IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN TUESDAY, THE 29TH SEPTEMBER 2009 / 7TH ASWINA 1931 OP.No. 24567 of 2000(Y) ------------------------------------ PETITIONER(S): ------------------------ 1. DR. K.M.NAWAZ, 2. DR.K.M.MEHABOOB, 3. DR.K.M.ASHIK AND 4. SMT. AMINA MOIDU, ALL ARE RESIDING AT C/O. MOIDU'S MEDICARE (P) LTD., INDIRA GANDHI ROAD, CALICUT - “SHADE” MALABAR CHRISTIAN COLLEGE, CROSS ROAD, CALICUT. BY ADV. SRI.ANIL K.NARENDRAN RESPONDENT(S): --------------------------- 1. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, CALICUT. 2. COMMISSIONER OF INCOME TAX (CENTRAL -I), DESIGNATED AUTHORITY, 108. UTHAMAR GANDHI SALAI, CHENNAI - 600 034. BY ADVS. MR.P.K.R.MENON,SR.COUNSEL, GOI(TAXES), SRI.GEORGE K. GEORGE, SC FOR IT THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 29/09/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Kss ORDER ON C.M.P.NO.41467/2000 IN O.P.NO.24567/2000 Y CLOSED 29/09/2009 SD/- S.SIRI JAGAN, JUDGE APPENDIX PETITIONER'S EXHIBITS: P1: COPY OF THE DECLARATION FILED BY THE FIRM M/S.WESTERN HOSPITAL AND NURSING HOME UNDER KAR VIVAD SAMADHAN SCHEME, 1998 DTD. 22/10/1998. P2: COPY OF THE FORM OF DECLARATION UNDER SEC.9 OF THE FINANCE (NO.2)ACT. 1998 FILED BY THE FIRST PETITIONER DTD. 23/10/1998. P3: COPY OF THE FORM OF DECLARATION UNDER SEC.89 OF THE FINANCE (NO.2) ACT, 1998 FILED BY THE SECOND PETITIONER DTD. 17/11/1998. P4: COPY OF THE FORM OF DECLARATION UNDER SEC.89 OF THE FINANCE (NO.2) ACT, 1998 FILED BY THE THIRD PETITIONER DTD. 29/10/1998. P5: COPY OF THE FORM OF DECLARATION UNDER SEC.89 OF THE FINANCE (NO.2) ACT, 1998 FILED BY THE FOURTH PETITIONER DTD.06/01/1999. P6: COPY OF THE ORDER U/S.155 OF THE I.T.ACT PASSED BY THE FIRST RESPONDENT ASSTMT.YEAR 1990-91 OF 1ST PETITIONER DTD.31/03/1998. P7: COPY OF THE ORDER U/S.155 OF THE I.T.ACT PASSED BY THE FIRST RESPONDENT ASSTMT.YEAR 1991-92 OF 1ST PETITIONER DTD.31/03/1998. P8: COPY OF THE ORDER U/S.155 OF THE I.T.ACT PASSED BY THE FIRST RESPONDENT ASSTMT.YEAR 1990-91 OF 2ND PETITIONER DTD.31/03/1998. P9: COPY OF THE ORDER U/S.155 OF THE I.T.ACT PASSED BY THE FIRST RESPONDENT ASSTMT.YEAR 1991-92 OF 2ND PETITIONER DTD.31/03/1998. P10: COPY OF THE ORDER U/S.155 OF THE I.T.ACT PASSED BY THE FIRST RESPONDENT ASSTMT.YEAR 1991-92 OF 3RD PETITIONER DTD.30/03/1998. P11: COPY OF THE ORDER U/S.155 OF THE I.T.ACT PASSED BY THE FIRST RESPONDENT ASSTMT.YEAR 1990-91 OF 4TH PETITIONER DTD.30/03/1998. Kss ..2/- ...2..... O.P.NO.24567/2000Y P12: COPY OF THE ORDER U/S.155 OF THE I.T.ACT PASSED BY THE FIRST RESPONDENT ASSTMT.YEAR 1991-92 OF 4TH PETITIONER DTD.30/03/1998. P13: COPY OF THE CERTIFICATE ISSUED TO THE FIRM M/S.WESTERN HOSPITAL AND NURSING HOME DTD. 17/03/1999. P14(A):COPY OF THE PETITION FILED BY THE 1ST PETITIONER BEFORE THE SECOND RESPONDENT DTD. 26/05/2000. P14(B):COPY OF THE PETITION FILED BY THE 1ST PETITIONER BEFORE THE SECOND RESPONDENT DTD. 26/05/2000. P14(C):COPY OF THE PETITION FILED BY THE 2ND PETITIONER BEFORE THE SECOND RESPONDENT DTD. 26/05/2000. P14(D):COPY OF THE PETITION FILED BY THE 2ND PETITIONER BEFORE THE SECOND RESPONDENT DTD. 26/05/2000. P14(E):COPY OF THE PETITION FILED BY THE 3RD PETITIONER BEFORE THE SECOND RESPONDENT DTD. 26/05/2000. P14(F):COPY OF THE PETITION FILED BY THE 4TH PETITIONER BEFORE THE SECOND RESPONDENT DTD. 26/05/2000. P14(G):COPY OF THE PETITION FILED BY THE 4TH PETITIONER BEFORE THE SECOND RESPONDENT DTD. 26/05/2000. P15(A):COPY OF THE ORDER OF THE SECOND RESPONDENT TO THE FIRST PETITIONER, CHENNAI DTD. 21/06/2000. P15(B):COPY OF THE ORDER OF THE SECOND RESPONDENT TO THE SECOND PETITIONER, CHENNAI DTD. 21/06/2000. P15(C):COPY OF THE ORDER OF THE SECOND RESPONDENT TO