2013 (3) TMI 375 - HC - Income Tax

Adjustment of Refund with Tax Demand of a Group company - as per dept. the amount refundable to the petitioner has been adjusted towards the demand of M/S Narain Properties Ltd., the Mall, Kanpur a group of company of assessee - Held that - As per Section 245 where any refund is due to any person, the Income-tax authorities may set off the amount to be refunded against any sum remaining payable under the Act by the person to whom refund is due, after giving him an intimation in writing to such person. Thus Section 245 authorizes for set off the refund against the dues of the same person that too after giving notice to him which is mandatory as held in Heera Lal and sons Vs. Income Tax Officer (1983 (2) TMI 5 - ALLAHABAD HIGH COURT) and Pradeep Kumar Harsaran Lal Vs. Assessing Officer (1997 (3) TMI 62 - ALLAHABAD HIGH COURT) There is no provision which authorizes Income-tax authorities to set off the refund of a person against the dues of another person. The petitioner was not given any notice nor he ever gave his consent for set off against the dues of M/S Narain Properties Ltd. The record shows that the petitioner has consistently made representations for his refund to the various authorities and had made all efforts from pillar to post. Action of the respondents in avoiding the refund of the petitioner is most arbitrary. The step of setting off the refund towards dues of another person without intimation to the petitioner is illegal and without jurisdiction. - Thus refund along with interest allowed up to date at the rate given under Section 244A (1) (a) to the petitioner within a period of one month from the date of production of a certified copy of this order before AO - in favour of assessee.

Summary

Issues:
Petitioner seeks quashing of order rejecting refund application and mandamus for refund with interest - Adjustment of petitioner's refund towards another company's dues without notice - Jurisdictional legality of refund set off against unrelated dues.

Analysis:
The petitioner, a tax-paying company, filed a writ petition challenging the rejection of its refund application by the Chief Commissioner of Income-tax. The petitioner sought a directive for refund of Rs. 2,40,471/- along with interest under Section 244A (1) (a) of the Income Tax Act, 1961. The core issue revolved around the adjustment of the petitioner's refund towards the demand of another entity, M/S Narain Properties Ltd., without proper notice or consent. The petitioner had diligently pursued its refund claims through various appeals and representations.

The court examined Section 245 of the Income Tax Act, which allows for the set-off of refunds against dues payable by the same person, subject to prior intimation. Citing precedents such as Heera Lal and sons Vs. Income Tax Officer and Pradeep Kumar Harsaran Lal Vs. Assessing Officer, the court emphasized that the law does not permit the offsetting of one person's refund against another's dues without explicit notice and consent. The court deemed the actions of the Income-tax authorities as arbitrary and lacking jurisdiction for adjusting the petitioner's refund against unrelated dues.

Consequently, the court upheld the petitioner's claim, ruling in favor of the writ petition. The respondents were directed to refund the amount of Rs. 2,40,471/- to the petitioner, along with interest as per the specified rate under Section 244A (1) (a) of the Income Tax Act, 1961, within one month of the order's certified copy submission. Each party was instructed to bear its own costs, bringing a resolution to the dispute in favor of the petitioner based on the legal provisions and precedents cited during the case analysis.