Tax Refund Reopening KVSS Settlement Is Impermissible Due To Bar Under Section 90(3)

KVSS Settlement: The assessee filed a declaration under the Kar Vivad Samadhan Scheme (KVSS) for Assessment Year 1995-96.

Determination & Payment: The designated authority issued a certificate dated 03.02.1999 determining total outstanding tax arrears at ~₹50.30 crores (tax of ~₹22.13 crores + interest of ~₹28.17 crores) and set the payable sum under KVSS at ~₹16.84 crores. The assessee paid this amount in full and final settlement.

Subsequent Recomputation: Pursuant to a Tribunal order for AY 1994-95, the Assessing Officer (AO) recomputed the brought-forward loss and set it off against the income of AY 1995-96.

AO’s Refund Denial: The AO held that no refund could be granted for the income portion covered under the KVSS settlement (~₹16.84 crores paid). The AO granted a refund of ~₹1.08 crores for a subsequent addition (~₹0.81 crores) not covered by KVSS, but denied a refund for the remaining balance of ~₹3.22 crores.

Tribunal Order: The ITAT directed that the tax (~₹4.03 crores) attributable to the brought-forward loss set-off be refunded to the assessee.

High Court Ruling: The High Court reversed the ITAT’s order, holding that refunding tax on the brought-forward loss would alter the underlying tax demand for AY 1995-96, thereby reopening a conclusive settlement in violation of the bar contained in Section 90(3) of the Finance (No. 2) Act, 1998.

The Supreme Court held that no case for interference was made out against the High Court’s order.

The Special Leave Petition (SLP) filed by the assessee was dismissed.

The issue was decided in favour of the Revenue.

Finality and Conclusiveness of KVSS: An order determining the sum payable under the Kar Vivad Samadhan Scheme is final and conclusive regarding the matters settled therein.

Statutory Bar Against Reopening: Under Section 90(3) of the Finance (No. 2) Act, 1998, matters settled under the KVSS cannot be reopened in any proceeding under any direct tax enactment or any other law.

No Refund Post-Settlement: Subsequent adjustments, such as fresh set-off of brought-forward losses from other assessment years, cannot be used to claim a refund or disturb the tax demand settled under a amnesty or dispute-resolution scheme.