THE THIRD PETITIONER, CHENNAI DTD. 21/06/2000. P15(D):COPY OF THE ORDER OF THE SECOND RESPONDENT TO THE 4TH PETITIONER, CHENNAI DTD. 21/06/2000. P16: COPY OF THE PRESS RELEASE DTD. 17/12/1998. RESPONDENT'S EXHIBITS: N I L /TRUE COPY/ P.S.TO JUDGE Kss S.SIRI JAGAN, J. ================== O.P.No. 24567 of 2000 ================== Dated this the 29th day of September, 2009 J U D G M E N T In this original petition the petitioners are partners of a firm by name, “Western Hospital and Nursing Home”. By the Finance Act (No.2 of 1998), the Parliament brought in a Scheme, the Kar Vivad Samadhan Scheme 1998, as per which, the assessees submitting declarations in accordance with the Scheme, are permitted to pay tax at a specific rate fixed in Section 88 of the Act. Pursuant thereto, the firm filed declaration, Ext.P1, on 22.10.1998 and paid tax as per the the Scheme. Ext.P13 certificate was also issued to the firm in respect of payment of tax in accordance with the Scheme. Individual partners also filed Exts.P2, P3, P4 and P5 declarations on 23.10.1998, 17.11.1998, 29.10.1998 and 6.1.1999 respectively. They were also issued certificates. But unfortunately for the petitioners, although they were not liable to do so, they included their share income from the firm also for the purpose of declaration. But the Scheme did not contemplate payment of tax in respect of the share income of the partners, once the firm settles the dispute regarding tax by paying the percentage, fixed under Section 88, of the disputed income as tax. Subsequently, Ext.P16 clarification was issued by the Central Board of Direct Taxes, wherein it was clarified that partners of a registered firm, 2 under the provisions of the Scheme, are exempted from payment of tax further tax on their share income once the firm settles the dispute paying 35 per cent of the disputed income. By Ext.P16, those partners of a firm who had other income also who had filed declarations wherein the share income from the firm was also included for the purpose of declaration under the Scheme, were permitted to file revised declarations excluding such share income for the purpose of declaration under the Scheme. The petitioners came to know about Ext.P16 clarification only after the proceedings under the Scheme were completed by issue of certificates as envisaged under the Scheme. Thereafter, they filed Ext.P14 series of applications stating that such payment of tax under the Scheme on the share income of the petitioners in the firm was under a mistake and, therefore, the excess tax paid may be adjusted towards the tax dues of the petitioners. That was on 26.5.2000. However, by Ext.P15 series of orders dated 21.6.2000, the petitioners were informed that their applications were rejected on the ground that they had not filed revised declarations in accordance with Ext.P16 clarification dated 9.12.1998. The petitioners are challenging Ext.P15 series orders and seeking the following reliefs: “a) to issue a writ of certiorari or any other appropriate writ, order or direction to quash Exhibits P15 (series), b) to issue a writ of mandamus or any other appropriate writ, order 3 or direction directing the respondents herein to refund/adjust the tax as prayed in Exhibit P14 (series). c) to direct the respondents to adjust the excess payment towards the tax dues, if any, from the petitioners.” 