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Amnesty Scheme - Interpretation of the word "Admitted and Pending" - Part 1

Feb 12, 2020

The Govt. of India has been offering amnesty schemes practically every ten years to put an end to litigation in various forms and at various stages under Direct & Indirect Tax  and the Schemes have been described as the “very last opportunity”. The constitutional validity of VDIS, 1997 was challenged at SC in the case of AIFTP vs UOI [TS-5092-SC-1997-O] and SC upheld the constitutional validity of the amnesty scheme rejecting the contention that more benefits are given to tax-evaders, the provisions of the scheme are arbitrary and violative of Art. 14 of the Constitution of India. 

In the line of SVLDRs, Finance Minister, in her recent budget speech, introduced the scheme “The Direct Tax Vivad Se Vishwas Bill, 2020” (“the Bill”) (subsequently introduced in the “Lok Sabha”) to provide for resolution for the pending “direct tax disputes” and proposed waiver of interest & penalty provided the disputed tax amount is paid by March, 2020. The Scheme is to remain open upto June 2020. As per “the Bill”, any Taxpayer whose appeal is pending as on 31st January 2020 before any appellate forum [i.e., SC, HC, ITAT and CIT(A)] is eligible to avail the Scheme. 

At Taxsutra Database Insight Part-1, we bring to you key rulings on principles which examine and interpret the words "Admitted and Pending" in the context of an appeal before an appellate forum.  

Amnesty Scheme - Interpretation of the word "Admitted and Pending" 

1) [TS-5019-SC-2005-O] : Revision to be treated as pending – SC quashes the orders of the designated authority  rejecting assessee`s declarations filed under KVSS, 1988; Notes that, designated authority (DA)  within 60 days from the receipt of the declaration had to determine the tax arrears as well as the disputed tax amount as defined u/s. 87(f) of the Scheme and had to issue a certificate; In other words, till the completion of the aforestated exercise, the assessee could not have paid the amount of tax and, therefore, not liable to pay interest as liability accrued only after the ascertainment of the amount payable u/s 90; SC holds, the object behind s. 95(i)(c) of the Scheme 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; 

2) [TS-5040-SC-2002-O] : Interpretation of Sec. 95(i)(c) and Sec. 87(m)  of KVSS, 1988 – SC : “Not all "tax arrears" u/s  87(m) of the Scheme are entitled to the benefit of the Kar Vivad Samadhan Scheme,1998 (KVSS) – SC holds that, if no appeal is pending in respect of the tax arrears, the benefit of the KVSS is not available under s. 95(i)(c) and if an appeal etc. is pending, it is not for the designated authority to question the possible outcome of the appeals, nor for the HC to hold that the appeal was 'sham’, "ineffective" or "infructuous"; SC further notes that, AO during computation of the demand not only included those items which had been remitted by the CIT(A) for redetermination but also the items which had been confirmed by the CIT(A) which had not been conceded and were the subject-matter of appeal before the ITAT, therefore, it cannot be said that there was no appeal pending in respect of the tax arrears pertaining to those items within the meaning of s. 95(i)(c); SC sets aside the order of the HC, directs authorities to consider the declaration filed by the appellant;

3) [TS-5868-HC-2004(Allahabad)-O] : Interpretation of the word "Admitted and Pending" and S. 95(i) of the KVSS, 1998  – HC : Once the delay has been condoned, it relates back to the date of filing of the appeal and is treated to have been filed within limitation and, thus, would be treated as pending – HC holds, once the delay has been condoned by the ITAT, the appeal would be said to be pending before the ITAT on the date when a declaration was filed and, therefore Ld CIT, was not justified in rejecting the declaration on this ground; HC notes that, it is settled that an appeal in order to be pending must as a matter of fact be pending and it is immaterial as to whether it has been filed beyond time or is not in the prescribed form; Further in case the appeal has been filed beyond the period of limitation, in the event the application for condonation of delay has been allowed it will be treated as having been properly filed; Distinguishes [TS-5014-HC-2003(MADHYA PRADESH)-O];

