Bombay Dyeing & Manufacturing Co. Ltd Vs H.D. Trivedi (Bombay High Court)
As petitioner failed to disclose tax properly, amount of disputed tax under KVSS to be determined after reducing tax refunded
Bombay High Court held that the amount of tax refunded to the Petitioner, including interest, is to be reduced while determining the amount of disputed tax under KVSS as the Petitioner had not disclosed and calculated tax properly.
Facts- The present Writ Petition challenges the legality and validity of the orders passed by Respondent no.2 determining the amount of tax payable by the Petitioner pursuant to a declaration filed under the Kar Vivadh Samadhan Scheme, 1998 (“KVSS”) introduced by Finance (No.2) Act, 1998 (“Finance Act”).
It was contended that assuming such refund was to be deducted, the interest granted under section 244A of the Act of Rs. 56,29,680/- which formed a part of the said refund, could in no event had been reduced. The Petitioner further submitted that the adjustment so made was not in accordance with the provisions of the KVSS and that the Respondent No. 2 was required to amend the certificate and issue a fresh certificate.
Conclusion- Held that the fact that the Revenue refunded tax to the petitioner, and paid interest thereon because the Petitioner had not disclosed and calculated tax properly. This being the situation, the Petitioner cannot take advantage of its own wrong and claim that the interest which has been paid to it should not be reduced while computing the disputed tax.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. The present Writ Petition challenges the legality and validity of the orders passed by Respondent no.2 determining the amount of tax payable by the Petitioner pursuant to a declaration filed under the Kar Vivadh Samadhan Scheme, 1998 (“KVSS”) introduced by Finance (No.2) Act, 1998 (“Finance Act”). In particular, the Petitioner has challenged the Certificate dated 25.02.1999 issued by Respondent no.2 in terms of sub-section (1) of Section 90 of the Finance Act, Order dated 17.03.1999 passed by Respondent no.2 rejecting the Petitioner’s Rectification Application and a Certificate dated 02.08.1999 issued by Respondent no.2 under Section 90(2), read with Section 91, of the Finance Act.
2. The Petitioner is a public limited company which carries on the business interalia of manufacture and sale of textiles. The Petitioner had filed a Writ Petition in this Court, being Writ Petition No.2007 of 1991, wherein it had challenged interalia the validity of Section 115J of the Income Tax Act, 1961 (“the Act”), the validity of CBDT Circular No.495 dated 22.09.1987 and the manner in which Respondents ought to apply the said Section in the matter of working out the set off of brought forward depreciation and investment allowance. In the said Writ Petition, Rule was issued by this Court on 26.06.1991. While issuing Rule, this Court passed an interim order whereunder the Petitioner was permitted to pay advance tax or self assessment tax and/or file its return of income in accordance with the third interpretation given in the said Writ Petition to the provisions of Section 115J of the Act. Further, the Respondents were permitted to proceed with the assessment but could not serve any notice of demand on the Petitioner pending further orders in the said Writ Petition. Interest under Sections 234A. 234B and 234C of the Act as well as additional tax under section 143(1A) of the Act were to be paid in accordance with the third interpretation set out in the Petition. The Petitioner was also to furnish a bank guarantee of a nationalised bank for 50% of differential tax less advance tax and tax deducted at source for Assessment Year 1991-92 on the basis of the difference between the interpretation of Section 115J as per the said Circular No.495 dated 22.09.1987 issued by the Central Board of Direct Taxes and the third interpretation, which bank guarantee was to be furnished within three months from the date of the determination and which was so furnished.
3. On 20.12.1991, the Petitioner filed its Return of Income for Assessment Year 1991-92. The Petitioner returned a nil income and on account of the Advance Tax of Rs.4,51,50,000/- paid and the tax deducted at source of Rs.1,01,74,620/- the Petitioner claimed a refund of Rs.5,53,24,620/- in the Return as filed on 20.12.1991.
4. Respondent no.1 processed the Return filed on 20.12.1991 and made an intimation under section 143(1)(a). Respondent no.1, by his letter dated 11.06.1992, intimated to the Petitioner that the total tax, including interest under section 234B was determined at Rs.19,23,82,029/- and after allowing for credit of advance tax and tax deducted at source aggregating to Rs.5,47,97,545/- a sum of Rs.13,75,84,484/- was payable and accordingly, a demand was raised. The Petitioner was called upon to furnish a bank guarantee for a sum of Rs.6,87,92,242/- being 50% of the said demand.
5. The Petitioner, by its letter dated 27.11.1992, applied for rectification of certain errors. The said application was disposed by an Order dated 31.12.1992 made under section 154 of the Act. Respondent no.1 determined the total income at Rs.6,51,19,488/-and the tax payable thereon at Rs.3,59,45,957/-. After giving credit for advance tax of Rs.4,51,50,000/- and tax deducted at source of Rs.96,47,545/-, aggregating to Rs.5,47,97,545/-, a refund of Rs.1,88,51,588/- was determined. Respondent no.1 also granted interest to the Petitioner under Section 244A of the Act of a sum of Rs.45,24,384/- and accordingly determined the total sum refundable at Rs.2,33,75,972/-. This refund was adjusted against a demand for the Assessment Year 1990-91.
6. Being aggrieved by the said Order dated 31.12.1992, the Petitioner filed an Appeal to the Commissioner of Income tax (Appeals). The Petitioner also filed an application for rectification by its letter dated 24.05.1993.
7. Respondent no.1, by an Order dated 15.07.1993, rectified his earlier order and granted an additional credit for tax deducted at source of Rs.5,24,909/- as well as recomputed the interest allowable under section 244A. Accordingly a further refund of Rs.16,30,205/- was worked out and the same was received by the Petitioner.
8. The Petitioner’s Appeal challenging the said Order dated 31.12.1992 was allowed by the Commissioner of Income Tax (Appeals) by his Order dated 02.09.1993. On further Appeal by the Revenue to the ITAT, by an Order dated 22.12.1997, the ITAT restored the matter to the file of the Commissioner of Income Tax (Appeals) with a direction that the Appeal be disposed de novo.
9. By a letter dated 31.03.1994, Respondent no.1 intimated to the Petitioner that its assessment for the Assessment Year 19911992 had been completed under Section 143(3) of the Act and the total income was determined at Rs.29,04,54,928/-.
10. Respondent no.1, thereafter, by his letter dated 16.11.1994 addressed to the Petitioner, worked out the tax payable on a provisional basis at Rs.11,60,82,920/- and called upon the Petitioner to furnish a bank guarantee of 50% thereof viz., Rs.5,80,41,460/- within ten days of the receipt of the said letter.
11. Thereafter, pursuant to reopening of the Petitioner’s assessment under Section 148 of the Act, the total income of the Petitioner was revised to Rs.31,96,52,478/- and a demand of Rs.17,84,62,709/- was raised.
12. The Petitioner decided to take advantage of the KVSS to put an end to the disputes. Therefore, by its letter dated 30.12.1998 addressed to Respondent no.2, Petitioner forwarded a declaration under the KVSS for the Assessment Year 1991-92. The tax arrears outstanding as on 31.03.1998 for the Assessment Year 1991-92 were computed at Rs.17,84,62,709/- consisting of tax demand of Rs.9,17,17,686/-, interest of Rs.6,17,38,846/- and another sum of Rs.2,50,06,177/- which was the refund inclusive of interest granted under section 244A and which was received pursuant to the intimation made. The disputed income was computed at Rs.19,93,86,274/- on which the tax liability under the KVSS was determined at Rs.6,97,85,196/-. The computation of tax liability under the KVSS, as done by the Petitioner, is as under:
