation to income-tax liability for asst. yr. 1994-95 is quashed and set aside. The respondent Designated Authority is directed to issue fresh order under KVSS by including the income-tax liability arising out of assessment for asst. yr. 1994-95. The petition is allowed accordingly. Rule made absolute. There shall be no order as to costs.

[Citation : 326 ITR 402]