Andhra HC (Pre-Telangana)
Cil Securities Ltd., Hyd. vs Commissioner Of Income Tax, A.P. And ... on 17 December, 1999
Equivalent citations: 2000(4)ALD69, 2000(2)ALT541, [2000]242ITR472(AP)
Author: P. Venkataram Reddi
Bench: P. Venkataram Reddi
ORDER
V. Eswaraiah, J
1. The petitioner filed this writ petition to declare that the petitioner is entitled to the benefit of the Karvivad Samadhan Scheme-1998 (for short 'the Scheme') in respect of interest tax assessments for the assessment years 1994-95 and 1995-96 and consequently to set aside the order dated 10-2-1998 of Commissioner of Income Tax.
2. The Commissioner of Income Tax in the said order informed the petitioner that the declaration filed by him is lodged as there are no tax arrears remaining unpaid on the date of declaration as required under Section 87(m) of Finance (No.2) Act, 1998.
3. The petitioner-Company is carrying on business of stock broking, merchant banking, registrars and share transfer agents and investment banking. The petitioner-Company was contending that it was not liable to interest tax, and therefore, according to the petitioner, no return of income were filed for the assessment years 1994-95 and 1995-96. But, the Assessing Officer held that the Interest Tax Act was applicable, and accordingly assessments were completed vide his order dated 19-3-1998 assessing the total amounts payable for 1994-95 as Rs.93,032/- and 1995-96 as Rs.5l,458. The Assessing Officer simultaneously initiated penal proceedings under Section 13 of the Interest Tax Act. Aggrieved against the assessment orders, the petitioner filed appeals before the Commissioner of Income Tax (Appeals) and the said appeals are currently pending.
4. The petitioner filed a declaration on 29-12-1998 under Section 89 of the Finance Act to avail of KVS Scheme in respect of the interest tax determined for assessment years 1994-95 and 1995-96. But the declaration filed by the petitioner is lodged on the ground that there are no tax arrears remaining unpaid on the date of declaration.
5. The petitioner's learned Counsel submits that consequent to the assessment orders issued under Income Tax Act for the assessment year 1997-98, an amount of Rs.5,67,4477- was found refundable for the income tax assessment year 1997-98 and the same was adjusted against the arrears of interesi tax demand for the assessment years '994-95 and 1995-96 without giving any inlimation in writing before adjusting the refundable amounts. The petitioner submits that without giving a show-cause notice against the action proposed for setting off the refund, the refundable amount cannot be adjusted under Section 245 of the Income-Tax Act. It cannot be said that the tax was not due under the Interest Tax Act by the date of filing declaration when the dues payable under the Interest Tax Act are adjusted without giving any notice as contemplated under Section 245 of the Income Tax Act. Such action, according to the learned Counsel, is null and void.
6. It is the contention of the Department that the Scheme-1998 is applicable to a person, who is in arrears of tax by 31-3-1998 and on the date of declaration and in the instant case, the refund due under Income Tax Act to the tune of Rs.2.59,445/- was already adjusted before 31-3-1998 against the interest tax due and the said adjustment was never challenged, and therefore, the scheme is not applicable to the case of the petitioner as rightly intimated in the letter dated 10-2-1999,
7. The Deputy Commissioner of Income Fax (Assets), Special Range, Hyderabad, while scrutinsing return of income-tax of the petitioner for the assessment year 1997-98 intimated the proceedings dated 30-3-1998 under Section 143(1)(a) of the Income Tax Act, 1961, determining the total income tax payable and the refundable amount to the petitioner. The amount of Rs.1,14,955/-income tax demand for the assessment year 1996-97, an amount of Rs.93,032/- for the interest tax demand for the assessment year 1994-95 and an amount of Rs.51,428/-interest tax demand for the assessment year 1995-96 totaling Rs.2.59,415/- was adjusted and refundable amount of Rs.3,08,032/-was intimated under Section 143(1)(a) of the Income Tax Act. The said order of the Assessing Authority had become final as the petitioner had not chosen to question the same.
8. The Scheme came into force from 1-9-1998. The Scheme will apply to the petitioner if the disputed lax under the Interest Tax Act was not paid by 31-3-1998 and remains unpaid by the date of declaration. The disputed tax has already been adjusted by intimation dated 30-3-1998 under Section 143(1)(a) of the Act, and therefore, the petitioner was not in arrears of tax as on 31-3-1998, and therefore, we are of the view that the petitioner is not entitled for the benefit of the Scheme.
9. The contention of the learned Counsel for the petitioner that the disputed tax under the Interest "fax Act is adjusted under Section 245 of the Income Tax Act without giving any notice is not well founded as the set off of the refundable amount against the tax remaining unpaid cannot be said to have been made under Section 245. Section 245 applies to cases where under any of the provisions of Income Tax Act, a refund is found to be due to any person. The assessing authority may in lieu of the payment of such refundable amount under Income Tax Act, set off the amount to be refunded against the sum, if any, remaining payable under the same Act after giving an intimation in writing to the assessee of the action proposed to be taken under the Income Tax Act. Section 245 has no application for the adjustment of the demand of tax under the Interest Tax Act. The demand under Interest Tax Act was adjusted while finalising the assessment under Section 143(1)(a) of the Income Tax Act and the said intimation under Section 143(1)(a) has become final as the petitioner has not questioned the same.
10. As per the Scheme, if the disputed tax is found paid as on the date of making declaring under Section 88 of the Scheme, the Scheme is not applicable. A plain reading of the Scheme makes it clear that if the tax arrear is not existing on the relevant date, the Scheme has no application. There is no provision in the scheme empowering the designated authority to go into the legality of the adjustment made or sit in judgment over the intimation order made under Section 143(1)(a) of the Act.
