P. Venkatarama Reddi, J. - (1.) THE petitioner questions the legality of two similar orders passed by the respondent on February 26, 1999, rejecting the declarations filed by the petitioner under the provisions of the Kar Vivad Samadhan Scheme (hereinafter referred to as "the Scheme"), which was introduced by Chapter IV of the Finance Act (Finance (No. 2) Act of 1998), and seeks an order to direct the respondent to "consider" the declarations filed by the petitioner under Section 88 of the said Act on January 30, 1999. Three reasons are given for rejection of the declarations : "1. There do not exist any arrears on March 31, 1998, as seen from the facts stated above. 2. The appeal said to be pending is on levy of interest, which has been waived. Hence, there is no dispute. 3. The arrear that is sought to be settled relates to the current demand raised on December 31, 1998, which is entirely different from the arrear demand."
(2.) THE declarations relate to the income assessed for the years 1989-90 and 1992-93. The assessments of the petitioners for the aforementioned years were made under Section 143(3) of the Income-tax Act. The assessee-peti-tioner preferred appeals. The Commissioner of Income-tax (Appeals) by his orders dated July 51, 1997, and September 30, 1997, partly allowed the appeals, by giving partial relief in respect of unexplained investment in the co-ownership property of Raju Investments and also setting aside the addition in regard to unexplained investment in shares in one case and gold and jewellery in another case. For giving effect to the appellate order, modification orders were passed on September 30, 1997, and November 17, 1997, recomputing the income. The tax payable thereon was specified at Rs. 4,82,727 and Rs. 6,56,042 respectively. Thereafter, the competent authority granted waiver of interest payable-under Sections 234A, 234B and 234C by his order dated October 31, 1997. In order to give effect to that order, the Assessing Officer passed consequential orders on January 20, 1998. For the year 1989-90, the balance tax payable was shown as Rs. 3,25,401. This tax was paid in full on March 27,1998. For the year 1992-95, the refundable amount was arrived at Rs. 4,65,289. Questioning the order of the appellate authority in not granting full relief on the aforementioned items and upholding the levy of interest, the petitioner preferred appeals to the Income-tax Appellate Tribunal in the meanwhile. The appeals in so far as the interest is concerned, have become infructuous, as it was waived during the pendency of appeal. We are told that the appeals are still pending in the Tribunal, but that has no bearing on the present case inasmuch as the tax on the item disputed in the appeal was paid well before the crucial date, i.e., before the date of filing the declaration as noted above. While so, on December 31, 1998, the Deputy Commissioner of Income-tax, Central Circle III, Hyderabad, made fresh assessments under Section 143(3) read with Section 251 of the Act in order to carry out the directions of the appellate authority. Practically, those orders were based on a concession made by the petitioner agreeing to the additions. It may be mentioned that in the fresh assessment order dated December 31, 1998, for the year 1992-93, the assessing authority added with the consent of the asses-see, a sum of Rs. 2,80,786 towards the income from unexplained investment in Raju Investments, which according to the Assessing Officer was missed in the consequential order passed on November 17, 1997. As a result of fresh assessments made on December 31, 1998, the tax liability was worked out as Rs. 7,27,991 for 1989-90 and Rs. 13,38,040 for the year 1992-93. The balance tax payable was shown as Rs. 16,28,515 for the year 1989-90 and Rs. 22,05,925 for the year 1992-93 and the same was demanded.' Out of that, the interest component for the year 1989-90 was Rs. 15.02 lakhs and Rs. 14.42 lakhs for the year 1992-93. In the impugned order, it is stated that there is no proof of filing appeal against the assessment orders passed on December 31, 1998. However, it is seen from the material papers filed by the petitioner's counsel that appeals were in fact filed on February 4, 1999, i.e., four days after the declaration was filed only disputing the levy of interest under Sections 234A, 234B and 234C. It is further seen from the record that the appellate authority allowed the appeals on March 24, 1999, i.e., subsequent to the impugned order, directing the deletion of interest which was on the earlier occasion waived by the Director-General, Income-tax, Bangalore.
(3.) IN the declaration filed for the year 1989-90, the tax arrear on the date of filing the declaration was shown as Rs. 1,26,889 which is also the figure reflected in the fresh assessment order dated December 31, 1998, after excluding the interest under Sections 234A, 234B and 234C. The disputed income relatable to the tax arrear was calculated at Rs, 2,41,693 on which the petitioner offered to pay a tax of Rs. 96,677 under the scheme. Coming to the declaration for the year 1992-93, the tax arrear was shown as Rs. 5,42,174 on the date of making the declaration and the corresponding disputed income was calculated at Rs. 9,68,168. On this, the petitioner offered to pay the tax of Rs. 3,87,267 under the scheme. On these facts, the question is whether the petitioner can avail of the benefit of the scheme and whether the reasons given by the first respondent while rejecting the declaration are correct in law ? This in turn raises two questions : Whether on the date of filing the declaration (i) there was "tax arrear" ; (ii) there was an appeal in respect of such tax arrear. For resolving the issues, naturally, we must take stock of the relevant provisions.;