Holding

Any appeal, revision or reference that is pending on the date of filing a declaration under Section 95(i)(c) of the Kar Vivad Samadhan Scheme is deemed pending irrespective of its validity, and the Designated Authority cannot reject such declarations on the ground that the proceeding is time‑barred.

Summary

The respondent‑assessee, Shatrusail Ya Digvijay Singh Jadeja, had tax assessments for years 1984‑85 to 1991‑92 under the Income Tax Act and the Wealth Tax Act, which were appealed but dismissed in 1992‑93 for failure to pre‑deposit tax. After the Finance (No.2) Act, 1998 introduced the Kar Vivad Samadhan Scheme (effective 1 Sept 1998), the assessee filed appeals and revision petitions in November‑December 1998 together with applications for condonation of delay and made declarations under the Scheme. The Designated Authority rejected the declarations relating to the revisions on the ground that the revisions were time‑barred and therefore not “pending” under Section 95(i)(c) of the Scheme. The Supreme Court held that the Scheme is a self‑contained recovery code that places appeals, revisions and references on par, and that any such proceeding pending on the date of filing a declaration is deemed pending irrespective of its validity; consequently the Designated Authority could not deem the revisions “sham” or “infructuous”. The Court also clarified that interest liability accrues only after the amount payable is ascertained under Section 90 of the Scheme. Accordingly, the orders of the Designated Authority rejecting the declarations were quashed and the appeal was dismissed.

Issues considered

Whether appeals or revisions filed in November‑December 1998 are ‘pending’ within the meaning of Section 95(i)(c) of the Kar Vivad Samadhan Scheme, 1998.
Whether the Designated Authority can reject Scheme declarations on the ground that the underlying appeal or revision is time‑barred or ineffective.
Whether interest on tax arrears accrues before the amount payable is determined under Section 90 of the Scheme.

Legislation cited

Income Tax Act, 1961s. 143(3), s. 246, s. 260-A, s. 264, s. 95(i)(c)
Wealth Tax Act, 1957s. 95(i)(c)

Subjects

Income TaxWealth TaxKar Vivad Samadhan Schemepending litigationappealrevisionDesignated Authoritytax arrearsinterest liabilityscheme interpretation

Judgment

·- COMMISSIONER OF INCOME TAX, RAJKOT
v.
A

SHATRUSAIL YA DIGVIJA YSINGH JADEJA

SEPTEMBER I, 2005
B
[B.P. SINGH AND S.H. KAPADIA, JJ.]

Incorn,e Tax:
'
'· Kar Vivad Samadhan Scheme, 1998 [as introduced by Finance (2) Act,
1988} : c
Section 95(ij(c)-AYs 1984-85to1991-92-Declarationsfiled byassessee
...
- were rejected by Designated Authority (DA) on the ground that 'he appeals!
revisions filed by the assessee \Vere time-barred and that the assessee filed
revisions only to obtain the benefit of the Scheme and, therefore, such
D
revisions were not 'pending' under S. 95(i)(c)-Validity of-Held: If the
appeal or revision is pending on the date offiling of the declarations under
Section 88 of the Scheme, it is not for the DA to hold that the appeal revision
was "'sham", "ineffective" or "infructuous" and, therefore, they were not
'pending'-Further, assessee liable to pay interest only after determination
of tax payable by the DA-Hence, order of Designated Authority quashed. E

The respondent-assessee was liable to pay tax for the Assessment
years 1984-85 to 1991-92 under orders passed vide Section 143(3) of the
Income Tax Act, 1961 and also under the assessment orders passed under
the Wealth Tax Act, 1957. The appeals filed by the assessee were dismissed F
in the year 1992-93 as the respondent-assessee failed to pre-deposit the self
assessed tax.

