M.C. Agarwal, J. - (1.) BY this petition under Article 226 of the Constitution of India, the petitioner challenges the orders dated March 17, 1999, passed by the Designated Authority, i.e., Commissioner of Income-tax (Appeals), Meerut (respondent No. 1), whereby the petitioner's declarations under the Kar Vivad Samadhan Scheme have been rejected for the reason that there were no arrears of tax due from the petitioner on the date of the declaration, i.e., December 51, 1998.
(2.) THE petitioner's case is that by Section 89 of the Finance (No. 2) Act, 1998, a scheme for settlement of tax disputes was introduced and the petitioner, which is a Hindu undivided family, filed declarations for the assessment years 1988-89 to 1992-93. Under the scheme only an assessee against whom tax was in arrears could approach for the settlement of the dispute in accordance with the provisions of this Act. Section 88 provides for settlement of tax payable in respect of tax arrears and there is no dispute between the parties that if in a case there is no tax arrears, then an assessee cannot make a declaration and no settlement, can be made under the scheme. "Tax arrear" has been defined in Section 87 to mean in relation to direct tax enactment, the amount of tax penalty or interest determined on or before March 31, 1998, under that enactment in respect of an assessment year as modified in consequence of giving effect to an appellate order but remaining unpaid on the date of declaration. As mentioned above, the petitioner's declarations which were five in number have been rejected by the designated authority on the ground that when the declarations were made on December 31, 1998, there was no tax arrears, i.e., tax remaining unpaid against the petitioner. The petitioner's contention is that there was a Hindu undivided family in the name and style of Seth B. D. Gupta, Hindu undivided family, which was being assessed to income-tax and wealth-tax. There was a partition in that family under which an industrial unit, viz., Modern Industries, fell to the share of Sri B. B. Bindal, a coparcener. The said Sri B. B. Bindal was the karta of the present petitioner and under the terms of the partition, Sri B. B. Bindal was liable to any tax liability or refund of the erstwhile Sri B. D. Gupta, Hindu undivided family. It is claimed that for the assessment years 1988-89, 1989-90, 1990-91, 1991-92 and 1992-93 wealth-tax assessments were made on the petitioner resulting in a demand of Rs. 1,65,85,798 out of which sums amounting to Rs. 1,16,27,689 had been paid up to February 19, 1996, and the balance amount of Rs. 49,58,109 remained due. It is further averred that the petitioner was entitled to a refund from its income-tax assessment for the years 1988-89, 1989-90, 1990-91, 1991-92, 1992-93 and 1996-97 to the tune of Rs. 29,66,213. The petitioner was also entitled to a refund of income-tax out of the tax deposited in the case of B. D. Gupta, Hindu undivided family, for the assessment years 1970-71, 1971-72, 1974-75, 1985-86 and 1986-87 to the tune of Rs. 20,12,407. These figures find place in paragraphs 5 and 6 of the writ petition and it is specifically mentioned that while the amount remaining due in respect of the wealth-tax was Rs. 49,58,109, the refund of income-tax amounted to Rs. 49,78,620. In other words if the two amount figures were adjusted, the petitioner was entitled to a net refund of Rs. 20,411. The aforesaid amounts of refund were adjusted towards the outstanding amount of Rs. 49,58,109. It is claimed that before making" these adjustments, no notice of any kind or intimation was given to the assessee by the Wealth-tax Officer.
(3.) ON November 25, 1998, the petitioner moved applications before the Joint Commissioner of Income-tax, Meerut, claiming that adjustments of income-tax refund toward the wealth-tax liability was legally not correct and it appears to have been done by mistake and this mistake should be rectified and the process of adjustments may be revised and the outstanding demand may be ascertained and intimated to the assessee. The Joint Commissioner rejected those applications by an order dated December 30, 1998, saying that the adjustments were rightly made as the Assessing Officer was entitled to realise the amount under Section 226 of the Income-tax Act, 1961. It is claimed that in the meantime, the petitioner made declarations under Section 89 of the Finance (No. 2) Act of 1998, known as "Kar Vivad Samadhan Scheme, 1998" (hereinafter referred to as KVSS) with regard to the wealth-tax liability of the petitioner-Hindu undivided family for the assessment years 1988-89 to 1992-93. These declarations were made on December 31, 1998. The petitioner filed appeals against the order dated December 30, 1998, passed by the Joint Commissioner refusing to allow the petitioner's application under Section 154. The Commissioner of Income-tax (Appeals) by a consolidated order dated January 28. 1999, allowed the appeals and held that the impugned adjustment of refund under the Income-tax Act against the wealth-tax demand for different years and in some cases of different assessees, were not legally correct. The. Commissioner, therefore, cancelled the adjustments and the Assessing Officer was directed to make fresh adjustments after following the procedure under Section 245 of the Income-tax Act. After the decision of the Commissioner of Income-tax (Appeals), the petitioner moved an application before the Designated Authority under the Kar Vivad Samadhan Scheme claiming that since the adjustments had been cancelled, the wealth-tax demand became outstanding on the date of the filing of the declarations and, therefore, the declarations may be proceeded with. The declarations were, however, rejected by the designated authority on the ground that on the date of the declaration, no amount was in arrears. The contention of the petitioner is that this view taken by the designated authority is wrong because the order passed by the Commissioner of Income-tax (Appeals) would relate back to the date on which the petitioner's application under Section 154 was rejected by the Joint Commissioner which was dated December 30, 1998, and, therefore, on December 31, 1998, when the declarations were made the demands were outstanding. In the counter affidavit, it has been stated that refunds relating to the erstwhile Hindu undivided family B. D. Gupta were adjusted long back in the years 1992 and 1993 as under : JUDGEMENT_353_ITR246_2000Html1.htm ;