2. The counsel for the petitioners submits that in so far as the Scheme did not contemplate inclusion of the share income from the firm in the individual declaration of the partners of the firm, the designated authority had a duty to consider the declarations in accordance with the provisions of the Scheme. According to him, once the designated authority found that the inclusion of the share income from the firm of the partners of the firm in their individual declaration was wrong, he had a duty to exclude that share income from the declaration for the purpose of issue of certificate. Having failed to do so, the respondents are liable to refund the excess tax paid by mistake by the petitioners is his contention. The counsel for the petitioners relies on two decisions in support of his contention that application for refund of tax paid under a mistake can be submitted within three years from the date when the mistake came to knowledge of the petitioners, viz, South India Corporation v. Asst. Commr. Of Salestax [1994 (1) KLT 937] and CORPORATION BANK v. SARASWATI ABHARANSALA AND ANOTHER [(2009) 1 SCC 540]. 3. The learned Standing Counsel for the Income Tax Department stoutly opposes the prayers of the petitioners. According 4 to him, Ext.P15 series of orders are perfectly valid and proper. He contends that once a certificate is issued under the Kar Vivad Samadhan Scheme considering the declarations filed by the parties, unless the parties file revised declarations in respect of inclusion of any income which ought not to have been included under a mistake, before the certificate was issued as contemplated under Ext.P16, the petitioners cannot as of right claim refund of tax on the ground that tax was paid under a mistake. 4. I have considered the rival contentions in detail. 5. At the outset I note that the respondents do not dispute the fact that as per the Scheme, the individual partners of the firm are not liable to include their share income from the firm in their separate individual declarations. That being so, the inclusion of the share income in the petitioners' separate declarations was clearly not necessary and therefore, payment of tax by the petitioners in respect of their share income from the firm was in excess of the requirement of the scheme. Ext.P16 permitted individual partners to file revised declarations excluding the share income from the firm for the purpose of their individual declaration. Ext.P16 does not state that such revised declaration has to be before the issue of the certificate as contemplated under the Scheme. That being so, I do not think that the petitioners are disabled from filing a declaration even now, in so far as 5 the petitioners were diligently prosecuting the matter before this Court. In the above circumstances, this original petition is disposed of with the following directions: The petitioners shall file revised declarations as contemplated under Ext.P16 in respect of their share income from the firm within a period of one month from the date of receipt of a certified copy of this judgment. If the same is so filed, the 2nd respondent shall consider the same in terms of Ext.P16 notwithstanding the fact that the same has been filed after issue of the certificate. I make it clear that I am inclined to permit the petitioners to file such declarations at this point of time, only because the petitioners had approached this Court within a reasonable time after passing of Ext.P15 series orders and this original petition was pending in this Court all this while. On filing of such revised declarations, the 2nd respondent shall consider and pass orders on the same in accordance with the Scheme and Ext.P16 clarification, within a further period of one month from the date of receipt of the declarations. Sd/- sdk+ S.SIRI JAGAN, JUDGE ///True copy/// P.A. to Judge 6 S.SIRI JAGAN, J. ================== O.P.No. 24567 of 2000-Y ================== J U D G M E N T 29th September, 2009