TMI Blog2021 (7) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... artment and directed the 1st respondent therein to issue a fresh Certificate of Intimation in the light of the order of the Division Bench. Needless to emphasise that the above decision applies with all its fours to the case on hand. This writ petition is allowed and the respondent authorities are directed to adjust the tax refundable to the petitioner for the year 1996-97 to the tax arrears instead of penalty and accordingly, re-determine the amount payable by the petitioner under Section 90(1) of the Finance (No.2) Act, 1998 and grant certificate expeditiously, but not later than four (4) weeks from the date of receipt of a copy of this order - Writ Petition No.18126 of 2000 - - - Dated:- 24-6-2021 - HON'BLE SRI JUSTICE U. DURG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal and set aside the additions, which were made by the assessing officer. (a) Aggrieved, the Department preferred second appeal before the Income Tax Appellate Tribunal (I.T.A.T) and the Tribunal vide its order dated 23.05.1996 was pleased to allow the I.T.A.No.1600/Hyd/1989 and reversed the order of the first appellate authority. Aggrieved, the petitioner filed Reference Application under Section 256(1) of the I.T. Act and the same was also rejected. Aggrieved, the petitioner filed I.T.C.No.145/1998 under Section 256(2) of the I.T.Act. (b) While the matter thus pending, the Union Parliament has enacted the Finance (No.2) Act, 1998 introducing a Tax Amnesty Scheme called Karvivad Samadhan Scheme to enable the tax payers to settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax of an amount of ₹ 4,86,970/-. By order dated 24.11.1997 passed under Section 143(1)(a) of the I.T. Act, the assessing authority adjusted the said amount towards arrears for the assessment year 1986-87. However, the said order was silent as to whether the amount was adjusted towards tax arrears or penalty. As a matter of fact, questioning the levy of penalty of ₹ 6,10,670/- the petitioner filed first appeal to the CIT (Appeals), Vijayawada and the same is pending. In the declaration filed under the KVS scheme, the petitioner in column No.6 has clearly mentioned that a tax arrear of ₹ 1,23,700/- relating to 1986-87 assessment year was pending after adjusting ₹ 4,86,970/- of refund. The petitioner was under the bona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above respective contentions of both sides. On a conspectus of material on record, we find the action of the respondents in adjusting the tax refund of ₹ 4,86,970/- towards penalty is legally impermissible. As rightly argued by the learned counsel for petitioner, the circular of the Board F.No.149/145/98-TPL dated 03.09.1998 is clear on this aspect. Clarification on questions 3 4 is germane at this juncture and it is thus: Question No.3: Where refund for an earlier year is adjusted against the demand of any year, will such an adjustment be regarded as the payment of tax? Answer : Yes. The adjust of refund payable is one of the modes of payment of taxes. Question No.4: Where the tax arrear comprises tax and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance (No.2) Act, 1998 and the KVS scheme thereof. The reasons for such non-application of explanation to Sec.140A(1) of the Income Tax Act are as follows: 16. It is no doubt true that if the issue is examined with reference to the Explanation to Section 140A(1) of the Income-tax Act, the contention of the Department would be correct. But the issue will have to be examined not with reference to Section 140A of the Income Tax Act, but with reference to the provisions of the KVS Scheme, as contained in Chapter IV of the Finance (No.2) Act, 1998. The Explanation to Section 140A(1) of the Income Tax Act will not apply for the following two reasons: (i) The provisions of Section 88 of the Finance (No.2) Act, 1998, prevail over t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income or arrears of taxes will be open for full waiver, if the taxes are outstanding on the specified dates, e.g., interest under Sections 234A, 234B, 234C, 139(8), 215, 216, 217, 158BFA, 220(2) or penalties under Sections 271(1)(c), 221, 158BFA, 273, etc. (emphasis supplied). On the above observations, the Division Bench set aside the method adopted by the Department and directed the 1st respondent therein to issue a fresh Certificate of Intimation in the light of the order of the Division Bench. Needless to emphasise that the above decision applies with all its fours to the case on hand. 7. Accordingly, this writ petition is allowed and the respondent authorities are directed to adjust the tax refundable to the petitioner for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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