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Direct Taxes
Supreme Court
B. V. Jhaveri
Advocate
1. Kar Vivad Samadhan Scheme –
Liability to pay interest on arrears of tax arises only after determination by
designated authority
Shatrusailya
Digvijaysingh Jadeja vs. CIT [277 ITR 449 (SC)]
In respect of the
assessment years 1984-85 to 1991-92 the assessee was liable to pay tax under
assessment orders passed under the Income-tax Act, 1961, and the Wealth-tax Act,
1957. Being aggrieved by the assessment orders, the assessee preferred appeals
to the Commissioner (Appeals). The appeals were however dismissed in 1992 and
1993 as the assessee had failed to pre-deposit the self-assessed tax. After the
introduction of the Kar Vivad Samadhan Scheme the assessee filed appeals and
revisions on December 28/29, 1998, along with applications for condonation of
delay, and applied for settlement of tax dues under the Scheme by making the
requisite declarations. The Designated Authority rejected the declarations of
the assessee in relation to the revision applications.
On a writ petition
preferred by the assessee the High Court held that the fact that the revision
petitions were not filed within the period of limitation did not detract from
the fact that the proceedings were pending and the Designated Authority had to
accept the declarations. It was also held that the assessee has to pay interest
on the amount of tax payable under section 90 of Finance (No. 2) Act, 1998,
since the assessee had retained amounts otherwise payable under the scheme. The
assessee preferred an appeal to the Supreme Court against the direction of the
High Court for payment of interest.
The Supreme Court
set aside the direction of the High Court for payment of interest by the
assessee on the ground that 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.
2. Kar Vivad Samadhan Scheme –
Declaration to be considered even if revision petition filed after limitation
but with an application for condonation of delay
CIT vs.
Shatrusailya Digvijaysingh Jadeja [277 ITR 435 (SC)]
In respect of the assessment years 1984-85 to
1991-92 the assessee was liable to pay tax as per assessment orders passed under
the Income-tax Act, 1961, and the Wealth-tax Act, 1957. Being aggrieved by the
assessment orders, the assessee preferred appeals to the Commissioner (Appeals).
The appeals were however dismissed in 1992 and 1993 as the assessee had failed
to pre-deposit the self-assessed tax. After the introduction of the Kar Vivad
Samadhan Scheme the assessee filed appeals and revisions on December 28/29,
1998, along with applications for condonation of delay, and applied for
settlement of tax dues under the Scheme by making the requisite declarations.
The Designated Authority rejected the declarations of the assessee in relation
to the revision applications. On a writ petition preferred by the assessee the
High Court held that “pending” in section 95(i)(c) of the Finance (No. 2) Act,
1998, in relation to revision proceedings meant factually pending and the fact
that the revision petitions were not filed within the period of limitation did
not detract from the fact that the proceedings were pending and the Designated
Authority had to accept the declarations. The High Court also directed that the
assessee was to pay interest on the tax dues.
Being aggrieved, the Department preferred
appeals before the Supreme Court wherein it contended that the revisions did not
come within the meaning of the word “pendency” in terms of section 95(i)(c) of
the Scheme to get the benefit of it because of the following reasons:
1. The revisions
were not pending on September 1, 1998 when the Scheme came into force as the
revisions were filed in November and December, 1998, along with applications for
condoning of delay to create artificial pendency of litigation.
2. The revisions
filed by the assessee were not bona fide as the appeals under section 246 stood
dismissed in the year 1992-93 for failure to pre-deposit self-assessed tax.
3. The revisions
were filed u/s. 264 before the Commissioner of Income-tax after a long delay and
they were rightly dismissed by him subsequently.
4. The Department
had in fact resorted to execution proceedings and a part of the arrears was also
realized through the auction sale of the lands of the assessee and, therefore,
there was no bona fide pendency of litigation on the date when the assessee
filed his declarations under the Scheme.
On behalf of the assessee it was submitted that
the order of the Designated Authority was bad in law in rejecting the
declaration filed by the assessee covered by the revisions without waiting for
the Commissioner to exercise his authority to condone the delay under the
proviso to section 264(1) of the Act. It was also submitted that no reason has
been given by the Department for rejecting one set of declarations concerning
revisions under section 264 while accepting declarations concerning appeals
under section 246 of the Income-tax Act, though in both the cases, applications
for condonation of delay were filed and pending.
The Supreme Court observed that the object of
the Scheme was to make an offer by the Government to settle tax arrears locked
in litigation at a substantial discount. It provided that any tax arrears could
be settled by declaring them and paying the prescribed amount of tax arrears,
and it offered benefits and immunities from penalty and prosecution. In several
matters, the Government found that large number of cases were pending at the
recovery stage and, therefore, the Government came out with the said Scheme
under which it was able to unlock the frozen assets and recover the tax arrears.
Dismissing the Departmental appeal the Supreme
Court upheld the decision of the Gujarat High Court in holding that the
declarations filed by the assessee u/s. 88 of the scheme were competent and that
the High Court was right in directing the Designated Authority to determine the
amount payable u/s. 90(1) of the scheme. Their Lordships further held that
(a) Under section
95(i)(c) of the Kar Vivad Samadhan Scheme differences were obliterated between
appeals revisions and references.
(b) The object
behind section 95(i)(c) in putting on par appeals, references and revisions was
to put an end to litigation in various forms and at various stages under the
Income-tax Act and Wealth-tax Act and, therefore, the rulings on the scope of
appeals and revisions under the Income-tax Act or on Voluntary Disclosure
Scheme, will not apply to this case.
