Benefits of KVS Scheme shall be revived for the Appellant: Kerala HC

Issue  

The Writ petition filed to raise the subsequent questions before the law: 

Whether the encashments of seized Indira Vikas Patras (IVP’s) were carried out by the 1st respondent or the 2nd respondent? 

Whether the encashments of the seized Indira Vikas Patras (IVP’s) were in accordance with law? 

Whether the encashed amounts under the Indira Vikas Patras (IVP’s) were liable to be adjusted. If so, for which assessment years? 

Facts  

• The appellant was a homoeopathic practitioner at Kottayam. The income tax department conducted a search at the residence and clinic of the Homeopath on 30.12.1994. 
• Various documents, cash and several Indira Vikas Patras were recovered during the search. After the seizure of those assets, the assessee disclosed an amount of Rs,1,46,78,980/- for the assessment years 1990-91 to 1995-96 under section 132(4) of the Income Tax Act,1961. 
• On 28.4.1995 Assistant Commissioner of Income tax issued the order under section 132(5) of the Act, estimating the total income, the tax thereon, the interest and the penalty.  
• The IVP’s ‘retained’ were encashed through the postmaster and on different dates the realized amount was adjusted towards income tax allegedly due from the assessee for the period 1994-95 and 1995-96. When the KVS Scheme was introduced in 1998, the assessee could not claim the full benefit of the KVS Scheme, since by then, the tax arrears for the assessment years 1994-95 and 1995-96, were adjusted from the amounts obtained by encashing the IVP’s.  
• This adjustment disentitled the assessee to the benefit of the KVS Scheme. 
• Thereafter, assessee filed the petition before the Court wherein it was held that the encashment of IVP’s was valid and that the recovery and adjustments of tax and advance tax for the year 1995-96 were also proper. However, the recovery of tax and interest by adjustment from the encashed value of the IVP’s for all the other years effected prior to the due dates for such payments were held to be bad in law, and the same was directed to be reconsidered. 
• Aggrieved by the said judgment, the assessee is in appeal before this Court. 

Findings  

As per the provisions of Section 132(9A) of the Act, the authorized officer shall hand over all the seized assets, including documents, to the assessing officer within 15 days of seizure, and thereafter, the powers under sub-clause (8) and (9) of section 132 can be exercised only by such assessing officer. Thus after 15 days of seizure, the authorized officer cannot retain any of the seized documents or assets. Once the assessing officer comes into possession of the seized articles or documents, he is then obliged to pass an order under section 132(5) within 120 days of the seizure regarding five aspects. 

Judgement  

Therefore, it was held by this Court that the judgment of the learned Single Judge is set aside. Ext.P2 series and Ext.P3 series produced in the writ petition are hereby quashed. Ext.P5, insofar as it relates to the assessment years 1991-92, 1992- 93, 1993-94, 1994-95 and 1995-96, is also quashed. Even though the KVS Scheme is not in existence now, the appellant ought not to be prejudiced on account of the long pendency of this writ appeal before this Court. As the invocation of the IVP’s have been set aside and the consequent adjustment of the amounts encashed and restored status quo ante, the application for the grant of benefit under the KVS Scheme shall stand revived. The 3rd respondent shall pass fresh orders on the application claiming benefit of the KVS Scheme, in accordance with law. 

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