SCA/1888/1999 1/8 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 1888 OF 1999 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE D.A.MEHTA AND HONOURABLE MR.JUSTICE H.B.ANTANI ================================================= ====================== 1 Whether Reporters of Local Papers may be allowed to see the judgment? NO 2 To be referred to the Reporter or not? NO 3 Whether Their Lordships wish to see the fair copy of the judgment? NO 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any Order made thereunder? NO 5 Whether it is to be circulated to the Civil Judge? NO ================================================= ====================== SHEELA ASHOKKUMAR GOENKA - PETITIONER VERSUS DESIGNATED AUTHORITY UNDER KAR VIVAD SAMADHAN SCHEME - RESPONDENT ================================================= ======================APPEARANCE : MS VAIBHAVI PARIKH WITH MR SN SOPARKAR, SENIOR ADVOCATE FOR THE PETITIONER. MRS MAUNA M BHATT FOR THE RESPONDENT. ================================================= ====================== CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA AND HONOURABLE MR.JUSTICE H.B.ANTANI DATE : 01/07/2008 ORAL JUDGMENT SCA/1888/1999 2/8 JUDGMENT (PER : HONOURABLE MR.JUSTICE D.A.MEHTA) 1. This petition has been preferred challenging communication / order dated 15-02-1999 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 29-01-1999 by stating that the application for settlement in respect of assessment cannot be entertained because the petitioner had filed the application under Section 264 of the Income Tax Act, 1961 (“the Act”) on 28-01-1999. The said Revision Application under Section 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. 2. The facts which are not in dispute are that for the Assessment Year 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 Assessing Officer, the petitioner agreed to withdraw the claim of loss. Accordingly, in the Assessment Order made on 31-03-1997, the claim of loss was disallowed by the Assessing Officer, and while doing so, the Assessing Officer held that the withdrawal of claim of loss by the petitioner could not be considered to be voluntary and bona fide. The Assessing Officer initiated penalty proceedings for concealment / furnishing of inaccurate particulars of income under Section 271 (1) (c) of the Act and levied penalty vide order 26-09-1997. SCA/1888/1999 3/8 JUDGMENT The petitioner preferred Revision Application under Section 264 of Act against the Assessment Order and such Revision Application was preferred on 23-01-1999 (the date, according to the respondent, being 28-01-1999). 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. 3. 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 KVVS. 4. 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, [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 Commissioner of Income Tax Vs. Shastrusailya Digvijaysingh Jadeja, [2005] 277 ITR 435 (SC). SCA/1888/1999 4/8 JUDGMENT 5. As against that, the learned Standing Counsel appearing on behalf of the respondent-authority submitted that in this case, the Assessment Order for the Assessment Year 1994-95 was passed on 31-03-1997 and the order was served on the assessee on 07-04-1997. Under Section 264, the assessee may file a revision petition under Section 264 within the time period ending on 07-04-1998 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 Section 264 on 28-01-1999 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 Section 264 i.e. to avail the benefit of the Scheme though she was not eligible for the same by filing a belated petition under Section 264 of the Act. That there was no sufficient cause which has prevented the assessee to file application under Section 264 within the prescribed period of time. If the assessee had any grievance against the Assessment Order of the Assessing Officer, she must have filed appeal or revision petition against the said order in F. Y. 1997- 98 on or after 07-04-1997, 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. Assistant Commissioner of Income Tax And Another, [2006] 281 ITR 40 (Ker) and Supreme Court decision in case of Computwel Systems P. Ltd. Vs. W. Hasan And Another, [2003] 260 ITR 86 (SC). SCA/1888/1999 5/8 JUDGMENT 6. In case of Commissioner of Income Tax Vs. Shastrusailya 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 section 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 Income-tax Act / Wealth–tax Act. Keeping in mind the above object, we have to examine section 95(i)(c) of the Scheme, which was different from appeals under section 246, revisions under section 264, appeals under section 260A etc. of the Income-tax Act and similar provisions under the Wealth-tax Act. Under the Income-tax 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 section 95 (i) (c) of the Scheme. The object behind section 95 (i) (c) in putting on par appeals, references and revisions was to put an end to litigation in various SCA/1888/1999 6/8 JUDGMENT forms and at various stages under the Income-tax Act / Wealth-tax Act and, therefore, the rulings on the scope of appeals and revisions under the Income-tax 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. v. State of Bihar reported in [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.” 7. 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 KVVS 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. SCA/1888/1999 7/8 JUDGMENT 8. 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 Commissioner of Income Tax Vs. Shastrusailya 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 And Another (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 Commissioner who had rejected the application for condonation of delay. 9. In the aforesaid set of facts and circumstances of the case, the communication dated 15-02-1999 insofar as it rejects the declaration filed by the petitioner in relation to Income Tax liability for Assessment Year 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 Assessment Year 1994-95. The petition is allowed accordingly. Rule made absolute. There shall be no order as to costs. [D. A. MEHTA, J.] [H. B. ANTANI, J.] SCA/1888/1999 8/8 JUDGMENT /shamnath