Court grants writ petition, overturns rejection under KVSS scheme, orders rehearing. Proper hearing emphasized.

The court allowed the writ petition, set aside the Designated Authority's order rejecting the application for adjustment under the KVSS scheme, and remanded the matter for further consideration. The court emphasized the need for a proper opportunity of hearing and directed the petitioners to appear before the Commissioner of Income-Tax for subsequent proceedings in accordance with the law.

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Issues:
Petition to quash order under KVSS scheme and claim refund adjustment for tax paid in assessment year 1993-94.

Analysis:
The petitioners sought to quash an order dated 8.6.2004 passed by the Commissioner, Income-Tax, Meerut under the Kar Vivad Samadhan Scheme, 1998 (KVSS). They requested a mandamus for treating the demand of KVSS for assessment years 1986-87 to 1990-91 and 1992-93 as paid from the amount refundable in the assessment year 1993-94. The case involved the legal heirs of an assessee who received compensation and interest on acquired land. The assessing officer assessed interest on a protective basis for the assessment year 1993-94 due to a Supreme Court decision. Appeals were filed against assessment orders, including a protective assessment order. During appeals, the KVSS scheme was introduced, and the assessee applied for settlement under the scheme for specified assessment years. The Designated Authority accepted the application but directed the deposit of determined tax arrears. The assessee sought to adjust the excess amount from the protective assessment against the tax payable under KVSS, which was not immediately disposed of. Subsequently, the Joint Commissioner revised the assessment order for 1993-94, leading to a refundable amount. Due to non-deposit of tax arrears under KVSS, the Designated Authority rejected the application, prompting the petition.

The petitioners contended that the tax paid in 1993-94 was refundable as no amount was due against the protective assessment order. They argued that the application for adjustment was made promptly, and the subsequent refund exceeded the tax determined under KVSS. They highlighted the inequity in demanding further tax payment for earlier years when a significant refund was due for 1993-94. The Designated Authority's rejection without opportunity to be heard was challenged. The court acknowledged the lack of hearing in passing the impugned order and recognized the merit in the adjustment claim. However, it deemed further investigation necessary by the Designated Authority to consider all related claims raised by the petitioners. Consequently, the court allowed the writ petition, set aside the order, and remanded the matter to the Designated Authority for appropriate consideration after providing a proper opportunity of hearing. The petitioners were directed to appear before the Commissioner of Income-Tax for further proceedings in accordance with the law.

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