The court emphasized that the determination made by the Commissioner of Income Tax must be in accordance with the provisions of the Kar Vivad Samadhan Scheme, 1998, and any clarification issued must not go against the scheme itself.

JUDGMENT :

1. Heard counsel for the parties.

2. The Commissioner of Income Tax on the basis of a declaration made by the petitioner u/s 80 of the Finance (No. 2) Act, 1998, has determined a sum of Rs. 75,000 u/s 90(1) of the aforesaid Act towards the full and final settlement of her tax arrear covered by the said declaration under the Kar Vivad Samadhan Scheme, 1998. The determination as made by the Commissioner is as follows :

Sl. No. Direct tax enactment Assessment year Tax arrear Amount payable

1. income tax 1993-94 Tax : Rs. Nil Rs. 75.000

Interest : Rs. 1,50,000

Penalty : Rs. Nil

3. The petitioner assails the validity of the said determination on the ground, inter alia, that it is contrary to Section 88 occurring in Chapter IV (Kar Vivad Samadhan Scheme, 1998) of the Finance (No. 2) Act, 1998.

4. Pursuant to our order dated June 30, 2000, standing counsel for the Department has filed two separate charts showing adjustment of payments against arrear dues as per the petitioner and that of the Department, On a perusal of both the charts, it would appear that the dispute is confined on the payment of Rs. 2,10,000, made by the petitioner on December 13, 1996.

5. The petitioner paid the aforesaid amount of Rs. 2,10,000 on December 13, 1996, as per the challan at annexure 6 for the assessment year 1993-94 by bifurcating the same as follows :

Rs.

"(1) income tax 1,23,832

(2) Interest 77,103

9,065

Total 2,10,000"

6. According to her, the disputed income relatable to disputed tax is Rs. 7,499 as per the following calculation :

Tax

Rs. Interest

Rs.

1. Demand as per order u/s 154 dated December 9, 1997 2,91,950 3,28,669

2. less : Payment of Rs. 1,00,000 on December 13, 1994, before filing of the return u/s 140A _ 1,00,000

2,91,950 2,28,669

3. Less : Payments made after filing of the return :

Date Amount (Rs.)

(a) 13-12-1996 2,10,000 (-) 1,23,832 86,168

(b) 28-12-1997 1,00,000 (-) 1,00,000 -

(c) 24-2-1998 60,619 (-) 60,619 -

3,70,619 7,499 1,42,501

7. From the chart showing adjustment of payments as per the Revenue, it may be seen that it intended to adjust the entire sum of Rs. 2,10,000 towards tax and any excess has to be set off against interest. In this connection, learned standing counsel relies on clarification No. 4 issued on the Kar Vivad Samadhan Scheme, 1998, which is as follows (see 1998 233 1TR (St.) 50

"Question No. 4 : Where the tax arrear comprises tax and interest, how will the part payment be first appropriated towards tax or interest ?

Answer : The part payments are appropriated first towards tax and then towards interest."

8. We have carefully considered the submission of counsel for parties and are of the opinion that the aforesaid clarification goes against the scheme itself. Since the present is a case of payment on the principal head as indicated in the challan at annexure 6, the question of reapportionment towards tax and interest contrary to the entries made in the challan is not acceptable.

9. For the aforesaid reasons, this writ petition is allowed. The opposite parties are directed to issue necessary certificate in accordance with law keeping in view the observation made above.

10. Urgent certified copy of the order be granted on proper application.