High Court Of Madhya Pradesh : Indore Bench
Malwa Texturising (P) Ltd. vs. CIT
Section 1998FA(No. 2) 90
Block period : Asst. yr. 1994-95 to 20th Nov., 1995
A.K. Patnaik, C.J. & N.K. Mody, J.
IT Appeal No. 19 of 2002
20th July, 2006
Counsel Appeared
G.M. Chaphekar with Ravi Sarda, for the Assessee : R.L. Jain with Miss Veena Mandlik, for the Revenue
ORDER
A.K. Patnaik, C.J. :
This is an appeal against the order dt. 20th Nov., 1995 passed by the Tribunal, Indore Bench, Indore in Appeal No. IT(SS)A 84/Ind/1996 for the block year 1994-95 to 20th Nov., 1995. The facts briefly are that the appellant (hereinafter referred to as the assessee) is a private limited company registered under the Companies Act, 1956. On 21st Nov., 1995, the business premises of the assessee were searched and pursuant to a notice, the assessee filed an original return on 2nd July, 1996 disclosing nil income for the block period asst. yr. 1994-95 to 20th Nov., 1995. Thereafter, he filed a revised return showing the income at Rs. 30,50,000 on 26th Nov., 1996. The Asstt. CIT, Circle-I, Indore assessed the income at Rs. 30,50,000 on 29th Nov., 1996 under s. 158BC of the IT Act, 1961 (for short the Act). Aggrieved, the assessee preferred an appeal on 30th Dec., 1996 before the Income-tax Appellate Tribunal, Indore Bench, Indore (for short the Tribunal) under s. 253 of the Act. When the appeal was pending before the Tribunal, Kar Vivad Samadhan Scheme, 1998 (for short KVSS) was introduced by the Finance (No. 2) Act, 1998. The assessee submitted an offer for settlement under the KVSS and submitted a declaration under s. 89 of the Finance (No. 2) Act, 1998 on 30th Jan., 1999 in the prescribed Form 1A in respect of block period 1994-95 to 22nd Nov., 1995. The CIT, Indore (hereinafter referred to as the ‘designated authority’) determined the amount payable and issued certificate on 25th Feb., 1999 under s. 90(1) of the Finance (No. 2) Act, 1998 setting forth therein the particulars of the tax arrears and sum payable towards full and final settlement of the tax arrears and the assessee paid an amount of Rs. 13,72,700 by challan as directed in the said certificate and intimated the fact of such payment to the designated authority. The designated authority then issued a certificate for full and final settlement of tax arrears under s. 90(2) of the Finance (No. 2) Act, 1998 in Form No. 3 on 28th April,1999.
4. The Tribunal, after hearing learned counsel for the parties and after referring to the authorities cited by learned counsel for the parties held in its order dt. 26th Nov., 2001 [reported as Malwa Texturising (P) Ltd. & Ors. vs. Asstt. CIT (2002) 77 TTJ (Ind) 995—Ed] that notwithstanding the provisions of sub-s. (4) of s. 90 of the Finance (No. 2) Act, 1998, it will have to decide the preliminary question raised by the Department that the appeal filed by the assessee was not maintainable. In the order dt.26th Nov., 2001, the Tribunal, however, did not accept the contention of the Department that the assessee not having paid the tax on the return income, the appeal was not maintainable in view of the provisions of s.249(4) of the Act. But the Tribunal held in the said order that since the assessee had given his consent to the assessment order, it had lost the right to appeal against the said assessment order and hence the appeal filed by the assessee was not competent and void ab initio. In the said order dt. 26th Nov., 2001, the Tribunal also observed that the assessee had no right to appeal and thus, the appeal shall be treated to have never been filed and the Department is free to take action against the assessee. Thereafter, the assessee filed an application under s. 254(2) of the Act for correction of the said order dt. 26th Nov., 2001 of the Tribunal and the ground taken in the said application filed by the assessee was that under sub-s. (4) of s. 90 of the Finance (No. 2) Act, 1998, the appeal should have been treated to have been withdrawn on the day on which the designated authority passed the order under sub-s. (2) of s. 90 of the Finance (No. 2) Act, 1998 i.e. 28th April, 1999 and that the Tribunal in passing the order dt. 26th Nov., 2001 to the effect that the appeal of the assessee was not competent and void ab initio and is to be treated to have never been filed, exceeded its jurisdiction. The said application under s. 254(2) of the Act was registered as MA No. 8/Ind/2003 and after hearing learned counsel for the parties at length, the Tribunal allowed the said MA by the impugned order dt. 16th Jan., 2004 and substituted paras 10 to 12 of its appellate order dt. 26th Nov., 2001 with new paras 10 and 11 holding that as the assessee had opted for KVSS 1998 and had paid the taxes settled thereunder, the appeal has to be treated as dismissed.
