Bombay High Court: The Division Bench of Abhay Ahuja and K.R. Shriram, JJ., held that the intimation is to be given before setting off of refunds against tax remaining payable under Section 245 of the Income Tax Act prior to the officer sets off the amount.
Petitioner sought issuance of writ of certiorari or a writ in the nature of certiorari or any other appropriate writ or order or direction, calling for records of petitioner’s case so far as related to the adjustment of refund against outstanding demand for A.Y. 2019-20.
Further it was stated that respondent was yet to refund a sum of Rs 37,63,57,620 for AY 2019-20 along with applicable statutory interest under Section 244(A) of the Income Tax Act, 1961.
According to petitioner, for the assessment year 2019-20, respondent had to refund a sum of Rs 44,24,54,040/- as per the intimation dated 17th March, 2020 under Section 143 (1) of the Act. Thereafter, petitioner received a communication dated 13-05-2020 being intimation under Section 245 of the Act from the Centralised Processing Center, IT Department whereby petitioner was informed that their return for AY 2019-20 had been processed at CPC and the refund will be adjusted against the outstanding demand.
Petitioner responded and informed that no amount was adjustable and no recovery should be made with respect to outstanding demands, as demands have been stayed for recovery in appeals which were pending or erroneous.
Section 245 of the Income Tax Act:
- Set off of refunds against tax remaining payable 2 Where under any of the provisions of this Act, a refund is found to be due to any person, the [Assessing] Officer, Deputy Commissioner (Appeals)], Commissioner (Appeals)] or Chief Commissioner or Commissioner], as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section.
High Court expressed that,
Mere perusal of the section makes it clear that officers mentioned in the section, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under the Act by assessee to whom he refund was due.
Further, it was added that,
Officer may set off the amount to be refunded or any part of that amount only after giving an intimation in writing to the assessee of the action that he proposed to take under this Section.
Therefore,
“…intimation is to be given prior to the officer sets off the amount payable against the amount to be refunded. It can be neither simultaneous nor subsequent.”
High Court held that the fact that respondent did not follow the mandatory prior requirement of intimation under Section 245 of the Act would make the adjustment wholly illegal and therefore, respondent was clearly in error in not refunding the amount.
Court directed the respondent to refund the amounts to petitioner as determined for AY 2019-20 under intimation issued under Section 143(1) of the Act with the interest thereon as per law within a period of 4 weeks.
Petition was disposed of. [Jet Privilege (P) Ltd. v. Deputy Commissioner of Income, 2021 SCC OnLine Bom 1799, decided on 9-08-2021]
Advocates before the Court:
Mr Percy Pardiwalla, Senior Advocate i/b Mint and Cofereres for Petitioner.
Mr Sham V. Walve for Respondent
