BANK OF TOKYO MITSUBISHI LTD. vs COMMISSIONER OF INCOME TAX and Others

Ajoy Nath Ray, J.

The writ application is concerned with KVSS declaration made in time by the assessee for the assessment year 1993-94.

For the assessment year 1991-92 the assessee was assessed to a refund order. For the year 1992-93, whether there is any refund order or not there is at least no tax liability. For the assessment year 1993-94 there was assessed liability for the reason of which the assessee filed the declaration and sought for payment of the proportionate amount as per KVSS for settlement of the disputes which were then pending before the Tribunal.

The impugned order of the Designated Authority dated the 25-1-1999, sought to dismiss and reject the declaration filed by the assessee writ petitioner.

The reason appearing on the face of that impugned order of rejection is that there was no tax arrear to be compounded or settled as per the WSS in regard to the assessment year 1993-94.

Correspondence ensured thereafter and the reason why the Designated Authority rejected the declaration of the writ petitioner is clarified in his letter dated 30/31-3-1999.

It is stated there that the dues of the assessment year 1993-94 were adjusted against the credit of the assessee by way of refundable amount for the assessment year 1991-92 and, therefore, no tax arrear for the assessment year 1993-94 remained to be paid or settled. It is further stated in that letter that this position as to the adjustment as between the asst. yrs. 1991-92 and 1993-94 was known to the assessee and the assessee''s letters date 19th Feb., 1998, and 19th March, 1998, were referred to in this regard.

From these letters date 19th Feb., 1998 and 19th March, 1998, it appears that in both those documents the assessee was corresponding in regard to the assessment year 1994-95.

The assessee has also paid Rs. 6 crore or so in regard to the assessment year 1994-95 and the disputes in regard thereto are still pending.

The assessee was moving for stay under sub-section (6) of s. 220 of the Act for that assessment year 1994-95.

To make the case of the assessee appear strong and deserving the assessee mentioned in the context of the said assessment year 1994-95 that the assessee''s position with regard to previous assessment years was not bad; this was the meaning sought to be conveyed when the assessee wrote that "The net refund of earlier assessment years, viz., 1991-92 to 1993-94 which is Rs. 80,04,748 which may kindly be granted to us or may be adjusted against the demand, if any, for the assessment year under consideration".

According to the communication of the Designated Authority this portion of the assessee''s letter and the records available to the Designated Authority showed that the writ petitioner was aware of the adjustments made in regard to the asst. yrs. 1991-92 to 1993-94 sometime in December, 1997, leaving a balance of about Rs. 80,00,000 in favour of the assessee.

The short facts recited above will show that the Designated Authority, with respect, made a patent error. He confused the request of the assessee with an adjustment already made.

The adjustment of refundable amount against tax dues can be made and must be made in accordance with s. 245 of the Income Tax Act. Under s. 245 a prior intimation in that regard must originate from the Revenue. Only thereafter the Revenue has jurisdiction to make the set off.

In this case nothing originated from the Revenue. The sum of Rs. 80,00,000 and odd was mentioned in the assessee''s letter as a result of arithmetical computations made on their own. The assessee no doubt made a request for such adjustment in regard to the asst. yrs. 1991-92 to 1993-94 but the making of such a request by the assessee is an act not contemplated under S. 245. The set off is to be made by the Revenue and the Revenue alone after following the law and observing the mandate of s. 245 and perhaps, after observing the rules of natural justice.

In this case the request of the assessee for adjustment was treated by the Designated Authority as a matter of completing the adjustment by itself and even as acquiescence to such adjustment. When the initiation of the adjustment was not made by the Revenue at all, the assessee had nothing to acquiesce in.

In these circumstances, the writ application succeeds. It is declared that the declaration of the assessee was properly filed but improperly rejected. The impugned order of rejection by the Designated Authority is set aside and cancelled and is to be treated as replaced by an order accepting the declaration directing the assessee to pay to the Designated Authority a sum of Rs. 52,59,742 within a period of four weeks from date hereof. Upon such payment the due certificates shall be issued to the writ petitioner within eight weeks from date hereof. It is made clear that on the wiping off of the liability for the assessment year 1993-94, the revival of the credit for the asst. yrs. 1991-92 and 1992-93 would have to be prosecuted by the writ petitioner separately in other proceeding for obtaining those refunds with interest unless the Revenue automatically makes those payments. Thus, the prayer (a)(ii) is not granted and is declared to be the subject if future proceedings of parties in accordance with law. In addition to the above, there shall be rule absolute in terms of prayers (a)(i), a(iii), (b) and (c) of the writ petition.

The matter had to be disposed of without affidavits, as the writ petition is the only pleading before the Court no other affidavits being filed as per taken directions.