1999 (6) TMI 34 - HC - Income Tax

Summary

Issues involved:
The judgment involves the acceptance of declarations under the Kar Vivad Samadhan Scheme for assessment years 1991-92 and 1992-93, disputes over tax outstanding, adjustments made by the Revenue, compliance with section 245 of the Income-tax Act, 1961, and the legality of adjustments without prior intimation to the assessee.

Acceptance of Declarations under Kar Vivad Samadhan Scheme:
The assessee filed declarations for the two assessment years, offering to settle outstanding amounts of approximately Rs. 95 lakhs and Rs. 2 crores 94 lakhs by payments of Rs. 47 lakhs and Rs. 1 crore 47 lakhs, respectively. The designated authority rejected the request citing no tax outstanding according to the Revenue's records.

Compliance with Section 245 of the Income-tax Act:
The Revenue made adjustments without prior intimations to the assessee as required by section 245 of the Income-tax Act, 1961. The court emphasized the mandatory nature of section 245, stating that adjustments of refunds cannot be made without prior intimations to the assessee, as it is a special right of set off given to the Revenue.

Legality of Adjustments and Cash Recovery:
The adjustments made by the Revenue, totaling approximately Rs. 6 crores, were found to be ineffective due to non-compliance with section 245. Additionally, a cash recovery from an employee's house for a different assessment year was deemed premature and illegal, as it was subject to appeal.

Judicial Opinion and Discretionary Relief:
The court highlighted that prior intimation of adjustments to the assessee is essential, and the Revenue's actions without compliance render adjustments ineffective. The assessee's silence to adjustments does not disentitle them to discretionary relief, especially when seeking to undo adjustments for financial advantage.

Court's Decision and Future Proceedings:
The writ application succeeded, confirming the interim order and directing the designated authority to issue a final certificate of immunity under the Kar Vivad Samadhan Scheme. The assessee was granted liberty to pursue refund or recovery of adjusted amounts in accordance with the law, with no order as to costs.

Conclusion:
The judgment upheld the importance of following legal procedures, emphasized the mandatory nature of section 245, and granted relief to the assessee based on the non-compliance of the Revenue with the statutory provisions.