Finality under the Kar Vivad Samadhan Scheme and prior intimation for refund adjustment under income-tax law

A declaration under the Kar Vivad Samadhan Scheme attains statutory finality once the designated authority passes the settlement order, so the declarant cannot retract merely because the quantified liability is unfavourable. The article also notes that refund adjustment under the Income-tax Act requires prior written intimation before set-off, but no relief follows if the adjustment has already been upheld in revision and that revisional order has not been challenged, giving it finality by merger.

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Issues: (i) whether the assessee could retract from a declaration made under the Kar Vivad Samadhan Scheme after the designated authority passed an order on the declaration; (ii) whether adjustment of refund under section 245 of the Income-tax Act without prior intimation could be relied on for computing the amount payable under the Scheme.

Issue (i): Whether the assessee could retract from a declaration made under the Kar Vivad Samadhan Scheme after the designated authority passed an order on the declaration.

Analysis: Section 90(4) provides that once an order is passed determining the amount payable under the Scheme, any pending appeal, reference, or reply relating to the tax arrear is deemed to have been withdrawn. The Scheme contemplates full and final settlement on the basis of the declaration and does not permit an assessee to undo that statutory consequence merely because the amount determined is unfavourable. Allowing retraction after the order would defeat the scheme's finality and object.

Conclusion: The assessee could not retract from the declaration after the Scheme order was passed. This issue was decided against the assessee.

Issue (ii): Whether adjustment of refund under section 245 of the Income-tax Act without prior intimation could be relied on for computing the amount payable under the Scheme.

Analysis: Section 245 requires the Assessing Officer to give an intimation in writing of the proposed set-off before adjusting a refund against tax remaining payable. The Court accepted that prior intimation is required and agreed with the view that a refund cannot be adjusted without following that statutory requirement. At the same time, the Court held that in the facts of the case the petitioner could not succeed because the adjustment had already been upheld in revision and that order was not challenged, resulting in merger and finality against the petitioner.

Conclusion: Prior intimation under section 245 was required, but the assessee obtained no relief on this ground because the adjustment order stood unchallenged after revision. This issue was ultimately decided against the assessee.

Final Conclusion: The challenge to the Scheme order and the refund adjustment failed, and the original petition was dismissed.

Ratio Decidendi: A declaration accepted under the Kar Vivad Samadhan Scheme attains statutory finality under section 90(4), while adjustment of refund under section 245 requires prior written intimation, though relief may still be denied where the adjustment has attained finality by an unchallenged revisional order.

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