1999 (4) TMI 62 - HC - Income Tax

Summary

Issues Involved:

1. Legality of the adjustment of seized cash against existing tax liability for the assessment year 1994-95.
2. Validity of the rejection of the declaration under the Kar Vivad Samadhan Scheme, 1998.

Summary:

1. Legality of the Adjustment of Seized Cash:

The petitioner challenged the adjustment of Rs. 24,25,810 against the tax arrears for the assessment year 1994-95. The petitioner argued that the seized cash should be adjusted towards the tax liability arising out of the block assessment u/s 132 of the Income-tax Act, 1961. The petitioner contended that the adjustment was made without prior notice or opportunity, making it illegal. The respondents justified the adjustment u/s 158BC(b) read with section 132B(1) of the Act, which permits adjustment of seized cash towards existing tax liability.

The court held that the provisions of Chapter XIV-B, which deals with block assessments, override all other provisions of the Act. The court stated that the seized assets should first be adjusted against the block assessment liability, and only any surplus should be adjusted against existing tax liabilities. The court found that the adjustment made by the Assessing Officer was not valid or justified as it did not adhere to the priority of adjustments prescribed under Chapter XIV-B. Consequently, the impugned order dated November 18, 1998, was set aside.

2. Validity of the Rejection of the Declaration under the Kar Vivad Samadhan Scheme, 1998:

The petitioner filed a declaration under the Kar Vivad Samadhan Scheme, 1998, which was rejected on the ground that there were no arrears of tax for the assessment year 1994-95. The court, having found the adjustment of Rs. 24,25,810 towards the tax liability for 1994-95 to be invalid, held that the petitioner was indeed in arrears of income-tax for the assessment year 1994-95 as of March 31, 1998. Therefore, the rejection of the declaration under the Kar Vivad Samadhan Scheme was also unjustified. The court quashed the impugned order in W.P. No. 1424 of 1999 and directed the designated authority to proceed under the Kar Vivad Samadhan Scheme to determine the petitioner's liability for the assessment year 1994-95.

Conclusion:

Both writ petitions were allowed, and the rule nisi was made absolute, with no order as to costs.