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CASE NO.: Appeal (civil)  4403-4410 of 2003

PETITIONER: Shatrusailya Digvijaysingh Jadeja

RESPONDENT: Commissioner of Income Tax,Rajkot.                                       

DATE OF JUDGMENT: 01/09/2005

BENCH: B.P. SINGH & S.H. KAPADIA

JUDGMENT: J U D G M E N T

KAPADIA, J.

       These appeals by special leave have been filed against an  additional direction given by the Gujarat High Court vide  judgment dated 25.9.2002 holding the appellant liable to pay  interest under the Kar Vivad Samadhan Scheme, 1998 (for  short "the Scheme") on the tax arrears to be determined by the  designated authority (for short "DA").

       The appellant filed a writ petition in the Gujarat High  Court against the rejection of the declarations made by the  assessee under the said Scheme.

       By the impugned judgment, the High Court held that the  declarations filed by the appellant herein were competent as the  assessee’s revision applications were pending on the date of   filing of the declarations.  The department was, therefore,  directed to entertain the declarations, to determine the amount  payable and to grant a certificate under section 90(1).

       The decision of the Gujarat High Court dated 25.9.2002  was challenged by the department before this Court vide Civil  Appeal No.4411 of 2003.  By judgment pronounced today by  this Court, we have upheld the decision of the Gujarat High  Court in holding that the declarations filed by the assessee  under section 88 of the Scheme were competent and that the  High Court was right in directing the DA to determine the  amount payable under section 90(1) of the Scheme.

       In these appeals, the only grievance of the appellant is  that the additional direction given by the impugned judgment   making the appellant liable to pay interest on the amount  payable under section 90 was illegal and without authority of  law.

       Mr. M.L. Varma, learned senior counsel appearing on  behalf of the appellant submitted that under the Scheme, there  was no provision for charging interest in cases where the DA  wrongly refused to accept the declarations filed by the assessee  under section 88, as found by the High Court.  He contended  that the appellant cannot be faulted particularly when it is found  that the DA had erred in rejecting the declarations filed under  section 88; that by the impugned judgment, the DA was  required to undertake the assessment under section 90 and  determine the amount payable on the basis whereof the DA was  required to issue a certificate and on that basis the appellant had

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to pay the amount; that the appellant cannot be asked to pay  interest on the amount which was not ascertainable at the  relevant time for error on the part of the DA and in the  circumstances, the additional direction given by the High Court  should be cancelled.

       The Finance (No.2) Act, 1998 introduced a Scheme  called Kar Vivad Samadhan Scheme, 1998.  It was a recovery  scheme.  Under the Scheme, the tax arrear had to be  outstanding as on 31.3.1998.  Under section 87(f), "disputed  tax" was defined to mean total tax determined and payable  under the IT Act/Wealth Tax Act in respect of an assessment  year but which remained unpaid as on the date of making of the  declaration from which TDS, self-assessed tax, advanced tax  paid, if any, had to be deducted under section 90; the DA had to  determine the amount payable and for that purpose, he had to  determine the tax arrear as well as the disputed amount as  defined under section 87(f). Thus, the DA had to make an  assessment of tax arrears, disputed amount and amount payable  for each year of assessment; that appeal was barred against the  order under section 90 (see section 92); that such determination  had to be done within 60 days from the receipt of the  declaration and based thereon the DA had to issue a certificate.  In other words, till the completion of the aforestated exercise,  the appellant could not have paid the amount of tax and,  therefore, the appellant was not liable to pay interest as his  liability accrued only after the ascertainment of the amount  payable under section 90.  

For the aforestated reasons, on the facts of this case, we  set aside the additional direction given by the impugned  judgment directing the appellant to pay interest, particularly  when the department had wrongly rejected the declarations filed  under section 88.

Accordingly, these appeals are allowed, with no order as  to costs.