ALANG SHIP BREAKERS LTD. vs. THE DEPUTY COMMISSIONER OF INCOME TAX and ORS.

Oral Judgment (Per M.S.Sanklecha, J) 1 None appears for respondent. This even though the respondent had waived service on 11th August 1999 at the time of admission.

2 This petition under Article 226 of the Constitution of India challenges the order dated 12th February 1999 passed by the respondent No.2, the Commissioner of Income Tax i.e. the designated authority under the Kar Vivad Samadhan Scheme 1990 (Samadhan Scheme), which was issued as a part of Finance (No.2) Act, 1998. RK MOre 1 of 8 CNR No : HCBM020037181999 Uploaded on - 17/09/2020 (201)wp 1416-1999 3 By the impugned order dated 12th February 1999 the petitioner's declaration dated 27th January 1999 fled under Section 88 of the Samadhan Scheme to settle the dispute for the assessment year 1991-1992 was rejected. This on the ground that there were no outstanding arrears of income tax as on 31st March 1998 i.e. a qualifying condition to avail of the Samadhan Scheme. 4 Briefly, the facts leading to this petition are that for the assessment year 1991-1992 an assessment order was passed on 28th February 1994 under Section 143(3) of the Income Tax Act, 1961 (Act) determining the total income at Rs.24.24 lakh as against Rs.11.47 lakh declared in the return of income. This enhancement of income was on account of disallowing of deductions under Section 80HHA and 80I of the the Act. 5 Being aggrieved, the petitioner fled an appeal against the order dated 28th February 1994 of the Assessing Ofcer to the Commissioner of Income Tax Appeals (CIT(A)). By an order dated 25th November 1994, the petitioner's appeal was dismissed by the CIT(A). 6 Being aggrieved with the order dated 25th November 1994 of the CIT(A), the petitioner fled an appeal before the Income Tax Appellate Tribunal (Tribunal). The above appeal was pending as on 1st September 1998 when the Samadhan Scheme came into force. 7 Consequent to the above, on 27th January 1999 the petitioner fled declaration under Section 88 of the Samadhan RK MOre 2 of 8 Uploaded on - 17/09/2020 (201)wp 1416-1999 Scheme seeking to inter alia settle its pending dispute before the Tribunal by availing of the Samadhan Scheme. In its declaration the petitioner declared that the tax outstanding i.e. tax arrears as on 31st March 1998 was Rs.7.56 lakhs and interest outstanding was Rs.10.06 lakhs i.e. aggregating to Rs.17.63 lakh. In the declaration, the petitioner for the frst time points out that this demand of Rs.17.63 lakh in respect of the assessment year 1991-1992 had been illegally adjusted against the refunds which were due to it for the assessment year 1994- 1995 and 1995-1996. This adjustment made on 18th November 1996, according to the petitioner, was in defance of Section 245 of the Act, as the same was in absence of an intimation. 8 On 12th February 1999 the impugned order was passed rejecting the declaration. This on the ground that as per the record of the department there were no income tax arrears outstanding as on 31st March 1998. 9 The petitioner has fled this petition challenging the impugned order dated 12th February 1999 inter alia on the ground that the adjustment of the refund against the pending demand of Rs.17.63 lakh for the assessment year 1991-1992 done on 18th November 1996 was in violation and contrary to Section 245 of the Act. This is so, as this adjustment was done without any intimation to the petitioner. Therefore, if the adjustment of the pending demand of the refund payable made on 18th November 1996 is set aside/ignored then there would be tax arrears as on 31st March 1998. RK MOre 3 of 8 Uploaded on - 17/09/2020 (201)wp 1416-1999 10 This petition was admitted on 11th August 1999, However no interim relief was granted to the petitioner. 11 Mr. Gopal, the learned Counsel for the petitioner very fairly points out that after the petition was admitted, the petitioner's appeal for the assessment year 1991-1992 pending with the Tribunal was heard and fnally disposed of on 6th July 2003 adverse to the petitioner. The petitioner accepted the order dated 6th July 2003 of the Tribunal and has not challenged it.

12 Mr. Gopal, the learned Counsel, in support of the petition submitted that as on 31st March 1998 there were income tax arrears of Rs.17.63 lakh as the adjustment of demand (income tax arrears) with the refund due for the assessment years 1994- 1995 and 1995-1996 was invalid in law. This in the absence of any intimation being given to the petitioner under Section 245 of the Act. Thus, the declaration dated 27th January 1999 fled under Section 88 of the Samadhan Scheme ought to have been accepted and the impugned order dated 12th February 1999 is unsustainable in law. In support, he places reliance upon the decision of the Karnataka High Court in Fosroc Chemicals (India) Ltd. v. Commissioner of Income-Tax and another1 , J.K. Industries Ltd. v. Commissioner of Income-Tax and others (Calcutta High Court)2, Bank of Tokyo Mitsubishi Ltd. v. Commissioner and others(Calcutta High Court)3 and M.D. Ali Khan and another v. Commissioner of Income-Tax and another 1 248 ITR 607 2 238 ITR 820 3 240 ITR 331 RK MOre 4 of 8 Uploaded on - 17/09/2020 (201)wp 1416-1999 (Patna High Court)4 . 13 It is, further, submitted that the petitioner had no option but to proceed with the hearing of the pending appeal before the Tribunal on merits for the assessment year 1991-1992 which has led to the fnal order dated 6th July 2003. This for the reason that the petition had not come up for hearing and inspite of best eforts, the petitioner was unable to obtain adjournment before the Tribunal. In view of the above, it is submitted that the fact that the petitioner prosecuted its appeal before the Tribunal should not deprive the petitioner of its right in law to settle the dispute under the Samadhan Scheme by allowing its challenge to the impugned order dated 12th February 1999. 14

