2005 (8) TMI 278 - AT - Income Tax

Summary

Issues:
1. Adjustment of tax refund for assessment year 1997-98 against the outstanding demand for assessment year 1992-93.
2. Compliance with the provisions of the Kar Vivad Samadhan Scheme, 1998 (KVSS).
3. Validity of adjustments made by the tax department without prior intimation to the assessee.
4. Grant of interest under section 244A of the Income Tax Act.

Analysis:

Issue 1: Adjustment of tax refund for assessment year 1997-98 against the outstanding demand for assessment year 1992-93:
The case involved the adjustment of a tax refund for assessment year 1997-98 against the outstanding demand for assessment year 1992-93. The assessee contended that no intimation was received regarding this adjustment and questioned the validity of the adjustment. The Tribunal found that no adjustment had been made by the tax department in its records, as evidenced by the pursuit of the demand for assessment year 1992-93 in January 2002 without deducting any refund for assessment year 1997-98. The Tribunal held that since there was no adjustment of the refund due to the assessee, the right to claim the refund was unequivocal. The order of the CIT(A) was reversed, and the Tribunal directed the issuance of a refund to the assessee as per law.

Issue 2: Compliance with the provisions of the Kar Vivad Samadhan Scheme, 1998 (KVSS):
The assessee had filed a declaration under the Kar Vivad Samadhan Scheme, 1998 (KVSS) to settle tax arrears for assessment year 1992-93. The Tribunal noted that the Designated Authority's certificate under the KVSS was final and conclusive proof of the settlement. The Tribunal emphasized the mandatory nature of the provisions of the KVSS and upheld the assessee's right to the settlement as determined under the Scheme.

Issue 3: Validity of adjustments made by the tax department without prior intimation to the assessee:
The Tribunal highlighted the mandatory nature of section 245 of the Income Tax Act, requiring prior intimation to the assessee before any adjustment of refunds. It noted that adjustments made without intimation and opportunity for objection would be bad in law. Citing relevant case law, the Tribunal emphasized the importance of following due process and providing the assessee with a chance to raise objections before making adjustments.

Issue 4: Grant of interest under section 244A of the Income Tax Act:
The Tribunal addressed the grant of interest under section 244A of the Income Tax Act. It clarified that the provision for interest was mandatory, and the Assessing Officer (AO) was obligated to grant interest along with the refund. The Tribunal directed the AO to ensure compliance with the provisions of section 244A and instructed the assessee to file a separate application under section 154 of the Act if interest for a specific period was warranted.

In conclusion, the Tribunal allowed the appeal, directing the issuance of the refund to the assessee and addressing the concerns related to compliance with the KVSS, adjustments made by the tax department, and the grant of interest under section 244A.