Wp/6238/1999 Of Feno Foams Pvt. Ltd v. The Commissioner Of Income Tax

HON'BLE SRI JUSTICE G.CHANDRAIAH& HON’BLE SRI JUSTICE CHALLA KODANDA RAMW.P. No. 6238 of 1999 DATE: 13.02.2014 Between: Feno Foams Pvt. Ltd. .. Petitioner And The Commissioner of Income-tax and another .. Respondents O R D E R:- (per Hon’ble Sri Justice Challa Kodanda Ram) This writ petition is filed questioning the order dated –26.02.1999 passed by the 1[st]respondent Commissioner of Income-tax who is the designatedauthority under the Kar Vivad Samadhan Scheme, 1998(hereafter referred to as “K.V.S.S.”) intimating thepetitioner - assessee that the declarations filed by theassessee were rejected. The brief facts of the case are set out as below: The petitioner is a Private Limited Company. On31.03.1993, it was assessed to gift tax by the assessingofficer for the assessment year 1989-90 and demanded topay gift tax of Rs.26,048/- and interest of Rs.18,200/-. Being aggrieved by the assessment order, the petitionerpreferred an appeal before the Commissioner of Gift Tax( A p p e a l s - I I ) , Hyderabad through authorizedrepresentative, M/s. M. Anandam & Company CharteredAccountants. As per the averments made in the affidavit,though initially, appeal was addressed to theCommissioner of Gift Tax (Appeals-II), but as theauthorized representative was informed that jurisdiction ofthe appellate authority had undergone a change, the address in the covering letter dated 14.07.1993 of theappeal appeared to have been changed to DeputyCommissioner of Gift Tax (Appeals-II), Hyderabad byadding the word “Deputy” before the words“Commissioner of Gift Tax (Appeals-II)”. The appealpapers were received by the authorities concerned on14.07.1993 and for some reason or the other the appealswere pending as on 31.03.1998. The Finance (No.2) Act, 1998 introduced a Schemecalled Kar Vivad Samadhan Scheme, 1998. Broadly, theScheme makes an offer by the Government for settling taxarrears locked in litigation subject to the provisionscontained in Chapter IV of the Finance Act. The petitionerbeing eligible under the KVSS made a declaration on29.12.1998 under Sections 88/89 of the Finance Act inForm 1(A) to the first respondent who is the designatedauthority under the K.V.S.S. The declaration made bythe petitioner was to settle the tax dues in respect of thepending gift tax appeal. As per the provisions of theKVSS, the petitioner would have to make payment of theoutstanding tax of Rs.26,048/-. Thereafter, the petitionerreceived a letter dated 26.02.1999 from the firstrespondent indicating that since there was no valid appealfiled by the petitioner before the appropriate appellateauthority, the petitioner was not entitled to make adeclaration under the K.V.S.S. and the declaration underSection 89 of the Finance (No.2) Act, 1998 is never deemed to have been made. It is submitted that the letterof the first respondent rejecting the KVSS declaration filedby the petitioner is arbitrary, unjust and illegal. The letterof the first respondent does not disclose any reasonswhatsoever why the appeal filed by the petitioner is notvalid. The petitioner filed the appeal within the time limit of30 days prescribed under the Gift Tax Act. A counter affidavit is filed on behalf of the 1[st] respondent wherein there is no denial of the fact ofreceipt of the appeal through the covering letter dated14.07.1993. However, it is sought to be contended thatinasmuch as there is no Deputy Commissioner of Gift Tax(Appeals-II) in relation to the companies, the appealalleged to have been filed by the petitioner was not filedbefore the competent authority in the eye of law and theappeal addressed to Deputy Commissioner can never betreated as an appeal. It was further contended, as therewas no valid appeal pending as on the crucial date i.e.31.03.1993 for the purpose of considering the declarationfiled under the KVSS, the impugned order rejecting thedeclaration is proper and justified. A counter affidavit is filed on behalf of the 1[st] respondent wherein there is no denial of the fact ofreceipt of the appeal through the covering letter dated14.07.1993. However, it is sought to be contended thatinasmuch as there is no Deputy Commissioner of Gift Tax(Appeals-II) in relation to the companies, the appealalleged to have been filed by the petitioner was not filedbefore the competent authority in the eye of law and theappeal addressed to Deputy Commissioner can never betreated as an appeal. It was further contended, as therewas no valid appeal pending as on the crucial date i.e.31.03.1993 for the purpose of considering the declarationfiled under the KVSS, the impugned order rejecting thedeclaration is proper and justified. We have heard the learned counsel for both theparties and perused the material placed on record. In the facts and circumstances of the case, it cannotbe said that there was no appeal pending before theDepartment inasmuch as there is no categorical denial ofthe fact that the petitioner filed the appeal before the Department though the same has been addressed to theDeputy Commissioner of Income Tax (Appeals-II). Wemay not loose sight of the fact that the appeal was filed asfar back as on 14.07.1993 and for one reason or the otherthe same was not disposed of. Assuming that the appealfiled by the petitioner was addressed to a wrong officernothing prevented the Department from intimating theassessee to return the papers to enable them to file thesame before the appropriate authority or in the alternativemaking over the appeal papers to the competent authorityin the hierarchy. This exercise having not been done bythe Department and the petitioner having never beeninformed of its appeal not being accepted on the technicalground that the same was addressed to the DeputyCommissioner of Income-tax (Appeals-II), it is not open forthe Department to turn round and say that the appeal wasnot filed before the competent authority. Having regard tothe facts of this case, we are satisfied that there was nolapse on the part of the petitioner in filing the declaration,and in our opinion, the authorities ought to haveconsidered the declaration filed by the petitioner under theKVSS on merits. It is to be taken note of that at the time of admissionof the writ petition, the petitioner sought leave of this Courtto deposit the tax arrears in terms of the Scheme. Now, itis submitted that the tax arrears have been deposited. In the above view of the matter, this is a fit case to set aside the order dated 26.02.1999 passed by the 1[st]respondent – Commissioner of Income-tax. Accordingly, the writ petition is allowed setting aside the order dated 26.02.1999 of the 1[st] respondent anddirecting him to process the declaration filed by thepetitioner under the KVSS. It is made clear that assubmitted by the petitioner if tax arrears are deposited, the1[st] respondent, while passing orders under the K.V.S.S.,shall give credit to the amount deposited. No order as tocosts. _________________ G. CHANDRAIAH, J 13.02.2014 bcj ______________________ CHALLA KODANDA RAM,J