We have considered the submission made on behalf of the petitioner. The condition precedent to avail of the SamadhanScheme is that there must be a pending appeal under the Act and there must be arrears of tax payable as on 31st March 1998 as well as on the date when the declaration is fled. It is an undisputed position before us that as on 31st March 1998 as well as on the date when the declaration was fled, there were no tax arrears payable by the petitioner to the Revenue. Only the appeal in respect of assessment year 1991- 1992 was pending before the Tribunal. It is the case of the petitioner that it cannot be said that there were no arrears as on 31st March 1998 for the reason that the adjustment of the demand of Rs.17.63 lakh out of the refund due to the petitioner for the assessment years 1994-1995 and 1995-1996 without the 4 248 ITR 753 RK MOre 5 of 8 Uploaded on - 17/09/2020 (201)wp 1416-1999 authority of law as much as no intimation as required under Section 245 of the Act was given to the petitioner. Therefore, in law, there is no adjustment of the demand of tax. Consequently there are tax arrears as on 31st March 1998 as well as on the date of fling of the declaration. It is not disputed that the petitioner was aware of the adjustment of the demand of Rs.17.63 lakhs relating to assessment year 1991- 1992 with refunds due to the assessment years 1995-1996 and 1995-1995 took place on 18th November 1996, at around the same time. However, the petitioner did not make any grievance in respect of the same at that point of time. It is only now when the Samadhan Scheme was formulated that the petitioner wants to avail of it that has led the petitioner to challenge the order passed far back on 18th November 1996 i.e. over two years prior to the fling of the declaration. The Samadhan Scheme does not contemplate unsettling settled matters, create a tax dispute so as to settle under the Scheme. 15 Moreover, this adjustment was done under Section 245 of the Act and setting aside the order of adjustment is sought to be done under the Samadhan Scheme which is a part of the Finance (No.2) Act 1998. This on the face it cannot be done for the reason that the Samadhan Scheme is part of diferent statute from the Income Tax Act. The orders passed under the Income Tax Act have to be challenged before the Authorities under the Income Tax Act and it cannot be challenged under the Samadhan Scheme which is part of Finance (No.2) Act, 1998. Therefore, the petitioner for the RK MOre 6 of 8 Uploaded on - 17/09/2020 (201)wp 1416-1999 period of over two years accepted the order dated 18th November 1996 carrying out the adjustment and it is only now that it is seeking to set aside the same before an authority, acting under a diferent Act. Thus the designated authority under the Samadhan Scheme has no jurisdiction to set aside the order dated 18th November 1996 passed under the Act. 16 As regards the decisions relied upon of the Calcutta High Court in J.K. Industries Ltd. (supra) and Tokyo Mitsubishi Ltd. (supra); the decision of the Karnataka High Court in Fosroc Chemicals (India) Ltd. (supra); and the decision of Patna High Court in M.D. Ali Khan (supra) , are concerned we are in respectful disagreement with all the aforesaid decisions. The diference in the two Acts i.e., the Samadhan Scheme and Income Tax was not brought to the notice of the Court in any of the above cases. Therefore, orders passed under the Income Tax Act can be set aside as by the authorities discharging functions only under the Income Tax Act and not under any other Act such as Samadhan Scheme which is a part of Finance (No.2) Act, 1998. 17 In the aforesaid situation, we are of the view that no fault can be found with the impugned order dated 12th February 1999 rejecting the petitioner's declaration under the Samadhan Scheme as there were no outstanding dues as on 31st March 1998. 18. Further, there is one more reason why the petition RK MOre 7 of 8 Uploaded on - 17/09/2020 (201)wp 1416-1999 under the Samadhan Scheme ought not to be allowed. The petitioner after making a declaration under the Samadhan Scheme and the same being rejected has fled this petition in this Court challenging the order dated 12th February 1999 rejecting the declaration. The operation of the Samadhan Scheme would require the applicant before it like the petitioner to withdraw its appeal in cases where the declaration fled by the petitioner is accepted. In this case, the petitioner has gone ahead with the hearing of its appeal for the assessment year 1991-1992 and it was disposed of on merits as far back as 2003. Thus, even if direct the designated authority to accept the declaration fled by the petitioner yet the status quo ante cannot be restored as there would be no appeal pending for the Samadhan Scheme to operate in the facts of this case. Besides the object of the Scheme is itself defeated viz. reduce litigation. This is so the litigation in these facts has run its full course.

(RIYAZ I. CHAGLA,J.) (M.S.SANKLECHA,J.) RK MOre 8 of 8 Uploaded on - 17/09/2020 Powered by TCPDF (www.tcpdf.org)