The petitioner, M/s Best India Tobacco Suppliers may be a company engaged within the business of exporting tobacco. The petitioner was assessed tax under the Tax Act and has been filing its returns before the Assistant Commissioner, Circle-I, Guntur, who is that the Assessing Officer. While so, for the assessment year 1986-87 the petitioner had filed returns disclosing a net of Rs.1,87,540/-. The Assessing Officer issued a notice under Section 143(2) of the tax Act and passed an assessment order under Section 143(3) computing the entire income of the assessee for the Assessment Year and accordingly, levied tax, interest, and penalty.
The aggrieved petitioner preferred an appeal before C.I.T (Appeals). The primary appellate authority allowed the appeal and put aside the additions, which were made by the assessing officer.
Advocate Challa Gunaranjan on behalf of the petitioner contended that the petitioner was under the bonafide impression that the refund amount of Rs.4,86,970/- was adjusted towards tax arrears. However, an equivalent was adjusted towards penalty contrary to the knowledge provided to the petitioner under the proper Information Act by the CBDT. If the refund amount is adjusted towards regular tax, the petitioner is susceptible to pay only Rs.74,790/- but not Rs.3,70,103/- as determined by the respondents.
It was contended by the respondents that as per the Board directions, any payment or part payment of taxes should first be adjusted towards tax and balance towards interest and the same was correctly adopted in the instant case while determining the tax payable under the KVS scheme. On another breath, it was contended that the refund tax of Rs.4,86,970/- was adjusted towards penalty, and thereafter arrears of tax was arrived at Rs.3,70,013/- as per the provisions of the KVS scheme.
The division bench of Justice U.Durga Prasad Rao and Justice J.Uma Devi directed the respondent authorities to regulate the tax refundable to the petitioner for the year 1996-97 of Rs.4,86,970/- to the tax arrears rather than a penalty and accordingly, re-determine the quantity payable by the petitioner under Section 90(1) of the Finance (No.2) Act, 1998 and grant certificate expeditiously, but not later than four week