In a separate appeal filed by the Department against the said order dt. 16th Jan., 2004, we have today delivered an order [reported as CIT vs. Malwa Texturising (P) Ltd. (2006) 204 CTR (MP) 549—Ed.] holding that the aforesaid order dt. 16th Jan., 2004 passed by the Tribunal was outside the scope and purview of s. 254(2) of the Act which was confined only to rectification of any mistake apparent from the record and have set aside the said order dt. 16th Jan., 2004 of the Tribunal. Since we have set aside the order dt. 16th Jan., 2004, the appellate order dt. 26th Nov., 2001 will now come into force. This appeal of the assessee is against the said appellate order dt. 26th Nov., 2001 of the Tribunal. At the time of admission of this appeal on 24th July, 2002, the Court had formulated the following substantial questions of law for decision :
(1) Whether the Tribunal erred in law in hearing and deciding the appeal on merit even when order under sub-s. (2) of s. 90 of the KVSS, 1998 was passed as the appeal in that situation shall be deemed to have been withdrawn as provided under sub-s. (4) of s. 90 ?
(2) Whether the Tribunal erred in law in considering the validity or the correctness of the certificate issued by the CIT under sub-s. (2) of s. 90 of the KVSS, 1998 ?”
8. Mr. Chaphekar, learned senior counsel for the appellant/assessee submitted that sub-s. (4) of s. 90 of the Finance (No. 2) Act, 1998 expressly provided that where the declarant has filed an appeal against the order or notice giving rise to tax arrears before any authority or Tribunal or Court, then notwithstanding anything contained in any provisions of any law for the time being in force, such appeal ‘shall be deemed to have been withdrawn on the day on which the order referred to in subs. (2) is passed’. He submitted that in the present case, the appellant/assessee had availed the settlement provisions under the KVSS contained in Chapter IV of the Finance (No. 2) Act, 1998 and after the settlement was made, the assessee had paid the sum determined by the designated authority within 30 days of the passing of the order and had intimated the fact of such payment to the assessing authority along with proof thereof and the designated authority had thereupon issued the certificate to the assessee on 28th April, 1999 under sub-s. (2) of s. 90 of the Finance (No. 2) Act, 1998 and, therefore, as per the provisions of sub-s. (4) of s. 90 of the Finance (No. 2) Act, 1998, the appeal of the assessee before the Tribunal is deemed to have been withdrawn on 28th April, 1999. He submitted that once an appeal is filed, it is to be treated as an appeal and the ineffectiveness, incompetency and merits of the appeal are not taken into account for the purpose of finding out as to whether the appeal had been filed and was pending before the concerned authority. He submitted that this view has also been taken by the Supreme Court while interpreting the provisions of sub-s. (4) of s. 90 of the Finance (No. 2) Act, 1998.
In support of the aforesaid submissions, Mr. Chaphekar cited the decisions of the Supreme Court in Union of India & Ors. vs. Onkar S. Kanwar & Ors. (2002) 177 CTR (SC) 281 : (2002) 258 ITR 761 (SC), Dr. (Mrs.) Renuka Datla & Ors. vs. CIT & Anr. (2003) 179 CTR (SC) 218 : (2003) 259 ITR 258 (SC) and CIT vs. Shatrusailya Digvijay Singh Jadeja (2005) 197 CTR (SC) 590 : (2005) 277 ITR 435 (SC). He finally submitted that in view of clear provisions of s. 90(4) of the Finance (No. 2) Act, 1998 and the decisions of the Supreme Court cited by him, this Court should hold that the appeal of the assessee pending before the Tribunal is deemed to have been withdrawn w.e.f. 28th April, 1999 and accordingly, answer the two substantial questions of law formulated by the Court by order dt. 24th July, 2002. Mr. R.L. Jain, learned senior counsel for the Department, on the other hand, submitted that since the assessee had disclosed the income of Rs. 30,50,000 in its revised return and the assessment was made on the basis of such revised return, the assessment order was really a consent order. He submitted that under s. 253 of the Act, any assessee aggrieved by an order, may appeal to the Tribunal against such order. He argued that in this case since the order of assessment had been passed on consent of the assessee, the assessee is not aggrieved by the assessment order and hence cannot file any appeal against the assessment order before the Tribunal and, therefore, the appeal was void ab initio and was not competent and the question of treating the void appeal as withdrawn w.e.f. 28th April, 1999 does not arise. He further submitted that there is clear provision in the first proviso to sub-s. (1) of s. 90 of the Finance (No. 2) Act, 1998 that where any material particular furnished in any declaration is found to be false by any authority at any stage, it would be presumed as if the declaration was never made and all the consequences under the direct tax enactment or indirect tax enactment under which the proceedings against the declarant are or were pending shall be deemed to have been revived. He submitted that in this case, the assessee does not appear to have furnished all the material particulars and, therefore, the designated authority should be at liberty to take action in accordance with the said proviso to sub-s. (1) of s. 90 of the Finance (No. 2) Act, 1998.
