TMI Blog1999 (5) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer at Rs. 98,38,07,930. The total tax including surcharge was determined at Rs. 49,51,66,047. The petitioner had however deposited an amount of Rs. 64,04,91,882 by way of tax. Thus, the petitioner was entitled to the refund of tax amounting to Rs. 14,53,25,835 besides interest amounting to Rs. 1,74,39,100. The total amount of refund worked out to Rs. 16,27,64,935. The petitioner filed an appeal before the Commissioner of Income-tax (Appeals) against the adjustments made by the Assessing Officer while processing the return under section 143(1)(a) of the Act. The appeal is said to be pending. The Assessing Officer vide letter dated March 26, 1997 (annexure P-4), informed the assessee that the amount of refund had been adjusted against the tax demands outstanding against the assessee relating to the earlier two assessment years. Out of the amount found refundable, a sum of Rs. 3,50,98,375 was adjusted by the Assessing Officer towards the tax demand relating to the assessment year 1994-95. The balance refund amounting to Rs. 12,76,66,560 was adjusted towards the tax demand arising in connection with the assessment year 1995-96. For the assessment year 1994-95 also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------- This is for your information." It would be useful to read section 245 of the Act : "245. Set off of refunds against tax remaining payable.---Where under any of the provisions of this Act, a refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section." The petitioner's challenge to the action relating to the set-off is primarily based on the intimation having been sent after adjustment and not before the adjustment. Shri Mittal has argued that no intimation in writing was sent by the Assessing Officer before making the adjustment of the refundable amount of tax. Refund of tax for the assessment year 1996-97 became due to the petitioner on March 19, 1997, when the return for that assessment year was processed by the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was rightly adjusted against the demand of tax for the other assessment years. Shri Sawhney has also argued that, in the absence of any specific provision in section 245 regarding the issue of notice before making adjustment, no such requirement can be assumed. Since section 245 simply requires that the Assessing Officer shall give an intimation in writing to the assessee, it would not mean that a prior show-cause notice should be issued before set-off. Shri Sawhney has placed reliance on two decisions of the Supreme Court : (i) A. K. Kraipak v. Union of India, AIR 1970 SC 150 ; and (ii) Union of India v. J. N. Sinha, AIR 1971 SC 40. Shri Sawhney has contended that, as laid down by the Supreme Court, the rules of natural justice may operate only in the areas not covered by any law. They do not supplant the law but supplement it. If a statutory provision could be read consistently with the principles of natural justice, the courts should do so. On a plain reading of section 245 of the Act, it would appear that this provision enables the Assessing Officer or other tax or appellate authorities to set off, after intimation to the claimant, the amount to be refunded or any pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be a requirement of giving intimation before making the adjustment. It would defeat the purpose of the provision if it is said that an intimation simpliciter, while making adjustment of the refundable amount towards the tax demand of other years, was sufficient. The facts in C. W. P. No. 10273 of 1997 may now be noticed. In this case, even the first condition under section 245 was not fulfilled. The petitioner filed on December 30, 1993, the annual return of interest-tax for the assessment year 1993-94 declaring net taxable interest at Rs. 2,77,96,97,855, on which interest-tax amounting to Rs. 8,33,90,936 was payable under the Interest-tax Act, 1974. Advance interest-tax amounting to Rs. 9,50,00,000 was already paid. Thus, excess interest-tax amounting to Rs. 1,16,09,064 had been paid by the petitioner. The Assessing Officer vide order dated December 16, 1995, under section 8(2) of the Interest-tax Act assessed interest income at Rs. 4,17,22,24,690 as against the net taxable interest income declared by the petitioner at Rs. 2,77,96,97,855. The petitioner filed appeal, which was allowed on January 15, 1997. For the next assessment year (1994-95), the petitioner declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75, 176, 178, 179, 220 to 227 (both inclusive), 228A, 229, 232, 237 to 245 (both inclusive), 254 to 262 (both inclusive), 265, 266, 268, 269, 281, 281B, 282, 284, 287, 288, 288A, 288B, 289 to 293 (both inclusive), the Second Schedule and the Third Schedule : Provided that references in the said provisions and the rules to the 'assessee' shall be construed as references to an assessee as defined in this Act." It would appear that the provisions regarding set-off as contained in section 245 of the Act were, by virtue of the deeming provisions of section 21 of the Interest-tax Act, made applicable to the set-off under the Interest-tax Act. It is provided that section 245 shall be applicable to the Interest-tax Act with necessary modifications as if it referred to the interest-tax instead of income-tax. It would mean that the provisions as contained in section 245 would apply mutatis mutandis to the interest-tax also as if such provisions formed part of the Interest-tax Act. If that be so, reference to the Income-tax Act in section 245 would stand substituted by reference to the Interest-tax Act. In that event, refund found due under the provisions of the Interest-tax Act may be se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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