Y VENUGOPALA REDDY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE appellant is a regular income -tax assessee. His main business is that of manufacture and sale of bricks under the name and style of M/s Nanjundeswara Bricks and Tiles, situated at Arakere Village, Bangalore. During the year relevant for the asst. yr. 1994 -95, the appellant had constructed a choultry named as 'AGN KALYANA MANTAPA' at Bannerghatta Road, Arakere village. The construction period was from the middle of 1961 to the end of September, 1994. The cost of construction according to the appellant's registered valuer was Rs. 60,68,000 but as per the IT Departmental Valuer it was Rs. 1,03,96,000 as on 30th Sept., 1994. The appellant estimated the cost of construction upto 31st March, 1994, (previous year ending date for asst. yr. 1994 -95) at Rs. 30,00,000 and after claiming the sources of funds to the extent of Rs. 10,25,000, he made voluntary disclosure of income at Rs. 19,57,000 under Section 69B of the IT Act (for short 'the Act') plus the income from business at Rs. 90,000 and filed a return of income declaring a total income of Rs. 20,65,000 for the asst. yr. 1994 -95.

(2.) THE AO adopted the valuation made by the Departmental Valuer at Rs. 1,03,96,936 and determined the total income at Rs. 45,54,965 in his assessment order dt. 21st March, 1997, passed under Section 143(3) and demanded the following taxes and interests :

(3.) WHEN the matter stood thus, the Finance (No. 2) Act, 1998 (hereinafter referred to as 'Finance Act'), introduced the scheme called Kar Vivad Samadhan Scheme (for short 'the scheme'). The same scheme is contained in Chapter -IV of the Finance Act and consisted of Sections 86 to 98 (both inclusive) as also a Schedule. By virtue of the provisions of the scheme, if an assessee undertakes to pay the 30 per cent of the disputed income as tax, interest and penalties would be waived and even intended prosecutions would be dropped. This scheme was effective from 1st Sept., 1998, till 31st Jan., 1999. The appellant in order to evaluate the benefits of the scheme filed a declaration under Section 88 of the scheme on 3rd Dec., 1998, before the CIT, Karnataka -IT, Bangalore, the first respondent herein who is the designated authority under the scheme. The first respondent passed an order is Form No. 2A on 22nd Dec., 1998, under Section 90(1) of the scheme and determined the tax and the interest payable by the appellant as under: