As Govt. of India aims to settle the unresolved issues with the 'Direct Tax Vivad se Vishwas Bill, 2020' [“The Scheme”], the Union Cabinet approved amendments to “The Scheme” with a view to increase its scope to cover litigations pending in revision, arbitration, DRP cases, etc.
The Finance Minister in her Budget speech while introducing "the Scheme" announced that, Taxpayers in “whose” case appeals are pending at any level can take the benefit from this scheme. However as per the Bill No. 29 of 2020 [“Vivad se Vishwas Bill, 2020”], introduced in LOK SABHA, in definition section 2(1)(a), the term used is "appellant" [which includes ‘The person or the income-tax authority or both’] while Sec. 2(1)(c) its "declarant" means a person who files declaration u/s 4.
At Taxsutra Database Insight Part 2, we bring to you rulings on certain key principles which examine whether “the scheme” applies to appeals by both the “Assessee” and the “Departmental”, effect of pendency of Departmental Appeal, power of AO to reopen assessment once tax arrears determined “the Scheme”, whether delay in payment of tax can be condoned or Amount Paid under Protest can be considered?
Amnesty Scheme - Effect of pendency of Assessee and Departmental appeal - Disputed tax and Tax arrears : Part 2
1) [TS-6047-HC-1998(Delhi)-O] - Effect of pendency of Departmental Appeal - HC: KVSS, 1998 applicable to both the Assessee’s and Departmental appeals – HC, upholding the constitutional validity of the ‘Kar Vivad Samadhan Scheme’ [“KVSS”] notes that, “once a liability to pay the tax was incurred and determined on or before 31st March, 1998, the assessee would be treated to be in arrears in spite of his having succeeded at one stage of litigation if the Revenue has chosen to continue with litigation and there is no reason why the benefit of the scheme should be denied to him”; States that to this extent, the scheme is discriminatory and violative of Art. 14 of the Constitution; all the Assessee`s litigating and in arrears belong to one class. Any attempt at carrying out further classes by reference to who is the prosecutor / appellant / applicant in the pending litigation is void as based on no intelligible differentia. It is arbitrary, irrational and evasive. It will have no rational relation to the object sought to be achieved by the Act. Explains that “On the other hand keeping them in one class would enable the twin objective of legislation being achieved (i) the reduction of litigation, and (ii) the realisation of revenue”
2) [TS-5457-HC-2008(Karnataka)-O] : Effect of pendency of Departmental Appeal - HC: Sec. 90 of the Finance (No. 2) Act, 1998 requires the designated authority [“DA”] to determine the amount payable by the declarant and grant a certificate setting forth the particulars of the tax arrears and the sum payable after such determination towards full and final settlement of tax arrears; HC holds, “once a liability to pay the tax was incurred and determined on or before 31st March, 1998, the assessee would be treated to be in arrears in spite of his having succeeded at one stage of the litigation if the Revenue has chose to continue with the litigation and there is no reason why the benefit of the scheme should be denied to him”; Relies on decision of AIFTP reported in [TS-6047-HC-1998(Delhi)-O], rejects revenue contention that, there ought to be an independent declaration insofar as the tax arrears that are subject-matter of the appeals by the Department; HC notes that, decision of the Delhi HC having struck down the proviso to s. 92, the Department insisting on its own hybrid procedure of requiring the assessee`s to file two declarations, one in respect of the appeals filed by the assessee`s and another in respect of the appeals by the Revenue; It was the duty of the “DA” while considering the declaration filed by the assessee to determine the tax arrears even with reference to any other amounts due from the assessee and which are not reflected in the declaration;
3) [TS-5247-HC-2012(Madras)-O] - HC : Once the Designated Authority passed an order determining the tax payable, the order thus determining the final sum payable by the assessee in respect of the tax arrears is conclusive; Holds that “It is so irrespective of whether the dispute raised by the Revenue in its appeal is included in its offer or not”; Followed [TS-5457-HC-2008(Karnataka)-O]
4) [TS-5668-HC-2008(GUJARAT)-O] - HC: Designated Authority cannot decide in the proceedings under Kar Vivad Samadhan Scheme [‘KVSS’] whether the revision application was barred by limitation or not, or whether the delay was required to be condoned or not; HC allows Assessees’s appeal holds that, “declaration made by the petitioner in relation to disputed amount of tax is required to be accepted”; Directs Designated Authority to issue fresh order under ‘KVSS’ by including the income-tax liability arising out of assessment for AY 1994-95;
5) [TS-18-SC-2002-O] – SC: AO not authorized to reopen assessment once tax arrears determined, paid and acknowledged under Kar Vivad Samadhan Scheme [“KVSS”] - SC holds that “the order to be made by the designated authority under the “KVSS”under section 90 of the Finance (No.2) Act, 1998 is a considered order which is intended to be conclusive in respect of tax arrears and sums payable after such determination towards full and final settlement of tax arrears; Also points out that “once the declarant makes payment of the amount so determined under section 90, the immunity under section 91 springs into effect”; Clarifies that “Upon such declaration being made, tax arrears being determined, paid and certificate issued under the “KVSS”, there is no jurisdiction for the AO to reopen the assessment by a notice u/s 143 of the Act”.
6) [TS-837-HC-2014(ANDHRA PRADESH)-O] – HC: Willingness to pay arrears only condition for Kar Vivad Samadhan Scheme [“KVSS”] application, extends benefit - HC allows assessee’s writ petition, extends benefit of “KVSS” providing for termination of appeal / revision proceedings on payment of 50% of tax arrears; CIT declined to extend Scheme benefit to assessee merely on the grounds that he had no power to waive interest liability u/s 234A/B/C imposed on assessee on assessment; HC holds that “question whether CIT had power to waive interest or whether assessee made out case for waiver, is ‘totally outside the purview of the “KVSS”’; Explains that the scope of scheme merely contemplates that if assessee is prepared to pay 50% of tax arrears, benefit must be extended, accordingly, directs CIT to extend benefit after ensuring payment of stipulated amount;
7) [TS-5035-SC-2002-O] - SC: Time schedule for payment of tax under VDIS is mandatory and cannot be extended – SC holds, that no extension could be granted beyond the period of three months as specified u/s 67(1) of Voluntary Disclosure of Income Scheme, 1997 [‘VDIS’]; Notes that, u/s 67(1) two conditions must be fulfilled (a) the payment of tax within three months from the date of the filing of the declaration (b) the payment of simple interest at the rate of two per cent for every month or part of a month, but proof of such payment must also be filed within the same period; The use of the word "shall" in a statute, ordinarily speaking, means that the statutory provision is mandatory; SC separately rejects Assessee submission to dilute the rigour of s. 67(2) on the basis of the ratio in Hindustan Steel Ltd, holds that there no question of imposition of penalty under the scheme; Explains that “What has been prescribed under s. 67(2) is merely the consequence of the failure to comply with s. 67(1), hence no question of importing the doctrine of mens rea or exercising any discretion contrary to the provisions of s. 67(2)”;
8) [TS-5021-SC-2002-O] - SC: The words "pending adjudication" cannot be read to exclude cases where the proceedings are still pending in appeal – SC holds, “restricting the benefit only to cases where the show cause notice is pending adjudication, would be unreasonable”; Explains that “A settlement by the main declarant (Company) under Kar Vivad Samadhan Scheme [“KVSS”] is to operate as full and final settlement in respect of all other persons on whom show cause notice was issued in respect of the same matter”; SC separately holds that, directors/officers would also not have been entitled to refund by virtue of s. 93 even if they have paid the amounts under protest;
9) [TS-5935-HC-2012(Rajasthan)-O] - HC : Cannot condone delay for non deposit of Tax within prescribed time under Voluntary Disclosure of Income Scheme, 1997 ('VDIS') while exercising powers of judicial review, dismisses writ; HC rejects assessee`s submissions that, what the authorities cannot do could yet be done by this Court in extraordinary writ jurisdiction. HC notes that, no legal right in the petitioners to make payment of the tax payable under ‘VDIS’ beyond the statutory time; and no case of infringement of any legal right is made out if delay in deposit; Follows SC ruling reported in [TS-5035-SC-2002-O] to hold that, the provisions remain strict and mandatory with no scope for any leniency or modulation;
10) [TS-5290-HC-2019(Bombay)-O] - HC: Denies credit of advance-tax, self-assessment tax under IDS; Disagrees with Delhi HC - Bombay HC denies granting credit of advance tax, self-assessment tax paid by assessee-individual [prior to filing of declaration under the Income Declaration Scheme, 2016 (IDS, 2016)] against discharge of assessee's liability to pay tax, surcharge and penalty under IDS Scheme; HC observes that the IDS is a complete code in itself in relation to the declaration of undisclosed income by the assessee, holds that, “Without there being any specific provision in the scheme granting benefit of tax voluntarily paid, or deposited as self assessed tax or by way of advance tax, a declarant under the scheme cannot claim set off of such tax against his liability to pay tax in terms of the provisions contained in the Scheme,”.
11) [TS-5010-HC-2004(Karnataka)-O] - Disputed tax and Tax arrears – HC : Protective assessment is in the nature of precautionary assessment and is not recognised in law – HC dismisses assessee’s appeal, holds “to avail to benefit of Kar Vivad Samadhan Scheme [‘KVSS’] there should be a factual tax arrears which could be demanded legally in terms of the Act”; HC notes that, protective assessment and protective demand are factually not found in the Act; Any demand in terms of protective demand cannot be legally enforceable like a regular assessment demand. In the case on hand, regular assessment also has been done; States that the authorities are right in holding against the petitioner by way of rejection of the petition;
Click Here to Read - Amnesty Scheme - Interpretation of the word "Admitted and Pending" - Part 1
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