Settlement Bars Adjustment

This judgment deals with an important principle in tax administration: whether the tax department can adjust a refund against demands that have already been settled under an amnesty scheme. The Bombay High Court held that once the taxpayer settles arrears under the Maharashtra Settlement Scheme, the earlier demands cease to exist. Therefore, the department cannot retain or adjust a refund against such settled dues. The Court directed the authorities to release the refund with interest, reiterating that tax retention without authority of law violates Article 265 of the Constitution.