STAR TRADING Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) PETITIONER is an assessee under the IT Act. It is a wholesale dealer of wheat products. For the asst. yrs. 1988 -89 to 1989 -90 the petitioner was assessed to tax. Aggrieved by the assessment, he preferred an appeal before the CIT. While the matter was pending before the CIT, the petitioner filed an application before the Settlement Commission, Chennai invoking the provisions contained under Section 245C of the IT Act. The Settlement Commission by order dt. 27th March, 1996 allowed the application to be proceeded with under Section 245D(1) of the Act. While so before passing final orders, a new scheme popularly known as 'Kar Vivad Samadhan Scheme' was introduced by Finance (No. 2) Act, 1998. Hence, the petitioner claiming benefit under the scheme approached the designated authority, namely, CIT. The designated authority, after processing the application, passed Ext. P1 order dt. 26th Feb., 1999 under Section 90(1) of the Finance (No. 2) Act, 1998 determining the amount payable by the declarant towards the full and final settlement of his tax liability under the scheme. Thereafter, when the matter came up before the Settlement Commission, the petitioner submitted that he has already applied for the benefit under the KVSS and that pursuant to the application his declaration made under the KVSS was accepted and amounts were determined by the designated authority under the scheme and so was not interested to prosecute the application. In the circumstances, the Settlement Commission remitted the case to the ITO stating that the assessee is not co -operating with the proceeding under Section 245D(4) of the IT Act. While so, pursuant to Ext. P1 order, a certificate was issued by the designated authority, and the matter became final. It is later that the CIT by Ext. P2 order dt. 30th Oct., 2000, cancelled the same for reasons stated in the order, which is impugned in this original petition.

(2.) THE CIT held that the appeal filed before the CIT(A) and pending disposal has become non est. According to the CIT, once the assessee had moved the Settlement Commission under Section 245D of the IT Act, the jurisdiction of the IT authorities is ousted by virtue of Section 245F(2) of the IT Act. The declaration made by the petitioner before the designated authority under the KVSS is not in accordance with law. As there was no appeal pending, the assessee is not entitled to claim the benefit of the scheme, which is a condition precedent for claiming any relief under the scheme. On the other hand the assessee contended that the declaration under the KVSS was made in terms of the scheme, that the appeal was pending before the CIT(A) -II, Ernakulam and was denuded by the order passed by the Settlement Commission. Although the settlement application was admitted under Section 245D(1), that in no way abates the appeal until final orders are passed by the CIT(A) under Section 251. Hence the appeal has to be treated as pending and therefore the assessee was entitled to file declaration under the KVSS. It was also contended that as per Section 95(1)(b) of the KVSS, 1998 the provisions of the scheme are not applicable only in cases where an order has been passed by the Settlement Commission under Section 245D(4) of the IT Act and in the present case only order passed is under Section 245D(1) admitting the application and no final order was passed under Section 245D(4) and as such the bar under Section 95 under the scheme is not applicable. These objections were overruled by the CIT(A) and confirmed the proposals made and cancelled the certificate issued under the KVSS, the correctness of which arises for consideration in this writ petition.

(3.) I have heard both sides.