The Finance (No. 2) Act introduced the Kar Vivad Samadhan Scheme,
1998 which came into force w.e.f. 1.9.1998 in respect of tax arrears
outstanding as on 31.3.1998. On 28/29.12.1998 the assessee filed appeals/ G
revisions. The Designated Authority (DA) rejected the declarations filed
by the assessee on the ground that the revisions filed by the assessee were
time-barred and as such they were not 'pending' in terms of Section
95(i)(c) of the Scheme. The High Court allowed the appeal filed by the
respondent-assessee. Hence the appeal. H
"""' I I 19
1120 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
,...~
c
A The following question arose before, the Court.

Whether the department was right in rejecting the Kar Vivad
Samadhan Scheme, 1998 declarations filed by the respondent-assessee on
the ground that the assessments had become final in the 1992-93 (when
the assessee's appeals were dismissed for failure to predeposit the self
B
assessed tax) and that the respondent had filed revisions under the Income
Tax Act,1961 and Wealth Tax Ac.t, 1957 in November/December, 1998
only to obtain the benefit of Kar Vivad Samadhan Scheme, 1998, which
~
came into force w.e.f. 1.9.1998? Dismissing the appeal, the Court
<:::i

c HELD: 1. The Kar Vivad Samadhan Scheme, 1998, was in substance
a recovery scheme and was a complete Code by itself. Section 95(i)(c) of
the Scheme, was different from appeals under Section 246, revisions
under Section 264; appeals under Section 260-A etc. of the Income Tax
..
Act, 1961 and similar provisions under the Wealth Tax Act, 1957. The
D differences between appeals, revisions and references were obliterated
and they were put on par under Section 95(i)(c} of the Scheme. The object
behind Section 95(i)(c) in putting on par appeals, references and revisions
r
was to put an end to litigation in various forms and at various stages under
the IT Act/Wealth Tax Act. (1125-D-E-F-G]

E 2. The Designated Authority (DA) had to determine the tax arrears
as well as the disputed amount ~s defined under Section 87(f) of the
Scheme. The1·efore, till the completion of the aforesaid exercise, the
respondent-assessee could not have paid the amount of tax and, therefore,
the respondent was not liable to pay interest as his liability accrued only
F after the ascertainment of the amount payable under Section 90 of the
~

Scheme. (1126-B-C-D]
'
4. If the appeal or revision is pending on the date of the filing of the
declaration under Section 88 of the Scheme, it is not for the DA to hold
that the appeal/:-evision was "sham", "ineffective" or '~infructuous" and,
G therefore, not 'pending' in terms of Section 95(i)(c) of the said Scheme.
(1126-E] -
Dr. Mrs. Renuka Datta v. CIT, (2003) 259 ITR 258, Raja Kulkarni v.
? State of Bombay, [1954] SCR 73 and Tirupati Balaji Developers (P) Ltd v. ,.
H State of Bihar & Ors., [2004) 5 SCC l, referred to. -~
COMMR OF LT., RAJKOT 1'. SHAillUSAILYA DIGVUAYSINGH JADEJA (KAPADIA, J.] 1121

Computwel Systems P. ltd v. W. Hasan, (2003) 260 ITR 86, referred A
to.

5. Therefore, the orders of the Designated Authority rejecting the
declarations filed by the respondent-assessee are quashed. (1127-B(
B
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4411 of2003.

From the Judgment and Order dated 25.9.2002 of the Gujarat High Court
in S.C.A. No. 2020 of 1999.

K.P. Pathak, Additional Solicitor General, Harish Chander, Tufail A. C
Khan and B.V. Balaram Das for the Appellant.

M.L. Vanna, Bhargava V. Desai, Sanjeev Kr. Singh, Ms. Sheenam
Parwanda and Satya Mitra for the Respondent.
D
The Judgment of the Court was delivered by

KAPADIA, J.: The question which arises for determination in this civil
appeal filed by the department is - whether the department was right in
rejecting the Kar Vivad Samadhan Scheme declarations filed by the respondent-
E
assessee on the ground that the assessments had become final in the year
1992-93 (when the assessee's appeals were dismissed for failure to pre-
deposit self-assessed tax) and that the respondent herein had filed revisions
under the Income Tax Act and Wealth Tax Act in November/December, 1998
only to obtain the benefit of Kar Vivad Samadhan Scheme, 1998, which came
into force w.e.f. 1.9.1998. According to the department, the revisions filed F
by the assessee were time barred and as such they were not "pending" in terms
of section 95(i)(c) of the said Scheme.

