1991 (4) TMI 24 - HC - Income Tax

Summary

Issues:
1. Writ of mandamus sought against Assistant Commissioner of Income-tax for refund adjustment.
2. Legality of adjusting refunds against individual demands.
3. Nature of assessments against the first petitioner.
4. Consent for adjustment of refunds by the petitioners.
5. Permissibility of petitioners to resile from their earlier stand.

Analysis:
The petitioners sought a writ of mandamus against the Assistant Commissioner of Income-tax for refunds due to the second petitioner, which were adjusted against individual demands of the first petitioner. The assessments against the first petitioner for the years 1984-85 and 1985-86 were completed after a search under section 132(1) of the Income-tax Act, resulting in demands and initiation of recovery proceedings. The petitioners initially agreed to adjustments but later filed a writ petition claiming the adjustments were illegal due to the protective nature of the assessments against the first petitioner.

The petitioners argued that the demands against the first petitioner were protective and could not be legally recovered on a protective basis. The respondents contended that the assessments were substantive, irrespective of the protective label, and the income assessed had not been taxed elsewhere. The court declined to delve into the nature of assessments as the matter was pending before the appellate authority. The adjustment of tax dues against refunds due to the second petitioner was found legal, supported by letters from both petitioners consenting to the adjustments.

The court emphasized that the adjustments were made at the petitioners' request and found no illegality in the process. It was noted that if the second petitioner had not consented to the adjustments, the amounts could have been recovered due to the company's indebtedness to the first petitioner. Therefore, the court rejected the writ petition summarily, stating that the petitioners could not retract from their earlier consent for adjustments based on the protective nature of the assessments, especially when the adjustments were made with their agreement.