KVSS : A.Y. 1993-94 : On 29-12-1998, the assessee AOP filed KVSS application in respect of appeal pending before Tribunal on basis of tax dues of Rs.24,04,600 : Rejection of application on ground that tax dues have been adjusted on 30-11-1998 against refu

[M/s. Asia Corporation and Ors. v. CIT and Ors. (Bom.),
W.P. Nos. 782 and 783 of 1999, dated 14-9-2009]

Pending an appeal before the Tribunal for the A.Y. 1993-94,
on the basis of the tax dues of Rs.24,04,600, the assessee AOP had filed an
application under KVSS on 29-12-1998. The application was rejected by the
Commissioner on 24-2-1999 on the ground that there are no tax dues as on
30-11-1998, since in respect of one of the members of the AOP, namely,
Petitioner No. 1, refund had been ordered by the Assessing Officer for the A.Y.
1997-98 and that refund had been adjusted on 30-11-1998 against the dues of
the AOP.

The members of the AOP filed two writ petitions, one
challenging the adjustment of refund and the other challenging the rejection
of the KVSS application. The Bombay High Court allowed both the petitions and
held as under :

“(i) The grievance of the petitioner is that the order of
adjustment was passed without complying with the mandatory requirements of
S. 245 of the Income-tax Act. Our attention is invited to the provisions
which mandate that the refund can be adjusted against the dues of the
persons to whom the refund is due after giving intimation in writing to such
persons of the action proposed to be taken under the Section. It is
submitted that no notice as required u/s. 245 was served on the petitioner
proposing to make adjustment. This it is submitted would render adjustment
illegal, and consequently the order making adjustment has to be set aside.
Reliance for that purpose is placed on the judgment of this Court in
Suresh Jain v. A. N. Shaikh, 165 ITR 151 (Bom.) which was confirmed by
the Division Bench in A. N. Shaikh v. S. B. Jain, 165 ITR 86 (Bom.).

(ii) After considering the language of the Section and
the judgment of the Co-ordinate Bench of this Court, we find no reason to
take a different view than the view taken by the Co-ordinate Bench of this
Court, namely, failure to comply with the mandatory requirement of S. 245,
would result in the adjustment made becoming illegal.

(iii) As the application under KVSS was rejected solely
on the ground that there were no dues pending, and once in W.P. No. 783 of
1999 the order of adjustment passed on 30-11-1998 has been set aside,
consequently we will have to set aside the order under KVSS dated 24-2-1999
and consequently this petition will have to be allowed.”