Madras High Court
Sabena Detergents Ltd. vs Commissioner Of Income Tax on 17 November, 2000
Equivalent citations: (2001)165CTR(MAD)147
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu
JUDGMENT R. Jayasimha Babu, J.
Petitioner complains that section 245 of the Income Tax Act was not complied with before the refund of a sum of Rs. 12 lakhs for the assessment year 1996-97 was adjusted towards the arrears of tax, in the calculation of the amount outstanding as on 31-3-1998, which is the material date for determining the extent of the relief to be granted to those availing the Samadhan Scheme.
2. The petitioner does not dispute the fact that he had in fact received an intimation under section 143(1)(a) of the Act for the assessment year 1996-97, in which the amount of refund payable to him had been set out. That order itself states prepaid tax adjustment: that refund is adjusted against tax due for 1995-96". Despite that intimation having been received by the assessee, the assessee did not communicate any reason to the department as to why the adjustment as proposed therein should not be made. The assessee chose to remain silent.
3. It is only after the amounts payable by the petitioner when he opted for the Samadhan Scheme was calculated, and the petitioner was called upon to pay a sum of Rs. 8,46,456, which sum was determined after taking into account the adjustment of the refund of Rs. 12 lakhs for the year 1996-97 against the tax arrears due, that the petitioner came forward to contend that the adjustment should not have been made.
4. Learned counsel for the petitioner submits that section 245 of the Act is mandatory, that it contemplates a notice being given to the assessee before the adjustment is made, that it contemplates a hearing to be given to the assessee, and that the proceedings are quasi judicial in nature. Counsel submitted that such hearing not having been given, the adjustment was without jurisdiction and is required to be ignored. Counsel placed reliance on the decision of the Allahabad High Court in the case of Hira Lal & Ors. v. CIT (1985) 156 ITR 30 (All), wherein without referring to any of the provisions of the Income Tax Act, a general observation was made that proceedings for adjustment of amount towards tax liability out of any sum due to the assessee by way of refund are quasi judicial in nature. With respect, I am unable to subscribe to that view. There is nothing in section 245 of the Act to warrant the conclusion that the task of adjusting the refund towards the arrears of tax payable by the assessee is a quasi judicial proceeding. Section 215 of the Act in terms does not require any show-cause notice being given, calling upon the assessee to explain as to why the adjustment should not be made, nor does it contemplate any hearing. All that section 245 of the Act requires the authorities to do is to make a readjustment after giving an intimation in writing to such person of the action proposed to be taken under this section. The authorities are not required to go beyond that the section itself requires them to do.
5. If, after the intimation is given, the assessee were to make out of a case for directing the authorities not to make the adjustment for good reasons, or to make the adjustment in a particular way any such representation on his part would certainly require the consideration of the authority before making the adjustment. But, even without making a representation, the assessee cannot contend that a show-cause notice ought to have been issued apart from intimation, and that a date for a formal hearing fixed before proceeding to make the actual adjustment.
6. Counsel next relied on a decision rendered by the Delhi High Court in the case of Vijay Kumar v. CIT (1994) 205 ITR 110 (Del). The court therein reiterated what the section itself provides viz., that for before adjustment intimation has to be given in writing to the assessee of the action proposed to be taken.
7. Reliance was also placed on the decision of the Bombay High Court in the case of Suresh B. Jain v. A. N. Shaikh (1987) 165 ITR 151 (Bom), wherein again, it was held that the adjustment can only be after giving intimation in writing to the person of the proposed action. In that case, it was found that no such intimation had been given, which rendered the action of the Income Tax Officer illegal.
8. Counsel then invited attention to the decision of this court in the case of K.T. Kunjumon v. CIT (1999) 239 ITR 782 (Mad). There is nothing in that decision which would assist the petitioner to support his contention. That was a case of a block assessment, and the court found that the adjustment of cash which had been seized from the assessee, first against that existing tax liability could not be regarded as valid.
9. Reliance was lastly placed on a decision by a learned Single Judge of the Calcutta High Court in the case of Bank of Tokyo Mitsubishi Ltd. v. CIT (1999) 240 ITR 331 (Cal), it was emphasised therein that under section 245 of the Act, prior intimation of the proposed adjustment must originate from the revenue , and in that case, no such prior intimation had been given.
10. These decisions, therefore, do not advance the case of the petitioner any further.
11. The adjustment having been made after due intimation to the petitioner, there is no error in the computation of the amount payable by the petitioner under the Samadhan Scheme. The writ petition is, therefore, dismissed. No costs. Consequently, W.M.P. No. 7997 of 1999 is dismissed.