Written in : October 1998

In the last article we discussed how tax arrears should exist for one to take advantage of the Kar Vivad Samadhan Scheme. There is another equally important requirement - disputes.

For you to be eligible to take benefit of the Scheme, not only should there exist tax arrears, but there should also exist a dispute relating to it. Thus, there should exist an appeal, a reference, a writ petition or a revision petition pending when you make a declaration under the Scheme.

An appeal may be before the Commissioner(Appeals), the Tribunal or the Supreme Court. A reference may be pending before a High Court or the Supreme Court. And, a revision petition may be pending before the Commissioner of Income Tax.

The dispute should be pending, not on March 31, 1998 but on the date of filing the declaration. Thus, there may be tax arrears determined before March 31, 1998 but the appeal etc could have been filed after that date, but before the date of filing the declaration under KVSS.

It is required that the appeal or reference petition filed by you should have been admitted. There is generally requirement of admission of an appeal or reference petition. However, the question of admission of an appeal arises when you have filed an appeal which is defective. Such a defect arises, for example, if the appeal is beyond the time permitted under law. Or it is filed without appropriate fees. Or it is filed without payment of undisputed taxes, as the law requires. If some defect like this exists, then the appeal needs to be admitted by the authority. This is done by condoning the delay, for instance.

You may have filed reference application before the Tribunal. The Tribunal has first to decide if the reference should be made. This it does based on whether a referable question of law exists against its order. Once it so decides, it can be said that the petition is admitted.

A writ petition, similarly, has to be admitted by the High Court for hearing.

However, if you have filed an appeal within time and with proper formal requirements, it should be enough.

A revision petition filed by you makes you eligible for taking benefit of the Scheme. There is no requirement that the revision petition should be admitted. It is, therefore, enough that you make a petition within the time allowed under law and by payment of the required fees. Your revision petition is one filed under section 264 which asks for relief from an order passed by the officer.

However, if the Commissioner has initiated revision proceedings (under section 263), then you are not entitled to take advantage of the Scheme.

Not only should the dispute be pending before filing the declaration, but it should also be pending. Thus, when a valid appeal is filed and is not disposed of, you would be eligible to make a declaration. If the appeal has been heard but the order has not been passed on the date you make a declaration, your eligibility remains. However, if the Commissioner(Appeals) has passed an order before your making a declaration, you should first file a valid appeal against the order before making a declaration.

The point is that the dispute should be pending when you make the declaration.

The law requires that you should have filed an appeal, reference or revision petition. Obviously, the dispute should be real. That is, the substance of the appeal etc should emanate from the tax arrears. However, the merits of your dispute are irrelevant. You may have disputed with substantial grounds in your favour or not. It does not matter. The department cannot go into the merits of your dispute to check if you should get the benefit of the Scheme. This is important and should be remembered.

Suppose there are various additions made by the officer in an assessment and there exist tax arrears against you. You have contested only one or some of the additions, but not all. It does not matter, your entire tax arrears are entitled to the benefit of the Scheme.

The reason is that the Scheme does not permit piece meal settlement of disputes. Disputes and arrears for a given year may be settled totally, or not at all.

It also means that if you are disputing one or more issues and believe that you are strong on some of them, but weak on others you cannot ask for piece meal settlement. You have to choose between total settlement of all issues, or none at all.

What is relevant is that the dispute should relate to the tax arrears.

Prior to assessment year 1993-94, firms were assessed and partners were assessed separately on their share incomes. It is now clarified that if the firm has filed appeals which are pending, the partners can take benefit of the Scheme with respect to their tax arrears arising out of the assessment of the firm.

A question often asked is whether rectification proceedings pending would make one eligible to the Scheme. Rectification proceedings are not in the nature of appeal, reference or revision proceedings. And one cannot take advantage of the Scheme by filing plain rectification proceedings.

There is another situation where you are prohibited from making a declaration. This is where you have approached the Settlement Commission for settlement of your cases and the Commission has passed orders (under section 245D(4)) making assessment in your cases. Where no such orders are passed, you are not prohibited from taking advantage of the Scheme.