IN THE HIGH COURT OF KERALA
There is no provision under the Finance (No. 2) Act specifically conferring any power on the designated authority (CIT) to cancel the certificate so issued under section 90(2); the second proviso to section 90 only enables the CIT to amend the certificate and not to cancel the same, therefore, the power to amend does not extend to cancel the certificate as such.
IN THE HIGH COURT OF KERALA
O.P.NO. 32887 OF 2000(M)
July 11, 2008
RELEVANT EXTRACTS :
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5. The facts are not in dispute. At the time when the assessee approached the Settlement Commission under Section 245C of the Income tax Act, admittedly an appeal was pending before the Commissioner of Income-tax (Appeals) against the order of assessment passed by the income-tax officer. It is true that the Settlement Commission processed the application and admitted the same in terms of Section 245D(1) of the Income Tax Act. But admittedly before final orders are passed thereon, the new Scheme of Finance (No.2) Act 1998 was introduced and the assessee claiming the benefit under the KVS Scheme applied before the designated authority under Section 95 of Finance (No.2) Act, 1998 and the designated authority determined the amount payable by the declarant in terms of Section 90 as per Ext. P1 order. Subsequently, a certificate was also issued. As per Section 90(2) such certificate issued under the scheme is conclusive, and no matter covered by such order shall be reopened by any proceedings under direct tax enactment or indirect tax enactment or under any law being in force and by virtue of sub section 4 of section 90, the appeal, if any, filed by the declarant, shall be deemed to have been withdrawn as on the date on which the order referred to in sub section 2 of section 90 was passed. Therefore, the appeal shall be deemed to have been withdrawn only when an order under sub section 2 of Section 90 is passed. Therefore, in the present case, the appeal is deemed to be pending as on the date on which an application under the scheme was filed. Thus Section 95(1)(c) of the Act has no application. In so far as the Finance (No. 2) Act 1998 is concerned, the only provision by which the appeal deemed to have been withdrawn is sub section 4 of Section 90 to which I have already made reference. The effect of section 245F(2) in my view, is only to confer exclusive jurisdiction on the Settlement Commission to exercise the powers and perform the function of the Income tax Authority under this Act which, means, the reference is to the Income tax Act, 1961 only. It does not in any way take away the jurisdiction conferred on the designated authority under the Finance (No.2) Act, 1998 specifically providing certain benefits to the assessee to be dealt with under the Scheme. Further conferment of exclusive jurisdiction is until final orders are passed under Section 245(D)(4) of the Income Tax Act only. That does not have the effect of closing the appeal itself, at that stage. It only precludes the authorities from exercising the jurisdiction under this Act and to keep in abeyance the proceedings until final orders are passed under Section 245D(4) of the Income tax Act. Sub Section 2 of Section 245F is only by way of an interim measure so as to enable the Settlement Commission to exercise all such powers of the Income tax Authorities so as to give a finality to the proceedings pending before it by passing a final order under Section 245D(4) of the Act. There is no other provision under the Income tax act which expressely states that once the matter is referred to the Settlement Commission, it will automatically have the effect of the appeal or any other proceedings being withdrawn. True that once a final order is passed by the Settlement Commission, the matter become conclusive in respect of the matters dealt with by the Commission. Admittedly, no such final order was passed by the Settlement Commission in this case and therefore there is no reason to hold that the appeal preferred by the assessee before the Commissioner of Income tax (Appeals) is deemed to have been withdrawn and to deny the benefit thereunder. In my view, the appeal, though cannot be proceeded with, must be deemed to be pending until final orders are passed under Section 245D(4) of the Income tax Act. The assessee has submitted an application before the designated authority at a time when the appeal was pending and it is only when a certificate under Section 90(2) is issued that the appeal finally stood withdrawn or closed by virtue of section 90(4) of Finance (No. 2) Act, 1998. Therefore, both the reasoning adopted by the Commissioner of Income tax, in my view, is erroneous and liable to be set aside.
6. Admittedly, a certificate was issued by the designated authority and became conclusive. It was thereafter that Ext. P2 was passed. There is no provision under the Finance (No. 2) Act, 1998 specifically conferring any power to cancel the certificate so issued. At any rate, the Commissioner has only referred to second proviso to Section 90 under the Scheme so as to assume the power. It is only by virtue of the second proviso to Section 90 that the Commissioner has passed the impugned order. The second proviso to Section 90 only enables the designated authority to amend the certificate and not to cancel the same. The word “Amend” in the Oxford Dictionary means, correct error in (document); make proposed minor improvements in; make better; so etc. Therefore, the power to amend does not extend to cancel the certificate as such. Admittedly, this is not a case to attract the first proviso. If so, in the factual situation, the Commissioner has no power to cancel the certificate issued in favour of the assessee.
In the result, Ext. P2 is quashed and the Original Petition is allowed.