Kuber Builders v. Union of India, Through Chief Commissioner of Income-tax, Mumbai
[Citation -2020-LL-0626-15]

Citation 2020-LL-0626-15
Appellant Name Kuber Builders
Respondent Name Union of India, Through Chief Commissioner of Income-tax, Mumbai
Court HIGH COURT OF BOMBAY
Relevant Act Income-tax
Date of Order 26/06/2020
Assessment Year 1987-88
Judgment View Judgment
Keyword Tags kar vivad samadhan scheme • outstanding demand • outstanding amount • interest payable • stay of recovery • tax liability • demand notice • penalty
Bot Summary: Pending the hearing and final disposal of the Petition the Respondents, their officers and their employees be restrained from recovering any amount from the Petitioners by way of tax, interest or penalty 2 of 19 Ajay / Amberkar WP-2005-2001.doc under the Income Tax Act, 1961 in respect of A.Y. 1987-88 pursuant to the letter dated 19-7-91 at Exhibit A to the Petition or under any further order. The Petitioners do pay to the Respondents a sum of Rs.6,00,000/- in pursuance of the letter dated 19th July, 1991 being Exhibit Q to the Writ Petition No.2492/91 and Exhibit H to the Writ Petition No.2493/91 in the manner following :- a) Rs.50,000/- by a cheque, dt.15.8.1991. The petitioner filed two separate writ petitions viz; writ petition No.2492 of 1991 and writ petition No.2493 of 1991, inter alia, challenging the composite demand notice for the respective assessment years in this Court. 00 towards outstanding amount of the petitioner for the assessment year 1985 86 and 1987 88, the Kar Vivad Samadhan Scheme was not correctly complied in respect of the petitioner s case despite the petitioner making the appropriate application and the Revenue issuing the Certificate of Intimation dated 26.02.1999. In the declaration filed by the petitioner, according to the petitioner the total tax liability payable by the petitioner was Rs.2,74,316. We may state that the present writ petition was primarily filed as a sequel to earlier two writ petitions bearing writ petition No.2492 of 1991 and writ petition No.2493 of 1991, in which this Court was pleased to pass a common order on 13.08.1991, which reads thus :- 12 of 19 Ajay / Amberkar WP-2005-2001.doc 1. In view of the above, the petition is disposed of by issuing the following directions:- The Certificate of Intimation dated 26.02.1999 which confers liability on the petitioner towards payment of penalty and interest under the Act for the assessment year 1987-88 is set aside; 18 of 19 Ajay / Amberkar WP-2005-2001.doc The respondents / Revenue are directed to compute and intimate to the petitioner within a period of 8 weeks any outstanding penalty and interest, if payable, by the petitioner for the assessment year 1987-88 until the date of deposit by the petitioner of the amount of Rs.6,00,000.


Ajay (PA) / Amberkar (PS) WP-2005-2001.doc IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.2005 OF 2001 M/s. Kuber Builders registered partnership ) firm having office at 1112, Raheja Center, ) 214 Nariman Point, Mumbai 400 021. )...Petitioner Versus Union of India, Through Chief Commissioner ) of Income Tax, Aayaker Bhavan, ) Mumbai 400 021. )...Respondent . Mr. C.M. Kothari, Advocate for Petitioner. Mr. Suresh Kumar a/w. Ms. Sumandevi Yadav, Advocate for Respondent. . CORAM : UJJAL BHUYAN, & MILIND N. JADHAV, JJ. RESERVED ON : 05th March 2020. PRONOUNCED ON : 26th JUNE 2020. JUDGMENT (PER MILIND N. JADHAV, J.) :- 1. By this petition filed under Article 226 of Constitution of India, petitioner has prayed for following reliefs :- (a) This Hon ble Court be pleased to declare appropriation of Rs.3,11,206/- made by T.R.O. towards Tax demand of A. Y. 1987-88 out of 1 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc sum of Rs.6,00,000/- deposited with Respondent by Petitioner under said High Court order dated 13/8/91 as illegal; (b) This Hon ble court be pleased to declare that Petitioners are entitled for benefit of Kar Vivad Samadhan Scheme so far as they relate to Tax dispute / Tax arrears of A.Y.1987-88. (c) This Hon ble court be pleased to set aside and or quash Certificate of Intimation issued under Section 90 (1) of Finance (No.2) Act, 1998 under Kar Vivad Samadhan Scheme Rules 1998, dated 26/2/99. (d) This Hon ble Court be pleased to issue Writ of Mandamus or any other writ or order in nature of Mandamus against Respondents directing them to consider Petitioners case for Kar Vivad Samadhan Scheme and accord benefit there under as may be applicable to Petitioners. (e) This Hon ble court be pleased to direct Respondents to adjust illegally appropriated sum of Rs.3,11,206/- towards tax liability if any fixed under Kar Samadhan Scheme for tax dispute / arrears of A.Y. 1987-88. (f) Pending hearing and final disposal of Petition Respondents, their officers and their employees be restrained from recovering any amount from Petitioners by way of tax, interest or penalty 2 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc under Income Tax Act, 1961 in respect of A.Y. 1987-88 pursuant to letter dated 19-7-91 at Exhibit to Petition or under any further order. (g) Ad-interim order in terms of prayer (f) may be granted. (h) Such other and further relief as nature and circumstances of this case may require may be granted. 2. This Court after hearing matter on 17.10.2001 had passed following interim order :- 1. Heard. In matter of Writ Petition No.2490 of 1991, this court issued following order : 1. Petitioners do pay to Respondents sum of Rs.6,00,000/- (Rupees Six Lakhs) in pursuance of letter dated 19th July, 1991 being Exhibit Q to Writ Petition No.2492/91 and Exhibit H to Writ Petition No.2493/91 in manner following :- a) Rs.50,000/- by cheque, dt.15.8.1991. b) Rs.5,50,000/- within 8 weeks from today. 2. Respondents and / or Officers shall not take any proceedings for recovery of amounts mentioned in letter, dated 19.7.1991 for period of eight weeks; 3 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc 3. If said amount of Rs.6,00,000/- is paid within period stipulated above, demand notices in respect of amounts mentioned in letter dated 19th July, 1991 are stayed till hearing and final disposal of quantum Appeal for assessment year 1985 -86; 4. In default, Respondents are at liberty to enforce demand; 5. Petition to stand disposed off accordingly. 2. Mr. Kothari today submitted that these quantum appeals have been dismissed by Tribunal on 28 th February 2001. As per submissions advanced by Mr. Kothari, Respondents and their officers are recovering said amount of assessment tax from Petitioner and therefore Petitioner is making prayer for rule as well as rule nisi. 3. Mr. Chatterjee is also heard on behalf of Respondents. 4. We issue rule, returnable on 6 th November, 2001 with intimation to litigating parties that on that date this Writ Petition would be finally decided. Respondents are permitted to file affidavit in meanwhile. 5. Rule issued in terms of prayer clauses (a) and (b). Interim relief in terms of prayer clause (f). 4 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc 6. All concerned to act on ordinary copy of this order, duly authenticated by Court Associate. 3. At outset, it may be necessary to advert to relevant facts in present case to decide petition. 3.1 petitioner is registered partnership firm and is assessee. petitioner filed its income tax return for assessment year 1987 1988 showing total loss of Rs.28,890.00. Assistant Commissioner of Income Tax in assessment under Section 143 (3) of Income Tax Act, 1961 (hereinafter for brevity referred to as "the Act") disallowed aforesaid loss shown by petitioner and determined income of petitioner at Rs.7,83,760.00 and fixed tax liability at Rs.3,11,206.00 for assessment year 1987 88. petitioner filed appeal before Commissioner of Income Tax (Appeals) ("CIT (Appeals)" in short and hereinafter referred to as first Appellate authority ) which was partly allowed. Being aggrieved petitioner filed further appeal before Income Tax Appellate Tribunal (hereinafter referred to as Tribunal ). This second appeal before Tribunal came to be dismissed 5 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc subsequently on 28.02.2001 (as stated in petition). Hence, tax liability of petitioner for assessment year 1987-88 of Rs. 3,11,206.00 became final. 3.2. However during pendency of above second appeal before Tribunal, petitioner received demand notice dated 19.07.1991 from Tax Recovery Officer - 29 calling upon petitioner to make payment of composite tax demand for two years, viz. Rs.3,11,206.00 in respect of assessment year 1987 88 and Rs.9,33,020.00 in respect of assessment year 1985 86. 3.3. petitioner filed two separate writ petitions viz; writ petition No.2492 of 1991 (against tax demand for assessment year 1987 - 88) and writ petition No.2493 of 1991 (against tax demand for assessment year 1985 - 86), inter alia, challenging composite demand notice for respective assessment years in this Court. 3.4. By common order dated 13.08.1991 this Court stayed demand notice dated 19.07.1991 during 6 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc pendency of respective quantum appeals, subject to petitioner making payment of Rs.6,00,000.00 towards aggregate demand of Rs.12,44,126.00 as stated in demand notice as condition precedent for staying recovery proceedings. petitioner deposited amount of Rs.6,00,000.00 with Income Tax Department pursuant to above order on or about October, 1991. demand notice dated 19.7.1991 was, therefore, stayed. 3.5. In 1998 Government of India introduced scheme known as Kar Vivad Samadhan Scheme, 1998 (hereinafter referred to as KVSS scheme, 1998 ) for settlement of disputes relating to income tax or any other direct tax, which was unpaid or under litigation. feature of said scheme was that all arrears of income tax could be settled at current rate and interest and penalty could be wholly / 50% waived. 3.6. petitioner considered itself eligible and entitled under KVSS scheme, 1998 and therefore filed its declaration in form 1A under Kar Vivad Samadhan Rules, 7 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc 1998 before designated authority for settlement of its liability for assessment year 1987 88 only. designated authority after considering petitioner s application issued Certificate of Intimation dated 26.02.1999 to petitioner, inter alia, determining 50% amount of Rs.6,16,838.00 payable under KVSS scheme, 1998 for assessment year 1987 -88. This amount computed under Certificate of Intimation was only in respect of penalty and interest payable under Section 220(2) r/w Sections 271(1)(a), 271(1)(b) and 271(1)(c) of Act for assessment year 1987-88. 4. Mr. C.M. Kothari learned counsel appearing for petitioner submitted that in terms of order dated 13.08.1991 passed by this Court sum of Rs.6,00,000.00 was deposited by petitioner for stay of recovery proceedings and not towards any specific demand relating to income tax. He submitted that demand notice dated 19.07.1991 as received from Tax Recovery Officer was in respect of two outstanding demands, namely, Rs.3,11,206.00 for assessment year 1987 88 and Rs.9,33,020.00 for assessment year 1985 86. He submitted that pursuant to 8 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc application made by petitioner under Kar Vivad Samadhan Scheme for assessment year 1987-88, Revenue was not justified in adjusting deposit amount of Rs.6,00,000.00 against outstanding liability of petitioner and no appropriation should had taken place. He submitted that it was incorrect on part of Revenue to appropriate Rs.3,11,206.00 towards outstanding tax liability of assessment year 1987 88. He submitted that if at all Revenue had to adjust any amount, adjustment / appropriation by Tax Recovery Officer should have first been towards outstanding liability of assessment year 1985 86 and only after satisfaction of said liability, liability of assessment year 1987 88 ought to have been satisfied. He submitted that by appropriating and adjusting amount of Rs.6,00,000.00 towards outstanding amount of petitioner for assessment year 1985 86 and 1987 88, Kar Vivad Samadhan Scheme was not correctly complied in respect of petitioner s case despite petitioner making appropriate application (for A.Y. 1987-88 only) and Revenue issuing Certificate of Intimation dated 26.02.1999. He therefore submitted 9 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc petitioner had no option than to file present petition for seeking multiple reliefs as prayed for. He submitted that petitioner was denied benefit of Kar Vivad Samadhan Scheme. 4.1 Mr. Kumar, learned standing counsel, Revenue however has supported action taken by respondents. 5. We have perused pleadings, demand notice dated 19.07.1991, application made by petitioner declarant dated 29.12.1998 under Kar Vivad Samadhan Scheme and Certificate of Intimation dated 26.02.1999 issued by Revenue. We may state that petitioner had filed declaration in form 1A dated 29.12.1998 under Kar Vivad Samadhan Scheme for settlement of outstanding demand / tax liability for assessment year 1987 88 only. In declaration filed by petitioner, according to petitioner total tax liability payable by petitioner was Rs.2,74,316.00. However on consideration of petitioner s case, Revenue issued Certificate of Intimation dated 26.02.1999 under Kar Vivad Samadhan Scheme and 10 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc determined amount of Rs.6,16,838.00 being 50% liability payable by petitioner for assessment year 1987 88 which has been computed and levied against penalty and interest only. Thus, outstanding liability under Kar Vivad Samadhan Scheme was determined by Revenue for assessment year 1987 88 at Rs.6,16,838.00 towards penalty and interest only. However, by letter dated 24.03.1999 Commissioner of Income Tax informed petitioner that out of initial deposit amount of Rs.6,00,000.00 made by petitioner in compliance of order dated 13.08.1991, sum of Rs.3,61,201.00 was adjusted against outstanding demand for assessment year 1987 88 which was pending as per notice dated 19.07.1991 and balance amount of Rs.2,38,799.00 (6,00,000.00 3,61,201.00 = 2,38,799.00) was adjusted towards arrears of assessment year 1985 86 which was due and pending. petitioner was therefore called upon to make payment of outstanding demand as per Certificate of Intimation dated 26.02.1999. 