Restraining the Income Tax authorities from going back on their promises, the Supreme Court has categorically ruled that they cannot reopen the tax payments settled under the Kar Vivad Samadhan Scheme, 1998.
However, the authorities could reopen the assessment only if they come across documents to prove that the declaration was false, a Bench comprising Justice Ruma Pal and Justice B N Srikrishna said in a recent ruling.
The Killick Nixon Ltd, Mumbai, had a dispute over the assessment of income tax relating to the year 1992-93 and was contesting the tax demand of over Rs 2.6 million.
However, when KVSS, 1998 came about, it declared its assessed income as Rs 3.365 million and paid a tax of Rs 865,795.
This declaration under KVSS was accepted by the Designated Authority but they raised a demand of Rs 935,888 which was paid by the company in February 1999 leading to issuance of a certificate that it had paid tax towards full and final settlement of the assessment and demand of tax thereon.
However, the Income Tax authorities issued another notice to the company in August 1999 asking it to furnish details relating to the assessment year 1992-93.
The company challenged the same, but the Bombay high court dismissed its appeal. Killick appealed before the Supreme Court against the high court order.
The SC noted that the KVSS was to cut short litigation pertaining to taxes which were frittering away the energy of the revenue department and to encourage litigants to come forward and pay up a reasonable amount of tax payable in accordance with the scheme after declaration thereunder.
The counsel for Killick contended that once the assessment and tax was settled under the scheme, there was no question of reopening any issue which was subject matter of the orders of the designated authority.
Accepting his contention, the Bench said the order of the designated authority under Section 90 of the Income Tax Act was a considered one intended to be conducive in respect of tax arrears and sums payable after such determination towards full and final settlement of tax arrears.
Justice Srikrishna, writing for the Bench, said: "Once the declarant makes payment of the amount so determined under section 90, the immunity under section 91 springs into effect."
The Bench said: "We are also of the view that upon such declaration being made, tax arrears being determined, paid and certificate issued under KVSS, there is no justification for the assessing officer to reopen the assessment by a notice under section 143 of the Act except where any material particular furnished in the declaration is found to be false."
In the present case, as the assessing officer has not made a ground that the material particular furnished by the company was false, he could not have reopened the assessment, the Bench said.