The undisputed facts which lie within a very narrow compass are as
follows: G

In respect of assessment years 1984-85 to 1991-92, the assessee was
liable to pay tax under assessment orders passed vide section 143(3) of the
Income Tax Act, 1961 and also under the assessment orders passed under the
Wealth Tax Act, 1957.
H
1122 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A Being aggrieved by the assessment orders, the assessee herein, preferred
appeals to the Commissioner (A) under section 246 of the said Act. However,
the assessee failed to pre-deposit the self-assessed tax and consequently, the
appeals came to be dismissed in the year 1992-93.

The Finance (No.2) Act, 1998 introduced a scheme called Kar Vivad
B Samadhan Scheme (for short "the Scheme"). The said Scheme was contained
in Chapter IV of the Finance Act and consisted of s~ctions 86 to 98 (both
inclusive). The said scheme came into fo:ce w.e.f. 1.9.1998 in respect oftax
arrears outstanding as on 31.3.1998 and was in force up to 31.1.1999.

c mentioned
On 28/29.12.1998, the assessee herein filed appeals and revisions as
in the statement given herein below:

STATEMENT OF APPEALS AND REVISION PETITION VIS-A-VIS DECLARATIONS
IN RESPECT OF KVSS UNDER INCOME TAX ACT.

D ~ssessment !Appeals/ Date of Date of Date of Status on Date of order on Status on the
year Revision filing of filing. order on KVSS application for application for
Petition Appeal/ KVSS KVSS declarations condonation of condonation of
Filed Revision declaration declarations delay in filing of delay in filing
Petition Appeal/Revision Appeal/Revision

1980-81 Appeal 13il5.0l.99 Last Weeak 15/22/23.2. 99 Accepted - Delay
of Jan., 1999 & 5.3.99 Condoned

E 1981-82 Appeal 13/15.01.99 Last Weeak 15/22/23.2.99 Accepted - Delay
of Jan .• 1999 & 5.3.99 Condoned

1984-85 Revision 26.11.98 to 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not
8. 12.1998 Condoned

1985-86 Revision 26.11.98 to 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not
8. 12.1998 Condoned

F 1986-87 Revision 26.11.98 to 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not
8. 12.1998 Condoned

1987-88 Revision 26.11.98 to 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not
8. 12.1998 Condoned

1988-89 Appeal 13/15.01.99 Last Weeak 15/22/23.2.99 Accepted - Delay
of Jan., 1999 & 5.3.99 Condoned
G
1988-89 Revision 26.11.98 to 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not
8. 12.1998 Condoned

1989-90 Appeal 13/15.01.99 Last Weeak 15/22/23.2.99 Accepted - Delay
of Jan., 1999 & 5.3.99 Condoned

1989-90 RCvi~ion 26.11.98 to 28/29.12.98 9.2.1999 Rejected 31.3.2000 Delay not
8. 12.1998 Condoned
'H
COMMR. OF l.T., RAJK.OT 1•. SHATRUSAILYA DJGVIJA YSINGH JADEJA [KAPADIA, J.J l l 23

1990-91 Appeal t31l5.0l.99 Last Weeak 15121123.2.99 Accepted - Delay A
of Jan., 1999 & 5.3.99 Condoned

1990-91 Revision 26.ll.98 to 28/29. 12.98 9.2.1999 Rejected 31.3.2000 Delay not
8. 12.1998 Condoned

1991·92 Appeal 13115.01.99 Last \\'eeak 15/22123.2.99 Accepted - Delay
ofJan.,1999 & 5.3.99 Condoned

1991·92 Revision 26.ll.98to 28129. 12.98 9.2.1999 Rejected 31.3.2000 Delay not
B
8. 12.1998 Condoned

1992-93 Appeal 13.115.01.99 Last Weeak 15/22/23.2.99 Accepted - Delay
of Jan .. 1999 & 5.3.99 Condoned

1993·94 Appeal 13/15.01.99 Last \\'eeal.: 15/22/23.2.99 Accepted - Delay
of Jan.,1999 & 5.3.99 Condoned
c
On the above facts, the department's case before us is that the scheme
was enacted to resolve the pending litigation; that the purpose of the schen1e
was not to create artificial pendency of litigation; that the revisions were not
pending on 1.9.1998 when the scheme came into force as the revisions were
filed in November and December, 1998 along with applications for condonation D
of delay and consequently, such revisions did not come within the meaning
of the word "pend ency" as mentioned in section 95(i)( c) of the said Scheme.
On behalf of the department, it was further pleaded that under the IT Act,
there was a difference between an appeal and a revision; that the remedy of
filing an appeal is available to an assessee under section 246 as a matter of E
right Vi'hereas the remedy of filing revision under section 264 was a
discretionary remedy. On facts, it was pleaded that the revisions flied by the
assessee were not bonofide as the appeals under section 246 stood dismissed
in the year 1992-93 for failure to pre-deposit self-assessed tax; that the
revisions filed were also not bona fide as they were filed only to obtain the
benefit of the said scheme; that the revisions were filed under section 264
F
before the commissioner after a long delay and they were rightly dismissed
by the commissioner subsequently for want of sufficient cause to condone the
delay.

Shri K.P. Pathak, learned ASG appearing on behalf of the department G
would submit that the scheme was a self-contained Code; that it stood on its
own force different from the Income Tax Act/Wealth Tax Act; that the
intention of the Scheme as reflected in the speech of former finance minister
indicated that the purpose of the Scheme was to bring to an end pending
litigation and not to create an artificial litigation in respect of assessments H
1124 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A which had attained finality. In this connection, learned counsel pointed out
that in the present case 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. The learned counsel submitted that there was a difference
.B
between an appeal under section 246 and revisions under section 264 of the
IT Act; that under the proviso to section 264, the commissioner was
empowered to condone the delay in filing of revision if he was satisfied that
the assessee was prevented by sufficient cause from preferring the revision
within the prescribed time. It was submitted that the revision petition was not
c pending in terms of section 95(i)(c) of the Scheme; that the delay in filing
the revisions was not condoned and, consequently, the assessee was not
eligible to take the benefit of the scheme. In this connection, learned counsel
placed reliance on the judgment of this Court in the case of Computwe/
Systems P. Ltd v. W Hasan & Another reported in (2003) 260 ITR 86.
D
Per contra, Shri M.L.Vanna, learned senior counsel appearing on behalf
of the assessee submitted that revisions and appeals were filed by the assessee
along with the condonation applications; that, however, declarations pertaining
to the assessment years covered by the appeals under sections 246 were
accepted by the designated authority (for short "DA") under the Scheme
E though the applications for condonation of delay were pending decision
whereas the DA rejected the declarations 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 of the IT Act. Learned
counsel made the grievance that no reason has been given by the department
F for rejecting one set of declarations concerning revisions under section 264
while accepting declarations concerning appeals under section 246 of the IT
Act, though in both the cases, applications for condonation of delay were filed
and pending.

