IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 2020 of 1999 For Approval and Signature: Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE K.A.PUJ ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- SHATRUSHAILYA DIGVIJAYSINGH JADEJA Versus COMMISSIONER OF INCOME TAX RAJKOT -------------------------------------------------------------- Appearance: 1. Special Civil Application No. 2020 of 1999 MR KH KAJI for Petitioner MR BB NAIK for Respondent -------------------------------------------------------------- CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE K.A.PUJ Date of decision: 25/09/2002 CAV JUDGEMENT (Per : MR.JUSTICE M.S.SHAH) In this petition under Article 226 of the Constitution, the petitioner has prayed for a writ, direction or order of this Court quashing and setting aside the orders dated 9.2.1999 passed by the respondent-Commissioner of Income-tax, Rajkot rejecting the petitioner's declarations under the Kar Vivad Samadhan Scheme for A.Ys. 1984-85 to 1991-92 and the petitioner has also prayed for a writ to direct the respondent to accept the petitioner's declarations under the said Scheme and to pass necessary orders under the said Scheme as required by law. 2. The petitioner is an individual who has landed properties and various sources of income assessable under the Income-tax Act, 1961 (hereinafter referred to as "the Act") as well as under the Wealth Tax Act. The petitioner was assessed to income-tax and wealth-tax for various years and on completion of the said assessments, certain tax liabilities arose. The petitioner was unable to discharge the said tax liabilities which also resulted in liability for interest and for penalty for non-payment of dues. The relevant years are A.Ys. 1984-85 to 1991-92. For some of these years, the petitioner had preferred First Appeals before the Commissioner of Income-tax (Appeals), but as the self-assessment tax under Section 140A was not paid, the appeals were not entertained by the said appellate authority in the years 1992 and 1993. For the other years, the petitioner had not preferred appeals. 3. The Government of India promulgated the Kar Vivad Samadhan Scheme (hereinafter referred to as "the Scheme" or "the KVSS") through the Finance (No. 2) Act, 1998 as contained in Sections 86 to 98 of the said Act. The Scheme came into force from 1st September 1998 and remained in force till 31st December 1998 and extended till 31st January 1999. 4. The petitioner filed revision applications under Section 264 of the Act before the Commissioner of Income-tax, Rajkot-respondent herein. All the said revision applications were filed in November/December, 1998. The relevant A.Ys. were A.Ys,1986-87 to 1991-92 for income-tax and A.Ys. 1984-85 and 1985-86 for wealth-tax. Since there was delay in filing the said revision applications, the petitioner applied for condonation of delay. After filing of the revision applications, the petitioner also applied for settlement of the tax dues under the aforesaid KVSS in respect of his liability for tax, interest and penalty under the Income-tax Act and also under the wealth-tax Act. The said applications were made on 28/29th December 1998. The details about the revision applications including the assessment year, the amount of tax involved, the amount of interest and penalty involved etc. are set out in a statement which is annexed to this judgment at Annexure "A". According to the petitioner, since the revision applications were filed before the respondent under Section 264 of the Act and the same were pending on the date of filing of declarations for the relevant years, the petitioner's case was covered by the provisions of the KVSS. 5. On 13/15th January, 1999, the petitioner also filed appeals before the Commissioner of Income-tax (Appeals) or before the Income-tax Appellate Tribunal after 1st September 1998 in respect of A.Ys. 1980-81, 1981-82, and 1988-89 to 1993-94 in respect of the assessments under the Income-tax Act as well as under the Wealth-tax Act. The details about the appeals including the assessment year, the amount of tax involved, the amount of interest and penalty involved etc. are set out in a statement which is annexed to this judgment at Annexure "B". After filing the appeals, in the last week of January 1999 the petitioner also filed declarations under the KVSS in respect of the assessment years which were the subject matter of those appeals. 6. By his orders dated 15/22/23rd February 1999 and 5th March 1999, the respondent acting as the Designated Authority under the KVSS accepted the petitioner's declarations which were filed in pending appeals in respect of the above assessment years, but by his orders dated 9.2.1999 rejected the declarations in the pending revision applications. The said orders dated 9.2.1999 are under challenge in the present petition. The petition was filed on 22.3.1999 and during pendency of the present petition, the respondent rejected the petitioner's applications for condonation of delay and on that basis dismissed the petitioner's revision applications on 31.3.2000. 