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Issues: Refund adjustment against a demand raised in a different case, application of section 245 of the Income-tax Act, 1961, conditions for setting off a refund, legality of adjustment without proper intimation.
Analysis: The petitioner sought a refund following an assessment order under section 143(1)(a) of the Income-tax Act, 1961 for the assessment year 1998-99. Instead of granting the refund, the authorities adjusted it against a demand raised against a different entity, Techno Exports, for the assessment year 1994-95. The petitioner contended that the adjustment was improper and not in accordance with the law. The communication regarding the adjustment was made under section 245 of the Act, which allows for setting off a refund against any sum payable by the person to whom the refund is due. However, it was argued that the conditions for such set off were not met as the demand did not relate to the petitioner, and the adjustment was made without proper intimation. The court noted that the adjustment made by the authorities was legally flawed. The order of assessment was passed before the adjustment was communicated, and the adjustment referred to a refund voucher dated after the assessment order, which was irregular. The provisions of section 245 were misapplied by the Revenue, as the demand in question did not pertain to the petitioner. The court emphasized that for a valid set off under section 245, specific conditions must be met, including the refund being due to the person, the set off against a sum payable by that person, and proper intimation of the proposed action. Since these conditions were not fulfilled, the adjustment against the petitioner was deemed unlawful. In light of the above analysis, the court directed the authorities to refund the amount to the petitioner within two weeks, unless there was any outstanding amount due from the petitioner. It was further specified that if the refund was not processed within the stipulated period, it would accrue interest from a specified date. The court disposed of the petition, highlighting the importance of adhering to legal procedures and ensuring proper application of provisions like section 245 of the Income-tax Act, 1961.
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