11. The judgment of the Calcutta High Court in the case of J.K. Industries Limited v. Commissioner of Income Tax and others,, relied upon by the petitioner relates to the adjustment of the tax arrears against the refundable amounts under the income tax assessments in purported exercise of power under Section 245, and therefore, it has no application to the facts of the present case.
12. Viewing from any angle, I do not see any illegality of the order of the Commissioner of Income tax dated 10-2-1999, as there are no tax arrears remaining unpaid on the date of declaration as required under Section 87(m) of Finance Act, 1998. As already observed, the Commissioner is not empowered under the Scheme to decide as to whether interest tax demand for the year 1994-95 and 1995-96 were illegally adjusted and set off against the refundable amount under the Income-Tax Act or not.
13. I do not see any merits in the writ petition and it is accordingly dismissed. No costs.
P. Venkatarama Reddi, J
14. I am in agreement with my learned Brother that the writ petition ought to be dismissed. I am also in agreement broadly with the reasoning of the learned Judge. I would only supplement a few words in elaboration of the reasons given by my learned Brother.
15. I share the view of my learned Brother that the designated authority (hereinafter referred to as Commissioner) under Kar Vivad Samadhan Scheme cannot sit in judgment over the legality of the adjustment of tax. The Commissioner can only go by the factual position existing as on 31-3-1998 and on the date of filing the declaration in order to ascertain whether there was tax arrear. He can do so by scrutinsing the return and perusing the departmental records relating to assessment and recovery. He cannot embark upon an enquiry on the question whether the adjustment of tax for the payment of which the declaration is filed is legally valid. No such power is conceded to him either expressly or by necessary implication. The propriety of adjustment is a collateral issue which the Commissioner is not called upon to decide nor is; he invested with the power to do so. The Commissioner acting under the scheme must have regard to the factual position as it was vis-a-vis the tax arrear on the crucial dates. The Commissioner cannot go behind the adjustment done by the assessing Officer. He must accept the same as a 'fait accompli' and proceed to consider the question whether the assessee can invoke the Scheme.
16. Secondly, the proceeding relating to adjustment cannot in the instant case be ignored by the Commissioner treating it as a nullity and non-est in the eye of law. There is unmistakable indication in the present case that the assessee acquiesced in if not consented to such' adjustment. The adjustment of interest tax against the refund due under the Income Tax Act was never questioned by the petitioner as pointed out by my learned Brother, obviously because he did not find it detrimental to his interest. It cannot be said that the impugned 'adjustment', even if it is vitiated by procedural irregularity or failure in pulling the petitioner on prior notice, effaces itself out of existence and remains a dead letter I am inclined to think that the adjustment is not beyond the apparent authority of the assessing Officer nor docs it lack the sanction of law taking an overall view. The same Officer is the assessing authority under the Income Tax Act as well as Interest Tax Act. Though he acts in different capacities, he is empowered to recover the tax falling due under either of the enactments. It would have been open to him to attach the refundable amount due under the Income Tax Act for the purpose of recovering the outstanding interest tax. Instead of doing that, he has resorted to the mode of recovery by way of adjustment which did not evoke any sort of protest from the assessee. At best, it is a procedural irregularity, in fact, there is every reason to think that the adjustment was done with the implied consent of the assessee. The long silence of the assessee coupled with the fact that the learned Counsel for the assessee made it clear that the assessee did not have any grievance against the adjustment till the Scheme came into existence. reasonably gives rise to an inference that the adjustment made by the Assessing Officer had the nod from the petitioner. The adjustment suited both the parties. In this situation, it cannot be contended that the adjustment must be ignored by treating it as an act of nullity. If at all, it was voidable, but the assessee having consented or at any rate acquiesced in the act of adjustment, it is not open to the petitioner to question the same in a collateral proceeding. At any rate, he cannot request the designated authority to reopen the issue of adjustment at the stage of processing his declaration. I am unable to agree with the view expressed by the learned single Judge of Calcutta High Court in J.K. Industries' case, that the validity of adjustment (in that case it was under Section 245) could be raised before the designated authority under the scheme at any time and such authority should ignore the adjustment if it was in violation of (he prescribed procedure or principles of natural justice. That would amount to unsetting the settled facts and unduly stretching the provisions of the Scheme. Even if there was violation of principles of natural justice while effecting the adjustment, the Court can as well refuse to exercise its discretion to invalidate such adjustment having regard to the fact sand circumstances of the case, vide observations In M.C. Mehta v. Union of India, . The circumstances pointed out above afford sufficient justification not to exercise the discretion. After referring to earlier pronouncements, the Supreme Court observed in the said case:
"We may also state mat there is yet another line of cases as in Stale of Bank of Patiala v. S.K. Sharma, , Rajendra Singh v. State of Madhya Pradesh, , that even in relation to statutory provisions requiring notice, a distinction is to be made between cases where the provision is intended for individual benefit and where a provision is intended to protect public interest. In the former case, it can be waived while in the case of the latter, it cannot be waived."
17. The conduct of the assessee is an unequivocal indication that he waived the requirement of notice before adjustment and that is permissible in law. The petitioner having refrained from questioning the adjustment and having acquiesced in it, is estopped from contending before the Income Tax Authorities that he is not bound by such adjustment. Nor can the Court consider such adjustment 'ab initio' void or non-cat in the eye of law.
18. With the above clarificatory note, I agree with my learned Brother that the writ petition should be dismissed.