7. The major contention of the petitioner in the present petition is that when the tax arrears in the petitioner's case were determined before 31st March 1998 and the petitioner's revision applications were pending on 28/29th December 1998 when the declarations under the KVSS were filed, the petitioner satisfied all the requisite conditions for availing the benefits under the KVSS and, therefore, the respondent acted illegally in rejecting the petitioner's declarations. The second major ground urged in the petition is that the petitioner had also preferred appeals for A.Y. 1980-81, 1981-82, 1993-94 and some of the earlier years under the Income-tax Act as well as under the Wealth-tax Act. Those appeals were also filed belatedly beyond the period of limitation. The respondent, however, accepted the petitioner's declarations in pending appeals which were time barred, but the respondent illegally rejected the petitioner's declarations in pending revision applications. 8. In response to the notice issued by this Court, affidavit in reply dated 15th April 1999 came to be filed by the Commissioner of Income-tax, Rajkot. In the affidavit in reply, a reference is made to the provisions of the KVSS as contained in the Finance (No. 2) Act, 1998 and thereafter the following averments and submissions are made :- "2.2 The two main conditions precedent for eligibility for the benefits of KVSS were :- (i) Existence of outstanding tax arrears as on 31.3.98; and (ii) Pendency of dispute in respect of the relevant assessment by way of an Appeal or Reference or Revision or Writ, etc. as on the date of Declaration. 2.3 The deponent submits that Income Tax arrears of about Rs.2.65 Crores and Wealth Tax arrears of about Rs.3.64 Crores (Total Rs.6.29 Crores) pertaining to various assessment years between A.Y. 1980-81 to 1993-94, were outstanding against the petitioner. 2.4 The Income Tax and Wealth Tax assessments relating to all the above assessment years had already become final, except for income-tax assessment for A.Y. 1981-82 and Wealth-tax assessment for A.Y. 1993-94 long before the commencement of the KVSS, either because the petitioner had not filed the appeals before the concerned appellate authorities, or because his appeals were dismissed due to non-payment of self assessment tax, etc. The time limit for filing of further appeal had also long since expired. 2.5 The deponent submits that recovery proceedings under the law were in progress since long, for realization of these tax arrears by auction of the immovable properties and a part of the total arrears against the petitioner had already been realized by auction of his properties. The outstanding tax arrears mentioned in paragraph 2.2 above, were after adjustment of an amount of Rs.2.88 Crores, realized on 6.11.96, from auction sale of some land plots at Jamnagar. In connection with these recovery proceedings, the petitioner had also filed a Civil Suit before the Civil Court, Jamnagar, and the matter relating to auction proceedings also came before the Hon'ble Gujarat High Court in Civil Revision Application No. 340 of 1994, decided on 28.11.95. The petitioner thereafter filed a Special Leave Petition before the Hon'ble Supreme Court. 2.6 The deponent therefore submits that, the income-tax and wealth-tax assessment proceedings for all the years from A.Ys. 1980-81 to 1993-94, except for income-tax assessment for A.Y. 1981-82 and wealth-tax assessment for A.Y. 1993-94, had become final, long before the commencement of the KVSS, and the matters relating to recovery by auction has reached upto the Hon'ble Supreme Court." It is, therefore, submitted that declarations under the KVSS filed immediately after belatedly filing revision applications after a number of years merely for taking the benefit of the KVSS cannot be treated as pending revisions as provided in Section 95(1)(c). Rejoinder affidavit has also been filed by the petitioner. 9. At the hearing of the petition, Mr KH Kaji, learned counsel for the petitioner-assessee has raised the following contentions:- 9.1 The petitioner fulfilled both the conditions precedent for eligibility of the benefits under the KVSS. The petitioner had outstanding tax arrears as on 31st March 1998. The revision applications filed by the petitioner for the relevant years were pending on the date when the declarations were filed within the time limit prescribed by Section 89. Hence, the petitioner was entitled to get benefit of the KVSS. Strong reliance has been placed on the decision of the Apex Court in Mela Ram & Sons vs. CIT, (1956) 29 ITR 607, SB Jain, ITO vs. Mahendra, (1972) 83 ITR 104 and Raja Kulkarni vs. State of Bombay, AIR 1954 SC 73 in support of the petitioner's contention that "pendency" of the revision applications was required to be "factual pendency" irrespective of the fact whether the delay in filing the revision applications was ultimately condoned or not. Strong reliance has also been placed on the decision of this Court in Sheth Enterprises (P) Ltd. vs. Commissioner of Customs, 154 CTR 195 and the decision of the Kerala High Court in Lukkose John Thoppil vs. CIT, (2000) 242 ITR 1 wherein the Courts had an occasion to consider the provisions of the KVSS in respect of a declaration under the KVSS filed in a pending appeal which was also time barred, and in respect of the declarations under the KVSS filed in a revision which was subsequently held to be not maintainable. 9.2 Moreover, it is submitted that the respondent in his capacity as the Designated Authority under the KVSS was not entitled to look into the merits of the delay condonation applications filed in the revision applications under Section 264, as the Designated Authority under the KVSS cannot exercise the powers of the revisional authority under Section 264 of the Income-tax/Section 25 of the Wealth-tax Act, even if the same incumbent happens to hold both the posts. In support of this contention, reliance is placed on the decision of this Court in Gufic Pharma Ltd. vs. JG Arora, (1999) 238 ITR 835. 