In this appeal we are not called upon to decide as to whether the material particulars furnished with the declaration by the assessee under s. 90 of the Finance (No. 2) Act, 1998 were false or as to whether the designated authority was entitled to take any action in accordance with the said proviso to sub-s. (1) of s. 90 of the Finance (No. 2) Act, 1998. Hence we refrain from pronouncing any opinion on the said contention raised by Mr. Jain, learned counsel for the Department. All that we have been called upon to decide in this appeal is whether the appeal of the assessee before the Tribunal against the assessment order was said to be pending at the time the order under sub-s. (2) of s. 90 of the Finance (No. 2) Act, 1998 was issued by the designated authority to the assessee and if so, whether such an appeal stood withdrawn when such an order was issued under sub-s. (2) of s. 90 of the Finance (No. 2) Act, 1998 by the designated authority.
12. Sec. 90 of the Finance (No. 2) Act, 1998 is quoted hereinbelow:
“90. Time and manner of payment of tax arrear—(1) Within sixty days from the date of receipt of the declaration under s. 88, the designated authority shall, by order, determine the amount payable by the declarant in accordance with the provisions of this scheme and grant a certificate in such form as may be prescribed to the declarant setting forth therein the particulars of the tax arrear and the sum payable after such determination towards full and final settlement of tax arrears: Provided that where any material particular furnished in the declaration is found to be false, by the designated authority at any stage, it shall be presumed as if the declaration was never made and all the consequences under the direct tax enactment or indirect tax enactment under which the proceedings against the declarant are or were pending shall be deemed to have been revived: Provided further that the designated authority may amend the certificate for reasons to be recorded in writing. (2) The declarant shall pay the sum determined by the designated authority within thirty days of the passing of an order by the designated authority and intimate the fact of such payment to the designated authority along with proof thereof and the designated authority shall thereupon issue the certificate to the declarant. (3) Every order passed under sub-s. (1), determining the sum payable under this scheme, shall be conclusive as to the matters stated therein and no matter covered by such order shall be reopened in any other proceeding under the direct tax enactment or indirect tax enactment or under any other law for the time being in force. (4) where the declarant has filed an appeal or reference or a reply to the show-cause notice against any order or notice giving rise to the tax arrear before any authority or Tribunal or Court, then, notwithstanding anything contained in any other provisions of any law for the time being in force, such appeal or reference or reply shall be deemed to have been withdrawn on the day on which the order referred to in sub-s. (2) is passed :
Provided that where the declarant has filed a writ petition or appeal or reference before any High Court or the Supreme Court against any order in respect of the tax arrear, the declarant shall file an application before such High Court or the Supreme Court for withdrawing such writ petition, appeal or reference and after withdrawal of such writ petition, appeal or reference with the leave of the Court, furnish proof of such withdrawal along with the intimation referred to in sub-s. (2).” Sub-s. (2) of s. 90 of the Finance (No. 2) Act, 1998 quoted above provides that the declarant shall pay the sum determined by the assessing authority within thirty days of the passing of an order by the designated authority and intimate the fact of such payment to the designated authority along with proof thereof and the designated authority shall thereupon issue the certificate to the assessee. It is not disputed before us that the aforesaid provisions of sub-s. (2) of s. 90 of the Finance (No. 2) Act, 1998 have been complied with and that upon compliance of the said provisions of sub-s. (2), the designated authority had in fact issued a certificate to the assessee on 28th April, 1999. Sub-s. (4) of s. 90 of the Finance (No. 2) Act, 1998 quoted above provides inter alia that where the declarant has filed an appeal against an order or notice giving rise to tax arrears before any Tribunal, then notwithstanding anything contained in any other provisions of any other law for the time being in force, such appeal shall be deemed to have been withdrawn on the day on which the order referred to in sub-s. (2) of s. 90 of the Finance (No. 2) Act, 1998 is passed. While, the case of the assessee is that the assessee had filed such an appeal before the Tribunal and such