On the question of law, learned counsel invited our attention to section
G 95(i)(c) and submitted that the scheme was a Code by itself; that the object
of the scheme was to recover the taxes locked in the pending litigation and
for the purposes of the applicability of the scheme, appeals, references,
revisions, writ petitions pertaining to the tax cases were all put at par under
section 95(i)(c) of the Scheme. It was urged on behalf of the assessee that
H if a revision or an appeal was pending on the date of the filing of the
COMMR. OF l.T., RAJKOT 1•. SHATRUSAU.YA DlGVIJA YSINGH JADEJA [KAPADIA, J.J l 125

declaration under the Scheme, it was not open to the DA to hold that the A
appeals/revisions were sham, ineffective or infructuous. In this connection,
reliance was placed on the judgment of this Court in the case of Dr. Mrs.
Renuka Datta & Others v. Commissioner of Income-Tax & Another reported
in (2003) 259 !TR 258.

The basic point which we are required to consider in this case is the
B
meaning of the word "pending" in section 95(i)(c) of the said Scheme.

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 c
prescribed amount of tax arrears, and it offered benefits and immunities from
penalty and prosecution. In several matters, 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.
D
In our view, the Scheme was in substance a recovery scheme though
it was nomenclatured as a "!itigation settlement scheme" and was not similar
to the earlier Voluntary Disclosure Scheme. As stated above, the said Scheme
was a complete Code by itself. Its object was to put an end to all pending
matters in the form of appeals, reference, revisions and writ petitions under E
the IT Act/WT Act. Keeping in mind the above object, we have to examine
section 9.S(i)(c) of the Scheme, which was different from appeah under
section 246, revisions under section 264, appeals under section 260A etc. of
the IT Act and similar provisions under the W.T. Act. Under the LT. Act, there
is a difference between appeals, revisions and references. However, those F
differences were obliterated and appeals, revisions and references were put
on par under section 95(i)(c) of the Scheme. 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 IT Act/Wealth Tax
Act and, therefore, the rulings on the scope of appeals and revisions under
the IT Act or on Voluntary Disclosure Scheme, will not apply to this case. G

One more aspect needs to be looked into. The Finance (No.2) Act,
1998 introduced a Scheme called Kar Vivad Samadhan Scheme, 1998. It was
a recovery scheme. Under the Scheme, the tax arrear had to be outstanding

-·
' as on 31.3.1998. Under section 87(f), "disputed tax" was defined to mean total H
1126 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A tax determined and payable under the IT Act/Wealth Tax Act in respect of
an assessment year but which remained unpaid as on the date of making of
the declaration from which TDS, self-assessed tax, advanced tax paid, if any,
had to be deducted under section 90; the DA had to determine the amount
payable and for that purpose, he had to determine the tax arrear as well as
the disputed amount as defined under section 87(f). Thus, the DA had to make
B
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
c 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. In the present matter, that exercise
has been completed; that taxes have been recovered by sale of lands; that
amounts have been paid pursuant to the determination by the DA, may be
D under the orders of the High Court and, therefore, we do not wish to reopen
the matter.

In the case of Dr. Mrs. Renuka Delta (supra), this Court has held on
interpretation of section 9-5(i)(c) that if the appeal or revision is pending on
the date of the filing of the declaration under section 88 of the Scheme, it
E is not for the DA to hold that the appeal/revision was "sham'', "ineffective"
or "infructuous" as it has.

In the case of Raja Kulkarni v. The State of Bombay reported in AIR
(1954) SC 73, this Court laid down that when a section contemplates
F 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 1

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 the appeal
is heard but there is nothing to prevent a party from filing an appeal which
G may ultimately be found to be incompetent, e.g., 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.

H To the same effect is the law laid down by the judgment of this Court
COMMR. OF LT., RAJKOT l'. SHATRUSAILYA DIGVIJA YSINGH JADEJA {KAPADIA. J.] l J27

in the case of Tirupati Balaji Developers (P) Ltd v. State of Bihar & Others A
reported in [2004] 5 SCC l, in which it has been held that an appeal does
not cease to be an appeal though irregular and incompetent.

For the aforestated reasons, orders of the designated authority rejecting
the declarations filed by the assessee are quashed. We de not find any B
infinnity, to this extent, in the impugned judgment of the High Court. The
appeal is accordingly dismissed, with no order as to costs.

V.S.S. Appeal dismissed.