(c) In Raja Kulkarni
vs. State of Bombay (AIR 1954 SC 73) the Supreme Court laid down that when a
section contemplates pendency of an appeal, what is required for its application
is that an appeal should be pending and in such a case there is no need to
introduce the qualification that it should be valid or competent. Whether an
appeal is valid or competent is a question entirely for the appellate court
before whom the appeal is filed to decide and this determination is possible
only after appeal is heard but there is nothing to prevent a party from filing
an appeal which may ultimately be found to be incompetent, for example, when it
is held to be barred by limitation. From the mere fact that such an appeal is
held to be unmaintainable on any ground whatsoever, it does not follow that
there was no appeal pending before the Court.
(d) In the case of
Tirupati Balaji Developers Pvt. Ltd. vs. State of Bihar (2004 5 SCC 1) it has
been held that an appeal does not seize to be an appeal though irregular and
incompetent.
3. Whether
under section 3(2) of the Benami Transaction (Prohibition) Act, 1988 property
purchased in name of an unmarried daughter is for her benefit, would only be a
presumption, but presumption can be rebutted by person who is alleging to be
real owner of property by production of evidence or other materials before court
– Held, Yes
G. Mahalingappa vs. G.M. Savitha [147 Taxman 583
(SC)]
In this case the suit property was purchased by
appellant in the name of respondent, his daughter by a Registered Deed dated
24th August, 1970 when she was 7 years old. Subsequently, after her marriage,
the relationships between them became strained. For declaration of title and
recovery of possession of the said property the respondent filed a suit on 5th
July, 1984 before the trial court on the ground that the said property stood in
her name and was purchased for her benefit and had a security for her marriage
and therefore she was entitled to decree for declaration and possession of the
said property.
The Trial Court and subsequently the Appellate
Court on consideration of all the materials including oral and documentary
evidence and on a sound reasoning after considering the pleadings of the parties
came to concurrent finding of fact that purchase of the suit property by the
appellant in the name of respondent was benami in nature and therefore, the suit
filed by the respondent was dismissed.
Aggrieved by the aforesaid judgments the
respondent filed second appeal before the High Court wherein the concurrent
decisions of the Appellate Court as well as the Trial Court were set aside and
decreed the suit by holding that since the appellant had already executed a Will
bequeathing his property to the respondent and two other sons which would amply
show that the intention of the appellant to purchase the suit property in the
name of the respondent was to benefit the respondent.
On appeal
before the Supreme Court the following two questions were raised for
consideration:
1. Whether a property purchased in
name of an unmarried daughter, is for her benefit would only be a presumption,
and such presumption can be rebutted by person who is alleging to be real owner
of property by production of evidence or other materials before court?
2. As the suit was filed before coming
into force of Benami Transaction (Prohibition) Act, 1988 and the said Act could
not have any retrospective operation, whether the appellant was entitled to
raise plea of benami, in view of section 4(2), in written statement and to show
and prove that he was real owner of the said suit property and that respondent
was only his benamidar?
Their Lordships
observed that the transaction in question was registered on 24th August, 1970.
The suit was filed on 5-7-1984 which was long before coming into force of the
Act. It was an admitted position that the written statement in the suit taking
plea of benami was also filed by the appellant long before the Act had come into
force. Therefore, it was not a case where section 4(2) would have a limited
operation in the pending suit after section 4(2) had come into operation as held
by the Supreme Court. It was true that the judgment of the trial court was
delivered after the Act had come into force but that could not fetter the right
of the appellant to take the plea of benami in his defence. Since the Act could
not have any retrospective operation in the facts and circumstances of the
instant case, the appellant was entitled to raise the plea of benami, even after
coming into force of the Act, in the written statement and to show and prove
that he was the real owner of the suit property and that the respondent was only
his benamidar.
Their Lordships
further observed that the Trial Court as well as the Appellate Court
concurrently found that although the suit property was purchased in the name of
the respondent but the same was purchased for the interest of the appellant and
therefore even if the presumption under section 3(2) of the Act arose because of
purchase of the suit property by the father (in this case appellant) in the name
of his daughter (in this case respondent), that presumption got rebutted as the
appellant had successfully succeeded by production of cogent evidence to prove
that the suit property was purchased in the benami of the respondent for his own
benefit.
In respect of
concurrent findings of fact their Lordships held as under:
“As
held herein earlier the High Court had set aside the concurrent findings of fact
not on consideration of the evidence adduced by the parties but set aside the
concurrent findings of fact on the basis of findings contrary to the evidence on
record and without considering the findings of fact arrived at by the appellate
court and the trial court. From the judgment of the High Court we further find
that the concurrent findings of fact were set aside not on consideration of the
findings of fact arrived at by the courts below but only on the basis of the
arguments of the learned Advocate of the respondent. This was also not
permissible to the High Court in the Second Appeal to come to a contrary
findings of its own only on the basis of the arguments of the learned counsel
for the respondent without considering the findings of the trial court as well
as the appellate court. [See Smt. Gangajal Kunwar vs. Sarju Pandey [2002] 9 SCC
735]. It is equally settled that High Court in Second Appeal is not entitled to
interfere with the concurrent findings of fact arrived at by the courts below
until and unless it is found that the concurrent findings of fact were perverse
and not based on sound reasoning. We ourselves considered the evidence on record
as well as the findings of fact arrived at by the two courts below. From such
consideration we do not find that the concurrent findings of fact arrived at by
the appellate court as well as the trial court were either perverse or without
any reason or based on non-consideration of important piece of evidence or
admission of some of the parties. We are therefore of the view that the High
Court was not justified in interfering with the concurrent findings of fact
arrived at by the appellate court as well as the trial court which findings were
rendered on consideration of the pleadings as well as the material (oral and
documentary) evidence on record."
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