Shri Vijay Kumar Jain, Development Officer, 2 Ranbir Marg, Patiala v. Commissioner Of Income Tax, Patiala

Gurbax SinghIN THE HIGH COURT OF PUNJAB AND HARYANA AT 2017.08.16 10:44CHANDIGARH CWP No. 3875 of 1999 Date of decision: 07.07.2017 Shri Vijay Kumar Jain, Development Officer, 2 Ranbir Marg, Patiala Vs. ……Petitioner Commissioner of Income Tax, Patiala, C/o Income Tax Office, Patiala …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE AMIT RAWAL Present: Mr. Divya Suri, Advocate for the petitioner. Mr. Z.S.Klar, Senior Standing Counsel for the revenue. Ajay Kumar Mittal,J. ll.The petitioner prays for quashing the order dated 22.2.1999,Annexure P.1 in respect of demand of261,319/- raised by withdrawal ofinterest under Section 244A of the Income Tax Act, 1961 (in short, “theAct’) granted to him on refund of tax in pursuance of the appeal decidedin his favour by the Commissioner of Income Tax (Appeals) Patiala|CIT(A)] whereas the appeal of the department is pending before theIncome Tax Appellate Tribunal (in short, “the Tribunal’). Further prayerhas been made for a direction to the respondent to issue a certificateunder Section 90(2) of the Kar Vivad Samadhan Scheme, 1998 (in short, “the KVSS, 1998”) by recovery of the amount ofy1,70,733/- onlyagainst a total demand of22,33,052/- out of which<1,70,733/- is due as”per the scheme which has already been paid by the petitioner. A directionhas also been sought to the respondent to keep all actions under thescheme pending and not to make any declaration invalid under KVSS1998 till the disposal of the present writ petition. oOA tew tacts relevant for the decision of the controversyinvolved as narrated in the petition may be noticed. The petitioner retiredaS Development Officer of the Life Insurance Corporation of India inJune 1994. He was a regular income tax assessee. The assessments weremade for various years regularly whereas for the assessment years 1988-89 to 1995-96, the assessments were made by the assessing authorityraising various demands after making additions/adjustments in thedeclared income on account of expenses incurred in respect of incentivebonus and additional conveyance allowance received by the petitioner.The income was enhanced against which the petitioner went in appealbefore the Commissioner of Income Tax (Appeals) |CIT(A)] who hadgiven necessary relief and decided the said issues in favour of thepetitioner and in pursuance of the same for the assessment years inquestion, the tax amount recovered by the income tax department onaccount of the said additions alongwith interest under Section 244A ofthe Act was refunded. Against the said orders, the income tax departmentfiled an appeal before the Tribunal for each assessment year which ispending for adjudication till date. According to the petitioner, after thefiling of the appeal by the department before the Tribunal, there was notax due from him on account of the said assessments. In the meantime,KVSS 1998 was introduced by the Government of India through Finance (No.2) Act, 1998 passed by the Parliament to remain valid from 1.9.1998to 31.12.1998 and later on extended upto 31.1.1999 wherein any disputepending in respect of direct or indirect taxes before an appellate authoritywhether by the assessee or by the department could be resolved by askingpayment of tax on disputed income at a prescribed rate of tax. Initially,this scheme was not made available to cases where the appeals had beenfiled by the department and it could only be availed by the assessees whowere in appeals. After a decision by the Delhi High Court in|All IndiaFederation of Tax Practitioners vs. Union ofIndia,(1999) 236 ITR 1(Del.), one could make declaration for settlement of its dues in full andfinal settlement even in those cases where appeals had been filed by thedepartment and hence the petitioner opted to file the declaration under the,said scheme though the department was in appeal so that his tax disputes|could be settled. According to the petitioner, under the said scheme, thetax was to be paid in respect of the disputed income at the rate of 30% ofthe total disputed income and no interest or penalty levied was to be paidwhich was waived and if the amount due was on account of interestcharged or penalty levied, only then in such cases, 50% of the total.amount was to be paid. The other condition was that the said demands_should have heen raised before 31.3.1998 and it was calculated on the|basis of amount due as on the date of making the declaration. Theassessee also opted to pay the tax even though the appeal had been.decided in his favour. The petitioner also filed declaration before theIncome Tax Commissioner, Patiala in respect of the departmental appealand as per section 90(1) of KVSS 1998 within 60 days of the receipt ofthe declaration under section 8&8 of the said scheme determined theamount of tax payable