10. On the other hand, Mr BB Naik, learned standing counsel appearing for the respondent-revenue has vehemently opposed the petition and made the following submissions:- 10.1 The object of the KVSS was to settle pending disputes. Hence, revisions applications had to be pending on 1st September 1998 when the KVSS came into force and also on the date of filing the declarations under the KVSS. Since the revision applications were not pending on 1st September 1998, the revision applications cannot be said to be "pending". Strong reliance has been placed on the decisions of the Karnataka High Court in Gopal Films vs. Dy.CIT, (1999) 237 ITR 655 and of the Calcutta High Court in Paresh Premji Rajda vs. CIT, (1999) 239 ITR 11 in support of his submission that the KVSS was introduced to resolve pending disputes and not to create artificial "pendency" of disputes for the purpose of giving benefits to the assessees whose assessments had become final long before coming into force of the KVSS. It is also submitted that when there was gross delay in filing of the revision applications, before condonation of said delay, the revision applications cannot be said to be pending. 10.2 There is considerable difference between an appeal and a revision. The remedy of filing an appeal is available to an assessee as a matter of right whereas the remedy of filing a revision application under Section 264 is a discretionary remedy and, therefore, acceptance of the petitioner's declarations under the KVSS in appeals cannot clinch issue in favour of the petitioner in the matter of declarations under the revision applications also. 10.3 The petitioner's appeals filed against the assessment orders for the relevant assessment years (Statement Annexure "A") were already dismissed in the years 1992-1993 for non payment of self assessment tax and, therefore, the so-called revision applications filed in December, 1998 were not bona fide. In fact, the recoveries were started earlier and the tax dues of Rs. 2.88 Crores were already recovered from the petitioner by auctioning the petitioner's lands. 11. Before dealing with the rival submissions, it is necessary to set out the relevant provisions of the KVSS as contained in the Finance (No. 2) Act, 1998. "Short title and commencement. 86.(1) This Scheme may be called the Kar Vivad Samadhan Scheme, 1998. (2) It shall come into force on the 1st day of September, 1998. Definitions 87. In this Scheme, unless the context otherwise requires,- (f) "disputed tax" means 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 section 88; (m) "tax arrears" means,- (i) in relation to direct tax enactment, the amount of tax, penalty or interest determined on or before the 31st day of March, 1998 under that enactment in respect of an assessment year as modified in consequence of giving effect to an appellate order but remaining unpaid on the date of declaration. (n) all other words and expressions used and not defined in this Scheme but defined in any direct tax enactment or indirect tax enactment shall have the meanings respectively assigned to them in those enactments. Settlement of tax payable 88. Subject to the provisions of this Scheme, where any person makes, on or after the 1st day of September, 1998 but on or before the 31st day of December, 1998, a declaration to the designated authority in accordance with the provisions of section 89 in respect of tax arrear, then, notwithstanding anything contained in any direct tax enactment or indirect tax enactment or any other provision of any law for the time being in force, the amount payable under this Scheme by the declarant shall be determined at the rates specified hereunder, namely :- (a) where the tax arrear is payable under the Income-tax Act, 1961 (43 of 1961),- (i) ... ... ... ... (ii) in the case of a declarant, being a person other than a Company or a firm, at the rate of thirty per cent of the disputed income; (iii) in the case where tax arrear includes income-tax, interest payable or penalty levied, at the rate of ... ... ... ... thirty per cent of the disputed income for the persons referred to in clause (ii); (iv) in the case where tax arrear comprises only interest payable or penalty levied, at the rate of fifty per cent of the tax arrear; (v) ... ... ... ... Particulars to be furnished in declaration 89. A declaration under section 88 shall be made to the designated authority and shall be in such form and shall be verified in such manner as may be prescribed. Time and manner of payment of tax arrear. 90.(1) Within sixty days from the date of receipt of the declaration under section 91, 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; ... ... ... ... ... ... ... ... ... ... (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-section (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-section (2) is passed: No refund of amount paid under the Scheme 93. Any amount paid in pursuance of a declaration made under section 88 shall not be refundable under any circumstances. Scheme not to apply in certain cases 95. The provisions of this Scheme shall not apply - (i) in respect of tax arrear under any direct tax enactment,- (a) ... ... ... ... (b) ... ... ... ... (c) to a case where no appeal or reference or writ petition is admitted and pending before any appellate authority or High Court or the Supreme Court on the date of filing of declaration or no application for revision is pending before the Commissioner on the date of filing declaration." (emphasis supplied) 12. The first requirement for entitlement to the benefit under the KVSS viz.