1999 (12) TMI 10 - HC - Income Tax

Court dismisses petition challenging rejection under Kar Vivad Samadhan Scheme 1998, directs Commissioner to reconsider.

The court dismissed the petition challenging the rejection of a declaration under the Kar Vivad Samadhan Scheme, 1998, due to the non-pendency of an ... Kar Vivad Samadhan Scheme Issues Involved:1. Rejection of declaration under the Kar Vivad Samadhan Scheme, 1998, based on the pendency of application under section 254(2) of the Income-tax Act, 1961.2. Rejection of declaration under the Kar Vivad Samadhan Scheme, 1998, due to no outstanding demand after adjustment of refunds.Issue-wise Detailed Analysis:1. Rejection of Declaration Based on Pendency of Application under Section 254(2):The petitioner in C.W.J.C. No. 3317 of 1999(R) challenged the rejection of their declaration under the Kar Vivad Samadhan Scheme, 1998, by the Commissioner of Income-tax, Ranchi, on the ground that the application filed before the Income-tax Appellate Tribunal under section 254(2) of the Income-tax Act, 1961, cannot be considered as a pending appeal in terms of clause 95(i)(c) of the Scheme.The petitioner argued that the application under section 254(2) for rectification of mistakes should be treated as a continuation of the appeal, making the declaration under the Scheme maintainable. However, the respondent-department contended that an application under section 254(2) is not an appeal and thus, no appeal was pending, disqualifying the petitioner from the Scheme's benefits.The court held that an application under section 254(2) is limited to rectifying mistakes apparent from the record and cannot be treated as a continuation of the appeal. Therefore, clause 95(i)(c) was applicable, and the rejection of the declaration was justified.2. Rejection of Declaration Due to No Outstanding Demand After Adjustment of Refunds:The petitioner in C.W.J.C. No. 3318 of 1999(R) challenged the rejection of their declaration under the Scheme on the ground that there was no outstanding demand as the tax liability was adjusted against refunds from the assessment year 1994-95.The petitioner argued that the adjustment was invalid as it breached section 245 of the Income-tax Act, which requires prior intimation in writing before adjusting refunds. The department claimed that notice was given, but the petitioner refused to accept it.The court found no clear evidence of prior intimation in writing as required by section 245, rendering the adjustment invalid. Consequently, the tax liability was considered outstanding on the date of filing the declaration, and the rejection of the declaration was unjustified.Conclusion:The court dismissed C.W.J.C. No. 3317 of 1999(R), upholding the rejection of the declaration under the Scheme due to the non-pendency of an appeal. Conversely, C.W.J.C. No. 3318 of 1999(R) was allowed, quashing the rejection of the declaration and directing the Commissioner to reconsider the matter in terms of the Scheme.