2003 (2) TMI 57 - HC - Income Tax

KVSS - permissibility of adjustment/set off of refund available with the Department towards tax arrears in terms of the Scheme under section 245 - In the light of the definition of the designated authority , it is not possible for other officers to provide for any adjustment in terms of section 245 of the Act. Therefore, the respondents are right in saying that a close reading of the income-tax provisions to the Scheme would show that the adjustment is not permissible in law in terms of section 245 of the Act. II Further it is held that the time limit for payment under Kar Vivad Samadhan can not be exteneded once amount determined payable under the Scheme.

Summary

Issues Involved:
1. Permissibility of adjustment/set off of refund available with the Department towards tax arrears in terms of the Kar Vivad Samadhan Scheme, 1998.
2. Adherence to the time schedule in terms of section 90(2) of the Scheme.

Detailed Analysis:

Issue 1: Permissibility of Adjustment/Set off of Refund

The petitioner argued that the word "pay" under section 90 should include the adjustment of the excess amount available with the respondents. The petitioner relied on a clarification regarding the Kar Vivad Samadhan Scheme, 1998, which stated that "the adjustment of refund payable is one of the modes of payment of taxes." Counsel for the petitioner also referenced section 245 of the Income-tax Act, which allows for the set off of refunds against tax remaining payable.

However, the respondents contended that the Scheme is an independent and self-contained Scheme that does not provide for such adjustments. The court agreed with the respondents, stating that section 245 is not applicable to the Scheme. The court noted that the designated authority under the Scheme is defined specifically and does not include other officers who might have the authority to set off refunds under section 245. The court cited the Gujarat High Court's decision in Gufic Pharma Ltd. v. J. G. Arora, which emphasized the distinct roles of the designated authority and other officers. Consequently, the court rejected the petitioner's argument for adjustment.

Issue 2: Adherence to the Time Schedule

The petitioners did not make the required payments within the 30-day period specified in section 90(2) of the Scheme. They argued that the delay was due to pending adjustment proceedings. The court examined several judgments related to similar Schemes, including the Voluntary Disclosure of Income Scheme, 1997.

The Supreme Court's decision in Hemalatha Gargya v. CIT was particularly influential. The apex court ruled that the statutory requirement to pay within the specified time is mandatory and that there is no scope for equitable considerations or extensions beyond the terms of the Scheme. The court noted that the use of the word "shall" in section 67(1) of the Voluntary Disclosure of Income Scheme, 1997, indicated a mandatory requirement, and failure to comply within the specified time resulted in the declaration being deemed never to have been made.

The court applied the same reasoning to the Kar Vivad Samadhan Scheme, 1998, concluding that the time schedule must be strictly adhered to. The court dismissed the petitioners' argument for an extension, stating that the binding apex court ruling in Hemalatha Gargya v. CIT left no room for equitable considerations or extensions in similar Schemes.

Conclusion:

The court rejected both contentions raised by the petitioners. It held that the adjustment of refunds against tax arrears is not permissible under the Kar Vivad Samadhan Scheme, 1998, and that the time schedule specified in section 90(2) must be strictly followed. Consequently, the petitions were dismissed, and the endorsements issued by the respondents were upheld.