appeal was pending before the Tribunal on 28th April, 1999 when the order under sub-s. (2) of s. 90 of the Finance (No. 2) Act, 1998 was passed, the case of the Department, on the other hand, is that such an appeal could not have been filed by the assessee against the order of assessment which was made on the concession of the assessee. In Dr. (Mrs.) Renuka Datla & Ors. (supra) cited by Mr. Chaphekar, a modified demand was raised on the assessee pursuant to the orders passed by the CIT(A) and such a modified demand was not paid by the assessee on the date when the declaration was filed and the Supreme Court held that whether the modified demand is a result of concession or otherwise is not relevant consideration for the purposes of s. 87(m) of the Finance (No. 2) Act, 1998 which defines the expression ‘tax arrears’ for the purpose of KVSS. The Supreme Court further held that tax arrears in respect of which an appeal is pending would be entitled to the benefit of the KVSS and further, if an appeal is pending, it is not for the designated authority to question the possible outcome of the appeal nor for the High Court to hold that the appeal was sham, ineffective and infructuous. Relevant portion of the judgment of the Supreme Court is quoted hereinbelow : “…….It is not in dispute that the modified demand was not paid by the appellant on the date when the declaration was filed. Whether the modified demand is as a result of concession or otherwise is not a relevant consideration for the purposes of s. 87(m). The section itself makes no such distinction between a conceded demand and any other for the purposes of the scheme. Sec. 87(f) appears to fortify the position by the definition of ‘disputed tax’ as ‘the total tax determined and payable in respect of an assessment year under any direct tax enactment but which remains unpaid as on the date of making the declaration under s. 88’. The word ‘determined’ is not qualified by the process by which the determination is made. However, not all ‘tax arrears’ under s. 87(m) are entitled to the benefit of the scheme. If no appeal, etc. is pending in respect of the tax arrears, the benefit of the scheme is not available under s. 95(i)(c). If an appeal, etc. is pending, it is not for the designated authority to question the possible outcome of the appeals, nor for the High Court to hold that the appeal was ‘sham’, ‘ineffective’ or ‘infructuous’ as it has.”….
15. Following the aforesaid decision of the Supreme Court in Dr. (Mrs.) Renuka Datla & Ors. (supra), the Supreme Court again held in CIT vs. Shatrusailya Digvijay Singh Jadeja (supra) that the object of the KVSS was to recover taxes in lot in pending litigations and if an appeal was pending on the date of filing of the declaration, it was not open to the designated authority to hold that the appeal was sham, ineffective or infructuous. Relevant portions of the said judgment of the Supreme Court in CIT vs. Shatrusailya Digvijay Singh Jadeja (supra) are quoted hereinbelow : “On the question of law, learned counsel invited our attention to s. 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 s. 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 vs. CIT (2003) 179 CTR (SC) 218 : (2003) 259 ITR 258 (SC). 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. In the case of Dr. (Mrs.) Renuka Datla (supra), this Court has held on interpretation of s. 95(i)(c) that if the appeal or revision is pending on the date of the filing of the declaration under s. 88 of the Scheme, it is not for the designated authority to hold that the appeal/revision was ‘sham’, ‘ineffective’ or ‘infructuous’ as it has.”………..
16. In the aforesaid judgment in CIT vs. Shatrusailya Digvijay Singh Jadeja (supra), the Supreme Court has also relied on its decision in Raja Kulkarni vs. State of Bombay AIR 1954 SC 73 and has held that all that is to be considered is as to whether the appeal was pending and there was no need to introduce the qualification that it should be a valid or a competent appeal. The relevant paragraph of the said judgment of the Supreme Court is quoted hereinbelow: “In the case of Raja Kulkarni vs. State of Bombay AIR 1954 SC 73 : (1953-54) 5 FJR 677, 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.” Considering the aforesaid decisions of the Supreme Court, we have no doubt in our mind that as on 28th April, 1999 when the order under sub-s. (2) of s. 90 of the Finance (No. 2) Act, 1998 was passed by the designated authority, the appeal of the assessee was pending before the Tribunal and as per the provisions of sub-s. (4) of s. 90 of the Finance (No. 2) Act, 1998, the said appeal is deemed to have been withdrawn on 28th April, 1999. We accordingly answer both the substantial questions of law in the positive and in favour of the assessee and allow the appeal of the assessee.
[Citation : 286 ITR 664]
