Commissioner Duty Bound to Decide Appeal on Merits: High Court Clarifies Application of Kar Vivad Samadhan Scheme

Court remands G.S. Auto Industries tax case, emphasizing necessity of certificate issuance under Section 90(2) for appeal withdrawal.

The High Court of Punjab & Haryana has remanded a tax dispute involving M/S G.S. Auto Industries Pvt. Ltd. back to the Commissioner (Appeal) for fresh adjudication. The court clarified the application of Section 90 of the Finance (No.2) Act, 1998, commonly known as the Kar Vivad Samadhan Scheme, noting that the appellant's appeal should not have been dismissed as withdrawn in the absence of a certificate under Section 90(2).

M/S G.S. Auto Industries Pvt. Ltd., a private limited company engaged in manufacturing auto parts, sought to resolve its income tax litigation through the Kar Vivad Samadhan Scheme, 1998. The appellant initially filed a declaration under Section 89 of the scheme, but failed to pay the determined tax liability of Rs. 1,73,654 by the stipulated date. A second declaration was subsequently filed, which was rejected by the Commissioner (Appeal). The appeal was dismissed by the Income Tax Appellate Tribunal on the grounds of being deemed withdrawn under Section 90(4) of the scheme.

The High Court focused on the interpretation of Section 90, particularly subsections (2) and (4). The court noted that subsection (4) stipulates the deemed withdrawal of appeals only upon the issuance of a certificate under subsection (2).

The court stated, "From the perusal of sub-section (4) of Section 90 of 1998 Act, it is quite evident that it comes into play as soon as certificate under sub-section (2) of Section 90 of 1998 Act is issued by the competent authority. The said certificate is issued on payment of determined liability by the assessee."

The court emphasized that no certificate was issued under subsection (2) because the appellant did not pay the determined liability. "Unless and until the determined liability is paid, the certificate is not issued. In the case in hand, the appellant did not pay determined liability. Thus, there was no question of issuance of certificate under sub-section (2) of Section 90 of 1998 Act."

The court highlighted the objective behind subsection (4), which is to reduce pending litigation. Issuance of the certificate indicates that the matter is settled, and hence, pending appeals are deemed withdrawn. However, in this case, the absence of the certificate meant the matter was not settled.

Justice Jagmohan Bansal observed, "The jurisdictional Commissioner was duty bound to decide appeal of the appellant on merits. The issuance of certificate under sub-section (2) indicates that matter has been finally settled between the parties."

The High Court’s decision to remand the case underscores the importance of adhering to procedural requirements under the Kar Vivad Samadhan Scheme. The judgment clarifies that an appeal cannot be deemed withdrawn under Section 90(4) in the absence of a certificate under Section 90(2). This ruling ensures that tax disputes are resolved based on merit unless all procedural conditions are met, reinforcing the scheme's intent to fairly reduce litigation.

Date of Decision: July 11, 2024