( 1 ) TWO short but interesting questions namely, (i) whether interest under Section 220 (2) of the income-tax Act, 1961 (for short the Act) forms part of "tax arrear" as defined in Section 87 (m) of the Kar Vivad Samadhan Scheme ("kvss" for short ) and (ii) if it does, whether the same could be demanded after issue of final certificate under Section 90 (2) of the KVSS, arise for consideration in the present case.

( 2 ) THE facts lie in a narrow compass. The Petitioner is a private limited company. For the assessment year 1988-89 it was assessed on a total income of Rs. 6,26,81,410. 00 and on the basis of this assessment, a tax demand of Rs. 3,61,98,513. 00 was created. A further sum ofrs. l,53,31,342. 00 was determined as payable on account of interest under Section 215 of the Act. The Petitioner challenged the levy of interest under Section 215 by filing an appeal before the Commissioner of Income-tax (Appeals) but was un sucessful. The Petitioner took the matter in further appeal to the Tribunal. While the appeal was pending, the Government of India introduced the KVSS, contained in Chapter IV of the Finance (No. 2) Act, 1998, with a view to provide a quick and volun- tary settlement of tax arrears outstanding as on 31st March, 1998. Initially the scheme was to be in operation upto 31st December, 1998 but subsequently it was extended for a further period of one month i. e. upto 31st January, 1999.

( 3 ) ON 2nd September, 1998 the Petitioner filed a declaration under the said Scheme in respect of interest charged under Section 215 of the Act, amounting to Rs. l,53,31,342. 00. In the said declaration, the tax arrear outstanding as on 31st March, 1998 towards interest under Section 215 was shown at Rs. l,35,53,483. 00 , which, according to the covering letter filed with the declaration, was arrived at after making adjustments for the amounts recovered/adjusted by the Department upto 31st March, 1998.

( 4 ) ON 21st October, 1998 a certificate of intimation was issued to the Petitioner undersection 90 (1) determining the amount payable by the Petitioner towards the full and final settlement of its tax arrears covered under the declaration and the Petitioner was directed to make payment of Rs,67,80,008. 00 on tax arrear of Rs. l,35,60,015. 00 representing the interest charged under Section 215 of the Act. On Petitioner s making payment of the said amount, a certificate in Form-3 for full and final settlement of tax arrears under Section 90 (2) read with Section 91 of the Finance (No. 2) Act, 1998 was issued to the Petitioner on 7th December, 1998 by the Designated Authority. The afore noted details were mentioned in the said certificate.

( 5 ) ON 17th February, 1999 the Petitioner received an order dated 10th February, 1999 calling upon the Petitioner to pay a further sum of Rs. 37,91,152. 00 within thirty days from the date of the order in respect of the said declaration. The said amount was determined to be payable on the interest under Section 220 (2), amounting to Rs. 75,82,304. 00 , Worked out till 31st March, 1998. Since the said order is under challenge in this Petition, for the sake of ready reference it is reproduced here under: "sub: Declaration under KVSS intimation under Section 90 (1) of the Finance (No. 2) Act, 1998 - amendment thereof information reg. Please refer to the above. An order u/s 90 (1) of the Finance (No. 2) Act, 1998, in Form 2a was passed in your case. vide order dated 21. 10. 1998 whereby tax arrears for the assessment year 1988-89 were determined at Rs. l,35,60,015. 00 comprising of penalty u/s 215. In accordance with Board s circular dated 5. 1. 1999 where the tax arrears comprising of only interest, interest u/s 220 (2) of the I. T. Act is to be worked out till 31. 3. 1998 and the declarant is entitled to waive of 50% there of. In your case interest u/s 220 (2) was not charged. Now interest u/s 220 (2) has been worked out till 31. 3. 1998 which comes to Rs. 75,82,304. 00 and accor