By TIOL News Service

MUMBAI, FEB 22, 2018: THE issue is - Whether it is a clear case of barking up the wrong tree if the Revenue records show no tax arrears against the assessee. YES is the answer.

Facts of the case:

The Assessee-company, had filed its return for the relevant AYs. During the assessment proceeding, the Assessee had filed a declaration u/s 88 of the KVSS scheme seeking to settle the tax arrears pending as on 31 March 1998 for the AYs 1983-84 to 1986-87. However, the same was rejected by the Revenue on the ground that there was no pending Appeal, Writ petition, Revision or Reference for the AYs or which the declaration was made. Consequently, the Assessee filed a Reference Application u/s 256(1) to the Tribunal in respect of an order dated 1 April 1998 of the Tribunal. Immediately thereafter, the Assessee filed second declaration u/s 88 of KVSS scheme for the AYs under dispute. This second declaration was rejected by the Revenue on the ground that there were no arrears and/or outstanding dues in respect of AYs 1983-84 to 1987-88 on the date the declaration was filed. The Assessee's application to the Court seeking interim reliefs in order to avail the benefit of the said scheme was also rejected. However, as the Assessee was insistent upon depositing the amount payable, the Court directed the Revenue to prepare a challan so as to enable such due amount under the scheme, if accepted. Accordingly, the Court made it clear that the payment by the Assessee was without prejudice to the rights and contentions of the Revenue and therefore, the Assessee was not entitled to the benefit under the scheme.

the High Court held that,

++ the submissions made by the Assessee has no factual basis in as much as no document/order, in case relating to refund and demand has been cited in support. In fact the order so challenged also does not proceed on such basis. The order dated 19 February 1999 passed by the Revenue rejecting the Assessee's declaration under the Samadhan Scheme, which stated that "... As per the provisions of sec 88 of Finance [No. 2] Act, 1998 the provisions of KVSS Scheme are applicable when the declaration as prescribed is made in accordance with the provisions of sec 89 in respect of a tax arrear determined on or before 31st March, 1998. In this case, the AO has reported that after giving effect to ITAT order dated 1.4.1998, no arrears are outstanding for the years so challenged. Therefore the Assessee's declaration filed under KVSS on 29.1.99 for A.Y.s 1983-84, 1984-85, 1985-86, 1986-87 and 1987-88 is not maintainable and hence filed ..." Therefore, it would be noticed that it is not a case of adjusting the refund due for the arrears of tax;

++ thereafter, the Revenue has filed an Affidavit in SurRejoinder wherein it has been specifically stated that sec 245, which provides any adjustment only after giving intimation in writing will have no application in the instant case, as once the assessment is set aside the demand will get remitted. Clearly, this Court finds that the Assessee has barked up the wrong tree;

++ thus, from the reading of the order so challenged, the Affidavit in Reply filed by the Revenue dated 28 April 1999 and Affidavit in SurRejoinder dated 26 July 1999, it is clear that on the date of filing of second declaration i.e. 29 January 1999, there were no arrears of tax payable by the Assessee to the Revenue. Thus, no fault can be found with the order so challenged dated 19 February 1999 rejecting the second declaration dated 29 January 1999;

++ however, the Assessee is entitled to the voluntarily deposited amount of Rs. 7,64,630/with the Revenue. This payment/deposit was consequent to what has been recorded in the order dated 30 March 1999.

(See 2018-TIOL-319-HC-MUM-IT)