TMI Blog2009 (2) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... Gopinath for the petitioner. P. K. R. Menon and Jose Joseph for the respondent. JUDGMENT S.SIRI JAGAN J. - The petitioner is an assessee under the Income Tax Act. Certain amounts were assessed as due from him under the Income tax Act by Exhibit P1 assessment order, which was subjected to challenge before the Income Tax Appellate Tribunal. While that appeal was pending, by the Finance (No.2) Act of 1998, a Scheme was introduced by the Parliament, by name, "Kar Vivad Samadhan Scheme", whereby on a declaration made by an assessee in accordance with the provisions of the Scheme in respect of tax arrears due from an assessee, the amount payable under the Kar Vivad Samadhan Scheme by the declarant shall be determined at the rates specified in that Scheme and the declarant would only be liable to pay that amount, instead of the actual amount due. The petitioner filed a declaration, Exhibit P2 dated 24.12.1998, before the respondent claiming the benefit of the Scheme in respect of an amount of Rs.26,82,606/- due as interest from the petitioner as per Exhibit P1 assessment order. Pursuant thereto, Exhibit P3 order dated 5.2.1999 was passed, whereby the petitioner was given ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner should be allowed to retract from the declaration under the Kar Vivad Samadhan Scheme and must be permitted to pursue the appeal against the assessment order itself. The second is that in view of the specific stipulation in Section 245 of the Act, which requires the assessing officer to put the petitioner to notice on the proposal to adjust the refund against tax payable before making the adjustment, which has not been done in this case, the adjustment itself is bad and, therefore, for the purpose of Kar Vivad Samadhan Scheme, the respondent could not have legally taken into account the adjustment of the refund for the purpose of determining the amount due from the petitioner under the Kar Vivad Samadhan Scheme. The petitioner relies on the following decisions in support of his contentions that the refund could not have been adjusted without a prior notice regarding the proposal to adjust refund against tax due and also in support of the contention that such invalid adjustment of refund could not have been taken into account for the purpose of determining the amounts payable by the petitioner pursuant to Kar Vivad Samadhan Scheme: Hiralal and Sons v. Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a whole, it is celar that there is no prohibition in an assessee retracting from the declaration filed under the Scheme. He would further submit that the fact that he had not challenged the revisional order which was passed pending the original petition, does not prevent the petitioner from pursuing the original petition, in which he had specifically challenged the validity of the adjustment of refund of tax due to him also. He would submit that, at the most, the same is only a technicality which shall not stand in the way of giving justice to the petitioner, if he is otherwise entitled to the same. 7. I have considered the rival contentions in detail. 8. First I shall consider the question as to whether the petitioner can now validly retract from the declaration made under the Scheme. Section 90 of the Scheme reads thus: "90. Time and manner of payment of tax arrear. - (1) Within sixty days from the date of receipt of the declaration under section 88, the designated authority shall, by order, determine the amount payable by the declarant in accordance with the provisions of this Scheme and grant a certificate in such form as may be prescribed to the declarant setting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad Samadhan Scheme has been passed, the Tribunal before whom an appeal is pending, does not have jurisdiction to deal with the appeal in so far as that appeal shall be deemed to have been withdrawn, which is the specific condition of the Kar Vivad Samadhan Scheme. The petitioner's contention on the basis of the other sub section does not find favour with me on that point. Therefore, I have no doubt in my mind that once an order under the Scheme has been passed on the declaration by the assessee, which is Exhibit P3 in this case, the Tribunal cannot validly entertain the appeal at all. That being so, the petitioner cannot now be allowed to retract from the declaration already made. If that is allowed, then the very purpose of the Scheme would be defeated. Any assessee after finding that the order under the Scheme is not favourable to him, can turn around and retract his declaration, if such a permission is granted which is not contemplated by the Scheme. Further the petitioner filed Exhibit P2 declaration dated 24.12.1998 after being made aware of the adjustment of refund by Exhibit P5 dated 7.9.1998 served on the petitioner on 24.9.98. Therefore, there is no merit in the first con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have its say in the matter. It is obvious that the petitioner can legitimately urge that prejudice has been caused to it and that in case an opportunity was afforded to it, it would have succeeded in satisfying the respondents that no amount, from out of the amount which became due for refund to it in pursuance of the order of the Tribunal, could be adjusted towards any tax liability of Hiralal Mithal. The petitioner's grievance in this respect is well founded." In J.K.Industries Ltd.'s case [1999] 238 ITR 820 the Calcutta High Court held thus ( page 823): "The wording of the section leaves no manner of doubt that the proposed adjustment is to be intimated to the assessee. Since the adjustment at the time of intimation is only a proposed one, the intimation has to go before the adjustment has been made. If the assessee objects to the proposed adjustment, whether the Revenue can nonetheless make such an adjustment on its unilateral decision, is a point which does not fall for my consideration. But quite clearly the Revenue has no jurisdiction to make an adjustment of a refund without following section 245 and without giving a prior intimation to the assessee as required b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n) (1996) 222 ITR 620 (MP). 10. Since there has been no intimation in terms of sec. 245 of the Act, therefore, the petitioner has been deprived of his right to raise any objections to the order of adjustment. Therefore, the intimation to the extent of adjusting the amount is quashed. ' 15. I am in respectful agreement with the above decisions on the point as to whether adjustment of refund under Section 245 can be made without a prior intimation to the assessee regarding the proposal for such adjustment. In this case admittedly, there was no intimation of any proposal to make adjustment as required under Section 245. What has been done is only to intimate the petitioner about the amount of refund due, on the foot of which intimation, an endorsement has been made stating that the refund has been adjusted against the tax due for the year 1989-90, which is the assessment year for which the petitioner filed declaration under the Kar Vivad Samadhan Scheme. 16. Normally in view of my findings on the 2 nd contention of the petitioner, the petitioner should succeed in this original petition. However, still I have to consider the other contentions raised by the Revenue in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have successfully challenged the adjustment of refund. The fact that the appeal was pending, is no valid ground for objecting to the refund. There is no law saying that refund cannot be adjusted under Section 245, if an appeal against tax assessed, against which the adjustment of refund is to be made is pending. Further, the argument that since the declaration of the petitioner under the Kar Vivad Samadhan Scheme is pending, adjustment cannot be made also does not appeal to me. If before Ext.P3 order was passed the question of refund had been considered after due notice to the petitioner the fact that proceedings under the Kar Vivad Samadhan Scheme are pending would have been no valid ground to object to the refund. It is not as if simply because the petitioner objects to the refund, the Revenue would be prevented from adjusting the refund. Adjustment of refund is a power vested with the Revenue under section 245, which they can validly exercise, if the objections raised by the assessee are not valid. In this case, the petitioner has not been able to point out any valid objection against the adjustment now made. Further, immediately after issue of Exhibit P5 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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