11 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc 6. present petition has been filed to declare that appropriation of Rs.3,11,206.00 out of deposit amount was illegally done by Revenue. notice of demand dated 19.07.1991 as it stood issued by Revenue was in respect of two assessment years namely 1985 86 (Rs.9,33.020.00) and for assessment year 1987- 88 (Rs.3,11,206.00). So far as assessment year 1987 88 is concerned, petitioner applied under Kar Vivad Samadhan Scheme and liability of petitioner @ 50% of total liability was determined at Rs.6,16,838.00 towards penalty and interest only. letter dated 24.3.1999 has taken into cognizance declaration dated 29.12.1998 filed by petitioner in form 1A under Kar Vivad Samadhan Rules and subsequent Certificate of Intimation dated 26.02.1999 issued by Revenue to petitioner. 7. We may state that present writ petition was primarily filed as sequel to earlier two writ petitions bearing writ petition No.2492 of 1991 and writ petition No.2493 of 1991, in which this Court was pleased to pass common order on 13.08.1991, which reads thus :- 12 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc 1. Petitioners do pay to Respondents sum of Rs.6,00,000/- (Rupees Six Lakhs) in pursuance of letter, dated 19th July, 1991 being Exhibit Q to writ petition No.2492/91 and Exhibit H to writ petition No.2493/91 in manner following :- a) Rs.50,000/- by cheque, dt.15.8.1991. b) Rs.5,50,000/- within 8 weeks from today. 2. Respondents and / or Officers shall not take any proceedings for recovery of amount mentioned in letter, dated 19.7.1991 for period of eight weeks; 3. If said amount of Rs.6,00,000/- is paid within period stipulated above, demand notices in respect of amounts mentioned in letter, dated 19th July, 1991 are stayed till hearing and final disposal of quantum appeal for assessment year 1985-86; 4. In default, liberty to respondents to enforce demand; 5. Petition to stand disposed off accordingly. 8. above two writ petitions were filed challenging composite demand notice dated 19.07.1991. said demand notice which was in respect of two assessment years viz. 1985-86 and 1987-88 came to be stayed on petitioner 13 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc complying with direction of deposit of Rs. 6,00,000.00 contained in paragraph No.3 of above order. petitioner deposited amount of Rs.6,00,000/- with Revenue and thus demand notice was stayed. Paragraph No.3 of order also records that stay would be in effect till hearing and final disposal of quantum appeal for assessment year 1985-86. In present petition, petitioner has not furnished outcome of pending quantum appeal for assessment year 1985-86. 9. relief claimed in present petition are two fold. Prayer clauses and e pertain to appropriation and adjustment of Rs.3,11,206.00 out of deposit amount of Rs.6,00,000.00 by petitioner towards tax liability for assessment year 1987-88. Prayer clauses (b), (c) and (d) pertain to declaration filed by petitioner for availing benefit under Kar Vivad Samadhan Scheme for assessment year 1987-88 and challenge to Certificate of Intimation issued by Revenue on accepting application of petitioner under said scheme. 14 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc 10. In so far issue of adjustment of Rs.3,11,206.00 is concerned, prima-facie, it appears that said amount was crystallized final tax demand that was mentioned in demand notice dated 19.07.1991. However, on petitioner filing and availing benefit of Kar Vivad Samadhan Scheme, Revenue issued Certificate of Intimation for same showing total outstanding demand towards interest and penalty that was liable to be paid by petitioner @ 50% i.e. Rs.6,16,838.00. Thus, liability of petitioner in so far assessment year 1987-88 was concerned was crystalized and determined under Kar Vivad Samadhan Scheme at Rs.6,16,838.00. As against this, Revenue had already adjusted and appropriated amount of tax demand of Rs.3,11,206.00 out of deposit of Rs.6,00,000/- made by petitioner in October 1991. It is to be noted that, in so far this demand of Rs.3,11,206.00 was concerned it was only towards tax demand payable by petitioner. amount of penalty and interest payable by petitioner under Section 220(2) read with Sections 271(1)(a), 271(1)(b) and 271(1)(c) was computed @ 50% i.e Rs.6,16,838.00 by Commissioner of Income Tax, City XIV, Mumbai in 1999 as due and payable by petitioner under KVSS. Therefore, since liability of 15 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc petitioner for assessment year 1987-88 against tax demand of Rs.3,11,206.00 being crystallized, petitioner was called upon to pay interest and penalty @ 50% as determined at Rs.6,16,838.00 over and above aforesaid tax liability of Rs. 3,11,206.00 for assessment year 1987-88 (which was appropriated by Income Tax Department). However, if said tax demand was appropriated and adjusted (as it was received in October 1991), then petitioner cannot be burdened with payment of penalty and interest in year 1999, merely because interim order in WP 2490/1991 did not give such directions for adjustment and appropriation. In any event, since October 1991, Income Tax Department was in receipt of Rs. 6,00,000.00 from petitioner. 11. In so far reliefs in prayer clauses (b), (c) and (d) are concerned, same relate to declaration filed by petitioner under Kar Vivad Samadhan Scheme for settlement of its liability for assessment year 1987-88. Once petitioner had filed its declaration dated 29.12.1998 under said scheme, same was considered by Revenue and after due consideration Revenue issued Certificate of Intimation under Section 90(i) of Finance (No.2) Act, 1998 in 16 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc respect of Kar Vivad Samadhan Scheme, 1998 read with Kar Vivad Samadhan Scheme, Rules 1998 in form No.2 thereof, declaring 50% liability payable towards penalty and interest by petitioner at Rs.6,16,838.00. Once, this liability of petitioner was crystallized on petitioner s own application, petitioner was called upon to pay this amount. However in case of petitioner, since amount of Rs.3,11,206.00 (tax liability) was deposited by petitioner in year 1991 and same was adjusted by Revenue for outstanding demand for assessment year 1987-88, petitioner could not have been held to be liable to pay any penalty and interest which has been computed in Certificate of Intimation issued on 26.02.1999. Further Certificate of Intimation also does not give precise period for which penalty and interest under Section 220(2) read with Sections 271(1)(a), 271(1)(b) and 271(1)(c) has been computed / calculated by Revenue. In view thereof, there is force in submissions made by petitioner that Certificate of Intimation does not give precise period for which penalty and interest has been computed / calculated by Revenue and merely gives lumpsum computation and further that petitioner is not liable to pay any interest and penalty as levied. 17 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc 12. We may state that it is also admitted position that petitioner had already deposited Rs.6,00,000.00 with Revenue in Ocotber 1991. Since Revenue had appropriated same towards petitioner s tax liability for assessment year 1987-88, computation / calculation of penalty and interest for said assessment year in Certificate of Intimation dated 26.2.1999 was therefore, not justified. 13. We, therefore, conclude that petitioner is not liable to pay any interest on amount of Rs.3,11,206.00 as Tax Recovery Officer 29, Mumbai had adjusted amount of Rs.3,61,201.00 out of deposit amount of Rs.6,00,000.00 made by petitioner in October 1991; 14. In view of above, petition is disposed of by issuing following directions:- (a) Certificate of Intimation dated 26.02.1999 which confers liability on petitioner towards payment of penalty and interest under Act for assessment year 1987-88 is set aside; 18 of 19 Ajay (PA) / Amberkar (PS) WP-2005-2001.doc (b) respondents / Revenue are directed to compute and intimate to petitioner within period of 8 weeks any outstanding penalty and interest, if payable, by petitioner for assessment year 1987-88 until date of deposit (i.e. October 1991) by petitioner of amount of Rs.6,00,000.00 with Revenue; (c) If petitioner is liable to pay any penalty and interest, same shall be adjusted from balance amount of Rs. 6,00,000.00, if any, held by Revenue; (d) If Revenue holds any further balance amount after adjusting above penalty and interest, if any, same shall be adjusted towards outstanding liability for assessment year 1985-86; (e) Rule is discharged; (f) Petition is disposed of on above terms; (g) Parties to bear their own costs. ( MILIND N. JADHAV, J.) ( UJJAL BHUYAN, J.) 19 of 19 Digitally signed by Ravindra M. Ravindra Amberkar M. Date: Amberkar 2020.06.26 16:15:10 +0530 Kuber Builders v. Union of India, Through Chief Commissioner of Income-tax, Mumbai
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