kalyan jyoti sengupta, J. - (1.) THE point has become very simple in this writ petition because of the admitted position that no prior intimation for adjustment and/or setting off under s. 245 of the IT Act, 1961, was given to the writ petition for the relevant assessment year of 1991-92. THE first point is whether such an adjustment and/or setting off is permissible under the law or not and the next point, if not, then whether declaration dt. 30th Dec., 1998, filed by the writ petitioner under the Kar Vivad Samadhan Scheme, 1998, in respect of the asst. yr. 1991-92 can be directed to be accepted in view of the aforesaid illegal setting off and/or adjustment of the refund.
(2.) IT appears that on the first point in the case reported in J.K. Industries Ltd. vs. CIT (1999) 155 CTR (Cal) 249 : (1999) 238 ITR 820 (Cal), Justice Ajoy Nath Ray, has been pleased to hold amongst others that mere intimation after adjustment is not the requirement under s. 245 of the Act. IT has been categorically held in the said judgment that prior intimation of adjustment is necessary. Following the aforesaid judgment and having gone through s. 245 of the said Act, I am of the view that in this case setting off of the refundable amount in relation to the asst. yrs. 1991- 92 is wholly illegal and in breach of the principles of natural justice inbuilt in the aforesaid section itself as it will appear from the language, "after giving an intimation in writing to such person of the action proposed to be taken under this section". To be informed with reason before being affected with civil consequences is one of the facets of the principles of natural justice. Admittedly, in this case no prior intimation was given, as I have already observed but repeated reminders for making payment pursuant to the demands in relation to the aforesaid assessment year were made. In my view, demand for payment has again taken place in the lieu of notice of adjustment. IT is always open for the petitioner in case a demand for payment is made, either to pay it off or to take action in accordance with law without making any such payment. The petitioner herein was not prepared either mentally or otherwise for adjustment of the aforesaid amount. Had the adjustment been done so with prior notice, the petitioner at least could have taken steps in accordance with law. In view of non-compliance as above I hold the adjustment is illegal and wrongful. Accordingly, I do not uphold the aforesaid action of adjustment in the manner as above. Therefore, the same is set aside and I direct the refund of the amount which has been adjusted together with interest at the statutory rate. Therefore, the demand revives and both the parties will be entitled to take steps in accordance with law. As far as declaration mentioned in prayer (a)(iii) is concerned, in my view, the same is premature as on the date of making an application admittedly there was no demand and such demand either wrongfully or illegally stood liquidated and/or was deemed to have been liquidated. In view of this judgment, the aforesaid demand will stand revived on today itself. Therefore, both the parties would be entitled to take steps in accordance with law. No order is passed as to costs. All parties are to act on a signed copy of the operative portion of this judgment and order upon their usual undertaking and operative portion of this judgment and order be given to the parties if the same is applied for.;