under the scheme by order Annexure P.1 dated 22.2.1999. The petitioner was to pay it within 30 days of the passing ofthe order upto 23.3.1999 and certificate of full and final settlement wasfinally to be issued by the authority. The respondent in the case of thepetitioner issued a certificate showing amount payable at<2,32,052/-.which includes the amount of.z61,319/- as payable under the scheme onaccount of interest withdrawn which had already been allowed undersection 244A of the Act as refund. According to the petitioner, under thescheme, it was only the tax in respect of the disputed income which wasto be paid at the rate of 30% and no other amount if due on or before31.3.1998 shall be payable and hence raising of the demand bywithdrawal of interest given on refund under Section 244-A of the Act inconsequence of appeal effect to the extent of|z61319/- had not been|decided in accordance with KVSS 1998. The said amount was neitherlegally created nor payable under Section 244A(3) of the Act and,therefore, it could not be taken or raised under the KVSS_ scheme. Thelast date of making the payment was 23/24[th]ot March 1999 and hence|the petitioner had no other alternative except to approach this courtthrough the present writ petition. The petitioner has made the payment of<1,70,733/- which was the tax due in accordance with the said scheme|and for the balance amount, the petitioner has filed the instant writpetition. 3A written statement has been filed on behalf of therespondent by Commissioner of Income Tax, Patiala wherein it has beeninter alia stated that the stand taken by the department on merits of thecontroversy regarding taxability of incentive bonus stands accepted bythis court in a similar case reported in (1999) 235 ITR 679 in the case ofB.M.Parmar Development Officer, Life Insurance Corporation ofIndia| 3A written statement has been filed on behalf of therespondent by Commissioner of Income Tax, Patiala wherein it has beeninter alia stated that the stand taken by the department on merits of thecontroversy regarding taxability of incentive bonus stands accepted bythis court in a similar case reported in (1999) 235 ITR 679 in the case ofB.M.Parmar Development Officer, Life Insurance Corporation ofIndia| vs. CIT. As regards the KVSS 1998, it has been submitted that thescheme was not initially made available to the cases where appeals hadbeen filed by the department and it was limited to those cases againstwhich the assessee had preferred an appeal. However, on receipt ofdecision of the Delhi High Court in the case ofAll India Federation ofTax practitioners’|case (supra), which was accepted by the department,|the scheme of tax arrear was modified to cover tax, penalty or interestunder dispute in departmental appeal and the pending departmentalappeals were made eligible to be covered under the Scheme provided theoriginal demand had been determined on or before 31.3.1998. In suchcases, the entire income under dispute constituted disputed income andthe tax payable was required to be worked out on that income at theprescribed percentage. Since the petitioner wanted to settle the dispute bypaying taxes on the income disputed in second appeal, the interest givenunder section J44A of the Act was not to be allowed on such taxesrefunded to him while giving effect to the first appellate order andtherefore, it was rightly withdrawn. 4The primary question that arises for consideration is whetherthe interest given under Section 244A of the Act at the time of refund inpursuance to order of CIT(A), was required to be paid back by thepetitioner in case his application under KVSS, 1998 for settlement ofdispute was accepted. 5We have heard learned counsel for the parties and do notfind any merit in the writ petition. 6 |Admittedly, the petitioner filed a declaration under Section88 of the Finance (No.2) Act, 1998 which was received on 28.01.1999 inthe office of the Designated Authority. In exercise of the powers conferred by Sub Section | of Section 90 of the Finance (No.2) Act,1998, the Designated Authority after consideration of the relevantmaterial determined the following amount payable by the petitionertowards the full and final setthement of its tax arrears covered by theabove said declaration under the KVSS, 1998:- The petitioner was directed to make the payment of sum payable within 30 days from the date of the certificate. J |It would be advantageous to refer to certain relevantprovisions of the KVSS, 1998 Scheme. The definition of “tax arrear”under the KVSS, 1998 as enumerated therein reads as under:- “In relation to direct tax enactment, the amount of tax,penalty or interest determined on or before the 31 day of March, 1998 under that enactment in respect of anassessment year as modified in consequence of giving effectto an appellate order but remaining unpaid on the date ofdeclaration.” Section 88 of the KVSS, 