4) [TS-5014-HC-2003(MADHYA PRADESH)-O] : Interpretation of the word "Admitted" and "pending" and S. 95(i) of the KVSS, 1998 - HC : The word "admitted" cannot be employed for being used only for the HC and SC, it applies to the appellate authority also with full force – HC Division Bench dismisses petitioner's appeal challenging Ld. Single bench order, notes that “we are satisfied that the words admitted and pending have been properly interpreted by Ld. Single Judge"; Affirms Single bench order reported in, [TS-5973-HC-2002(Madhya pradesh)-O]; Earlier Single Bench observed that, the legislature has in its wisdom confined the benefit of the Scheme to only those assessee`s whose appeals are "admitted" and "pending" before the appellate authority for their final disposal and not to those appeals which are not "admitted" for final hearing or in other words, simply pending; The deliberate use of the word "admitted" prior to word "and pending" can never be regarded as redundant or otiose; The petitioner would have had some force if the word "admitted" had not been used by the legislature in s. 95(i)(c) of the Scheme and instead only the word "is pending" had been used; In that situation, what was required to be seen was whether any appeal was filed prior to submission of declaration and whether it was pending on the date of submission of declaration; 

5) [TS-5527-HC-1999(Kerala)-O] - Pendency of revision in the context of Section 95(c) KVSS,1998 – HC : To read the word "revision" in Section 95(c) of the Scheme as a revision which is maintainable or in which relief could be granted will be amounting to re-writing the Section – HC directs authorities to pass orders on declaration according to law, notes that the revision petitions were filed on October 28, 1998 and declarations were filed by petitioner on November 2, 1998; Thus, it cannot be said that the revision petitions were not pending on the date of filing of the declarations; HC observes that, the object of the scheme appears to be to put an end to litigation and also to see that the tax is collected from the assessee;

6) [TS-5933-HC-2019(Madras)-O] – HC : Authorities have power to revoke certificate granted under Voluntary Disclosure of Income Scheme – HC dismisses petitioner writ challenging Commissioner withdraw the certificate issued u/s 68(2) of VDIS invoking Section 21 of General Clauses Act, 1897; HC holds that, the petitioners has misrepresented before the authority to avail the benefits under the Scheme VDIS by suppressing the declaration made in the returns filed prior to the notification of VDIS; The petitioner cannot avail the benefits under VDIS, having contravened Section 64(2)(1), and as the notice under Section 148 of the Act was issued on 22.06.1997, which is prior to the notification of VDIS, wherein which the petitioner declared the gifts from NRI amounting to Rs.6,00,000/- and since there is prohibition under VDIS, that when the amount so declared is already disclosed by the assessee in the return of income filed before the Scheme came into operation, the same cannot be stated once again by way of revised return of income;

7) [TS-6168-HC-2016(Gujarat)-O] : Settlement Commission application withdrawal permitted, once tax-arrears settled under KVSS - HC quashes order passed by the Income-Tax Settlement Commission (‘ITSC’) rejecting assessee’s (an individual) application for withdrawal of settlement-application in view of certificate issued under Kar Vivad Samadhan Scheme,1998 (‘KVSS’, an amnesty scheme) for AYs 1987-88 to 1989-90; ITSC had rejected assessee's request for withdrawal on the ground that settlement application once made cannot be withdrawn; On noting that assessee’s declaration under the KVSS was accepted by the designated authority therein and assessee had also paid tax arrears under the amnesty-scheme (as per the directives of the designated authority) HC remarks that “it is difficult to comprehend how the Settlement Commission would continue to enjoy the jurisdiction over the same subject matter”; Observes that Sec.95 of the KVSS stipulated that amnesty-scheme’s provisions would be ousted where the ITSC had passed an order u/s 245D(4), holds that in the absence of any such order passed by the ITSC, assessee’s right to make a declaration under the amnesty scheme was not extinguished;

Miscellaneous 

8) [TS-5095-HC-2018(Karnataka)-O] : Time limit for payment of 3rd installment of Income Disclosure Scheme, 2016 (IDS 2016) cannot be extended u/s. 119(2)(b) by seeking condonation of delay in payment - HC dismisses assessee’s writ petition; Holds that there is no justification or reason for invoking the extraordinary jurisdiction of the Court under Article 226 of the Constitution for interference in the matter of relaxation or extension of time limit as prayed for and therefore Revenue was justified in rejecting the said request of the petitioner; Follows SC decision in Hemalatha Gargya;

9) [TS-6178-HC-2017(Bombay)-O] - Condonation of delay - HC directs Departmental authorities to dispose of Assessee's application seeking condonation of delay in making payment of first instalment under Income Declaration Scheme of 2016 in accordance with CBDT Instruction No. 2/2017;

Note: In Parts 2 & 3 at Taxsutra Database Insight we will focus on other issues  pertaining to Amnesty scheme similar to 1) Delayed appeal 2) Eligible legal entities 3) Appeal against fee u/s 234E ...etc and more!

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