IMPORTANT POINT
As appellant s case formally fulfilled the criteria for being considered under Kar Vivad Samadhan Scheme, 1998 their declarations should be considered by CIT in accordance with Ch. IV of Finance Act, 1998.

Headnote:Kar Vivad Samadhan Scheme 1998 -Appellant s declaration under-Declaration for settlement related to tax arrears determined before 31-3-1998 but remained unpaid on date of declaration-Finance Act, 1998-Ch. IV Sections 87(m), 88, 89, 95-Rejected by CIT(A) and High Court on ground that there were no tax arrears as the demand had been conceded to and interest had been directed to be waived by DGIT-Whether correct? (No)-Appeals allowed.
Held : In our opinion, both the CIT(A) as well as the High Court have proceeded upon an interpretation of the phrase tax arrears de hors the definition under Section 87(m) as quoted above. In this case, there was a determination of the amount taxed by the original assessment order on 31.3.1995 i.e. before 31.3.1998. The determination was modified by the orders dated 17.11.1997 and 31.12.1998 pursuant to the CIT(A) s order. The determination on 31.12.1998 was not a fresh assessment for the purposes of the scheme but the modification of the original determination by the assessment order dated 29.3.1996. It is not in dispute that the modified demand was not paid by the appellant on the date when the declaration was filed. Whether the modified demand is as a result of concession or otherwise is not a relevant consideration for the purposes of Sec. 87(m). The section itself makes no such distinction between a conceded demand and any other for the purposes of the scheme. Section 87(f) appears to fortify the position by the definition of Disputed tax as "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". The word "determined" is not qualified by the process by which the determination is made. However, not all "tax arrears" under S. 87(m) are entitled to the benefit of the scheme. If no appeal etc. is pending in respect of the tax arrears, the benefit of the scheme is not available under Section 95(1) (c). If an appeal etc. is pending, it is not for the designated authority to question the possible outcome of the appeals, nor for the High Court to hold that the appeal was sham , "ineffective" or "infructuous" as it has. In any event, the High Court erred in holding that the entire demand raised on 31st December 1998 had been consented to by the appellant. In computing the demand on 31st December, 1998 the assessing officer included not only those items which had been remitted by the CIT (A) for re-determination, and which were conceded to by the appellant, but also the items which had been confirmed by the CIT(A) which had not been conceded and were the subject matter of appeal before the Tribunal. Thus the question of imposition of interest under Section 234A, 234B and 234C and the determination in respect of items (iii) and (vii) referred to above, even according to the High Courts view, was the subject matter of appeal. In the facts of the case therefore, it cannot be said that there was no appeal pending in respect of the tax arrears pertaining to those items within the meaning of Sec. 95(1)(c). Since the appellant s case formally fulfilled the criteria for being considered under Chapter IV of the Act, we set aside the order of the High Court. The order by which the declaration filed by the appellant under the scheme was rejected is quashed and the respondents are directed to consider the declaration filled by the appellant under Section 88 of the Act within a period of eight weeks from today. (Paras 18, 19 & 20)

JUDGMENT

Ruma Pal, J.-The grievance of the appellants in these three appeals arises out of an order passed by the Respondent No.1 rejecting the appellants declarations which the appellants had filed under the "Kar Vivad Samadhan Scheme, 1998" (referred to briefly as "the Scheme").

2. The scheme was introduced by and is contained in Chapter IV of the Finance (No.2) Act, 1998 (referred to hereafter as the Act). It was in force between 1st September, 1998 and 31st January 1999. Briefly, the scheme permits the settlement of tax arrears" as defined in Section 87(m) of the Act. The relevant extract of the definition reads:

"tax arrears" means,-

(i) in relation to direct tax enactment, the amount of tax, penalty or interest determined on or before 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;"

3. We have emphasised the dates which have a bearing on the case, namely, (a) 31.3.98 and (b) the date of declaration. In other words, only those tax arrears which had been determined before 31.3.98 and which remained unpaid as on the date of the declaration would qualify for settlement under the scheme. The determination under Section 87(m)(i) by definition, therefore, is that which was modified and not the modification itself. It is to be noted that there is no requirement under Section 87(m) for the modification to have been completed on or before 31.3.1998. To hold that the modification must also be completed by 31st March 1998 would mean, as rightly submitted by learned counsel for the appellants, that in respect of a determination on 31st March 1998, the appellate order and consequent modification would all have to be completed on the same date. That, given the language of section 87(m) would be practically impossible and, clearly could not have been intended.

4. The other sections which are pertinent are Sections 88, 89 and 95. Section 88 in so far as it is relevant provides:

88. Settlement of tax payable.-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".

Section 89 provides that:

89. Particulars to be furnished in declaration.-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".

5. Section 95 of the scheme excludes certain tax arrears from the benefit of the scheme. In this case we are concerned with the particular exclusion from the purview of the scheme which is contained in Section 95(i)(c) of the Act. It reads:

95. Scheme not to apply in certain cases.-The provisions of this scheme shall not apply-

(i) in respect of tax arrears under any direct tax enactment.

(a) xxx xxx xxx xxx

(b) xxx xxx xxx xxx

(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.

6. The use of the double negative as emphasised above, positively stated means that the benefit of the scheme will be available only when an appeal reference etc. are pending in respect of the tax arrears.

7. On an analysis of these provision, it is clear that a person could avail of the benefit of the s

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2002 Supreme(SC) 1240

IMPORTANT POINTAs appellant s case formally fulfilled the criteria for being considered under Kar Vivad Samadhan Scheme, 1998 their declarations should be considered by CIT in accordance with Ch. IV of Finance Act, 1998.

IMPORTANT POINT
As appellant s case formally fulfilled the criteria for being considered under Kar Vivad Samadhan Scheme, 1998 their declarations should be considered by CIT in accordance with Ch. IV of Finance Act, 1998.