2013 (6) TMI 194 - HC - Income Tax

Adjustment of refund with tax demand - provisions of section 245 - prior intimation - 100% EOU - held that - in view of the decision in Fosroc Chemicals (India) Ltd vs. Commissioner of Income tax and another 2000 (11) TMI 100 - KARNATAKA High Court , the impugned communication adjusting the refund without prior intimation to the petitioner is illegal and contrary to law. Therefore, the impugned communication at Annexure-A1 in so far is it relates to adjusting of refund is to be set-aside. The matter is required to be remanded to the first respondent to follow the procedure laid down under Section 245 of the Income Tax Act by providing an opportunity to the petitioner and to pass an order in accordance with law. - Decided in favor of assessee.

Summary

Issues:
1. Adjustment of refund towards demand for assessment year 2008-2009 without prior intimation.
2. Rejection of stay application for assessment year 2008-2009 by the assessing officer.

Issue 1: Adjustment of refund towards demand for assessment year 2008-2009 without prior intimation:

The petitioner, an export oriented unit, filed returns of income for the assessment year 2007-2008, claiming deduction under Section 10(B) of the Income Tax Act. The first respondent disallowed the claim, but on appeal, the Commissioner of Income Tax (Appeals) partly allowed it. Subsequently, the first respondent issued a communication adjusting the refund towards the demand for the assessment year 2008-2009 without prior intimation. The court held that such adjustment without prior intimation is illegal and contrary to law, citing the mandatory nature of Section 245 of the Act. The court referred to past judgments emphasizing the necessity of prior intimation before making any adjustments. Therefore, the court set aside the communication adjusting the refund and directed the matter to be remanded to the first respondent to follow the proper procedure under Section 245.

Issue 2: Rejection of stay application for assessment year 2008-2009 by the assessing officer:

The petitioner filed a stay application for the assessment year 2008-2009 after discussions with the assessing officer, seeking to pay the demand in installments. The first respondent rejected the stay application, stating that the petitioner is not entitled to rely on certain circulars and instructions. The court upheld the first respondent's decision, noting that the issues involved in the assessment years 2007-2008 and 2008-2009 are partly similar. The court found no justifiable ground to interfere with the first respondent's reasoning. Additionally, the court directed the Commissioner of Income Tax (Appeals) to dispose of the appeal for the assessment year 2008-2009 within three months, subject to the petitioner complying with the specified installments.

In conclusion, the court partly allowed the writ petitions, quashing the adjustment of refund without prior intimation and remanding the matter for proper procedure under Section 245. The court also upheld the rejection of the stay application for the assessment year 2008-2009 and directed the timely disposal of the appeal by the Commissioner of Income Tax (Appeals).