1989 (2) TMI 75 - HC - Income Tax

Summary

Issues:
1. Interpretation of Section 269UG(1) of the Income-tax Act.
2. Validity of Department's action in withholding consideration amount.
3. Compliance with procedural requirements under the Act.

Analysis:
The petitioner sought a writ of certiorarified mandamus challenging the Department's decision to reduce the consideration amount for the acquisition of their property by the tax arrears owed. The petitioner had entered into a sale agreement for their property but the Department acquired it under section 269UD(1) of the Income-tax Act, reducing the consideration by Rs. 4,59,325 without providing prior notice or opportunity to the petitioner. The court noted that as per Section 269UG(1) of the Act, the Department can only set off consideration against tax arrears after giving intimation to the entitled person, which was not done in this case. The court highlighted that the Department failed to comply with the procedural requirement of providing notice and opportunity to the petitioner before withholding the amount.

The court emphasized that the Department's action of withholding the amount without following the statutory procedure was unjustified. The judge pointed out that the petitioner had not been given an opportunity to address the tax arrears claimed by the Department, which is a procedural lapse on the Department's part. The court observed that the petitioner's claim for refund from the Department was not relevant to the current issue. Consequently, the court directed the Department to pay the balance amount of Rs. 4,59,325 to the petitioner within four weeks, emphasizing that the Department could still provide an opportunity to the petitioner regarding the claimed arrears. However, due to the Department's failure to comply with the statutory requirements, the court allowed the writ petition in favor of the petitioner.

In conclusion, the court allowed the writ petition with costs of Rs. 500, highlighting the importance of adhering to procedural requirements and providing opportunities for affected parties in matters concerning the set off of consideration against tax arrears. The judgment underscores the significance of following due process and ensuring that statutory provisions are strictly adhered to in such cases to uphold the principles of natural justice and fairness in administrative actions.