- existence of tax arrear as on 31st March 1998 which remain unpaid on the date of filing the declaration under Section 88 - was complied with in the instant case. The serious controversy is about the second condition regarding "pendency" of revision applications in respect of the relevant assessment years as on the date of the declarations. The learned counsel for the assessee has relied on the decisions of the Apex Court interpreting the expression "pending appeals" in the cases under the Industrial Disputes Act and under the Indian Income-tax Act, 1922 and the Income-tax Act, 1961 and the decisions interpreting the expression "pending proceedings". 12.1 In Raja Kulkarni vs. State of Bombay, AIR 1954 SC 73, the controversy arose in the following context :- Section 24(b) of the Industrial Disputes Act, 1947 prohibits a workman, who is employed in any industrial establishment, from going on strike during the pendency of an appeal before the Appellate Tribunal. Section 25 renders, a strike and a lockout as illegal if it is declared, commenced or continued in contravention of the provisions of Section 24. Section 27 provides for penalty for contravention of Section 25 which may even lead to imprisonment for six months. The question before the Hon'ble Supreme Court was whether the appellants in that case rendered themselves liable to prosecution under Section 27, because they instigated the strike while the appeal was pending before the Appellate Tribunal. The contention raised on behalf of the appellant-workmen and the finding given by the Hon'ble Supreme Court are set out hereunder in Their Lordships' words :- "It is contended that Section 24 contemplates the pendency of a valid or competent appeal but, as no valid or competent appeal under the law was pending, the appellants committed no offence under Section 27. We are unable to accept this contention. Section 24 on a plain and normal construction requires for its application no more than that an appeal should be pending and there is nothing in the language to justify the introduction of the qualification that it should be valid or competent. Whether the appeal is valid or competent is a question entirely for the Appellate Court before whom the appeal is filed to determine, 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 or that it does not lie before that Court or is concluded by a finding of fact under Section 100 of the Civil Procedure Code. 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." 12.2 In Mela Ram & Sons vs. CIT, (1956) 29 ITR 607, the Apex Court held that an appeal presented out of time is as much an appeal as the one presented within time. The controversy in that case was in view of the provisions of Sections 30(2) and 31 of the Income-tax Act, 1922. Section 30(2) required filling of the appeal within a stipulated time with the power conferred on the first appellate authority (AAC) to condone the delay in filing the appeal beyond the stipulated time. Section 31 laid down the cases in which further appeal would lie. The question was if the first appellate authority (i.e. Appellate Assistant Commissioner) passes an order rejecting the application for condonation of delay, whether an appeal would lie under Section 31 against such an order. The contention raised before the Apex Court was - it is only after the Appellate Assistant Commissioner would condone the delay that the appeal before him would come into existence and, therefore, if he refuses to condone the delay in filing of the appeal before him, the order passed by him is not in appeal and, therefore, no further appeal would lie under Section 31 of the Act. In short, the contention was that there is no appeal unless it is presented in time and if presented beyond the time, unless the delay is excused. The Apex Court rejected the said contention and held that even where an appeal is filed beyond the prescribed period of limitation, it is also an appeal and, therefore, the order rejecting the application for condonation of delay is also an order passed in the appeal. 12.3. In S.B. Jain, ITO vs. Mahendra, (1972) 83 ITR 104, notice for reopening the assessment issued under Section 34(1)(a) of the Indian Income-tax Act, 1922 was pending when the Income-tax Act, 1961 came into force on 1st April 1962. Ultimately that notice came to be discharged by the authority after 1st April 1962 and thereafter the Income-tax Officer issued another notice for reopening the assessment under Section 148 of the Income-tax Act, 1961. The assessee invoked Section 297 of the 1961 Act which provided that notwithstanding the repeal of the 1922 Act where in respect of any assessment year any income chargeable to tax had escaped assessment within the meaning of that expression in Section 147 and no proceedings under Section 34 of the 1922 Act in respect of any such income are pending at the commencement of 1961 Act (1st April 1962), a notice under Section 148 may be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly. The assessee, therefore, contended that the proceedings under Section 34 of the 1922 Act were pending on 1st April 1962 and, therefore, the proceedings under Section 148 read with Section 297 of the 1961 Act could not have been commenced. The reply of the revenue was that since the notice under Section