1998 reads as under:- Settlement of tax payableC “88. Subject to the provisions of this Scheme, where anyperson makes on or after the I day of September, 1998 buton or before the 31 day of December, 1998, a declaration tothe designated authority in accordance with the provisions ofSection 89 in respect of tax arrear, then, notwithstandinganything contained in any direct tax enactment or indirecttax enactment or any other provision of any law for the timebeing in force, the amount payable under this Scheme by thedeclarant shall be determined at the rates specifiedhereunder, namely:- (a) where the tax arrear is payable under the Income TaxAct, 1961 (43 of 1961)- |.In the case of a declarant, being a company ora firm,at the rate of thirty-five per cent of the disputed|income.|at the rate of thirty-five per cent of the disputed|income.| “88. Subject to the provisions of this Scheme, where anyperson makes on or after the I day of September, 1998 buton or before the 31 day of December, 1998, a declaration tothe designated authority in accordance with the provisions ofSection 89 in respect of tax arrear, then, notwithstandinganything contained in any direct tax enactment or indirecttax enactment or any other provision of any law for the timebeing in force, the amount payable under this Scheme by thedeclarant shall be determined at the rates specifiedhereunder, namely:- (a) where the tax arrear is payable under the Income TaxAct, 1961 (43 of 1961)- |.In the case of a declarant, being a company ora firm,at the rate of thirty-five per cent of the disputed|income.|at the rate of thirty-five per cent of the disputed|income.| {IIn the case of a declarant, being a person other than a|company or a firm, at the rate of thirty per cent of the}dispute income.company or a firm, at the rate of thirty per cent of the}dispute income. IL.In the case where tax arrear includes income-tax,|interest payable or penalty levied, at the rate of thirty-five per cent of the disputed income for the persons|referred to in clause(i) or thirty per cent of the|disputed income for the persons referred to in|clause(i1);interest payable or penalty levied, at the rate of thirty-five per cent of the disputed income for the persons|referred to in clause(i) or thirty per cent of the|disputed income for the persons referred to in|clause(i1); LV|In the case where tax arrear comprises only interest|payable or penalty levied, at the rate of fifty per cent|of the tax arrear.payable or penalty levied, at the rate of fifty per cent|of the tax arrear. VvWhere the tax arrear includes the tax, interest or'penalty determined in any assessment on the basis ofSearch and seizure proceedings under section 132 or|penalty determined in any assessment on the basis ofSearch and seizure proceedings under section 132 or| Section 132A of the Income-Tax Act-| - 0In the case of a declaration, being a company or a|firm, at the rate of forty-five per cent of the|disputed income,| -G0In the case of a declarant, being a person other|than a company or a firm, at the rate of forty per|cent of the disputed income.” than a company or a firm, at the rate of forty per|cent of the disputed income.” Section 90 of the KVSS, 1998 reads as under:- Time and manner of payment of tax arrear. 90. (1) Within sixty days from the date of receipt of thedeclaration under section 88, the designated authority shall,by order, determine the amount payable by the declarant inaccordance with the provisions of this Scheme and grant acertificate in such form as may be prescribed to the declarantSetting forth therein the particulars of the tax arrear and thesum payable after such determination towards full and finalsettlement of tax arrears: Providedthat where any material particulars furnished in|the declaration is found to be false by the designatedauthority at any Stage, it shall be presumed as if thedeclaration was never made and all the consequences underthe direct tax enactment or indirect tax enactment underwhich the proceedings against the declaratnt are or werepending shall be deemed to have been revived. | Provided furtherthat the designated authority may amendthe certificate for reasons to be recorded in writing. (2) the declarant shall pay the sum determined by thedesignated authority within thirty days of the passing of anorder by the designated authority and intimate the fact ofsuch payment to the designated authority along with proofthereof and the designated authority shall thereupon issuethe certificate to the declarant. A perusal of above provisions shows that “tax arrears” Provided furtherthat the designated authority may amendthe certificate for reasons to be recorded in writing. (2) the declarant shall pay the sum determined by thedesignated authority within thirty days of the passing of anorder by the designated authority and intimate the fact ofsuch payment to the designated authority along with proofthereof and the designated authority shall thereupon issuethe certificate to the declarant. A perusal of above provisions shows that “tax arrears” means the amount of tax, penalty or interest determined on or before 31 of March 1998, under the enactment in respect of an assessment year asmodified in consequence of giving effect to an appellate order butremaining unpaid on the date of declaration. As per Section 88 of theKVSS 1998, any person who makes on or after first day of September,1998 but on or before 31 day of December, 1998 a declaration to the|designated authority in accordance with the provisions of Section 89 inrespect of tax arrear then notwithstanding anything contained in anydirect tax enactment or indirect tax enactment or any other provision ofany law for the time being in force, the amount payable under theScheme by the declarant shall be determined at the rates specified thereunder. Section 90 of the KVSS, 1998 provides that within sixty daysfrom the date of the declaration under Section 88, the designatedauthority shall determine the amount payable in accordance with theScheme and grant a certificate. 9 |Adverting to the facts of the present case, the petitionermade a declaration for the assessment years 1988-89 to 1995-96 beforethe respondent vide application dated 28.01.1999. The scheme inquestion was initially not available to the cases where appeals had beenfiled by the department but after the decision rendered by the Delhi HighCourt in.All India Federation of Tax practitioners’case (Supra) thescope of tax arrear was modified to cover tax, penalty or interest under,dispute in departmental appeal and the pending departmental appeals,were thus made eligible to be covered under the scheme in questionprovided the original demand had been determined on or before31.03.1998. On receipt of declaration by the petitioner, the respondentissued a certificate of intimation under Section 90 (1) of the Finance (No.2) Act, 1998 by considering the income under dispute in secondappeal as disputed income. The amount of tax was worked out on thatincome at the prescribed rate. On that basis, the tax payable under theKVSS 1998 was determined atan1,70,733/- payable by the applicant-assessee in respect of assessment years 1988-89 to 1995-96. Besides, theinterest oT|y61,319/- allowed under Section 244A of the Act on accountof order of CIT(A), in pursuance to which the refund had been allowed to.the assessee, was withdrawn. | (No.2) Act, 1998 by considering the income under dispute in secondappeal as disputed income. The amount of tax was worked out on thatincome at the prescribed rate. On that basis, the tax payable under theKVSS 1998 was determined atan1,70,733/- payable by the applicant-assessee in respect of assessment years 1988-89 to 1995-96. Besides, theinterest oT|y61,319/- allowed under Section 244A of the Act on accountof order of CIT(A), in pursuance to which the refund had been allowed to.the assessee, was withdrawn. | 10. |In those cases, where the department was in appeal, the taxarrears were to be calculated by taking the amount which was subject.matter of appeal before the appellate authority. However, wherever,refund of tax in pursuance to any order favourable to the assesseealongwith the interest under Section 244A of the Act had been made, theassessee could not take benefit of the interest and retain the same. It|could not be successfully pleaded by the assessee that he was legallyentitled to keep the interest amount. In other words, the entire income.under dispute in appeal constituted the disputed income on which tax was.to be calculated and any interest allowed under Section 244-A of the Act.could not be allowed to be retained by the assessee. Further, since no tax.arrear was pending against the petitioner on the date of filing thedeclaration and no such demand was created on that date, no separateorder under Section 244-A(3) of the Act was required to be issued.Further in B.M. Parmar’scase (supra), it has been held by this Court thatthe incentive bonus is assessable under the head “salary” and not underhead “profits and gains of business or profession”. The upshot of theabove discussion is that the petitioner is not entitled to claim benefit ofinterest ofy61,319/- paid to him under Section 244A of the Act while| availing the benefit of KVSS 1998 and thus it has been rightly concludedby the respondent-authority that the interest cannot be refunded whichwas withdrawn. The demand raised by the respondent by including thesaid amount of.y61,319/- thus cannot be faulted. ll.Learned counsel for the petitioner has not been able to pointout any error in the view taken by the respondent authority.Consequently, tinding no merit in the petition, the same is herebydismissed. July 07, 2017|Whether speaking/reasoned Whether reportable (Ajay Kumar Mittal)Judge (Amit Rawal)Judge Yes.Yes