2016 (9) TMI 62 - HC - Income Tax

Set off of refunds against tax remaining payable - writ petition filed by the Kerala State Beverages (M & M) Corporation Ltd. challenging Ext.P7 and for a direction to the respondent to grant refund of the amount adjusted as per Ext.P2 letter - Held that - True that, at the time when Ext.P1 order was passed on 30/01/2015, the refund order was not in existence and it came into effect only on 06/02/2015. However, merely for the reason that there is some irregularity in the procedure adopted by the Department, we do not think that any direction can be issued, as prayed for.

Summary

Issues:
Challenge to order adjusting refund against demand, legality of stay order, application of Finance Act provision for stay of collection of tax, power of assessing officer to set off refunds against payable amounts under IT Act, issuance of notice for setting off refund against dues.

Analysis:

Issue 1: Challenge to order adjusting refund against demand
The petitioner, a taxpayer, challenged the adjustment of refunds against the demand raised for a particular assessment year. The petitioner contended that the adjustment was illegal and sought a direction for refund. The respondents justified the adjustment citing provisions of the IT Act allowing such set-offs. The court noted that the adjustment was made as per the Act and dismissed the challenge.

Issue 2: Legality of stay order
The petitioner challenged the legality of the stay order granted by the Joint Commissioner of Income Tax, which was based on the adjustments already made. The petitioner argued that the order was improper as no prior notice of adjustment was served. The court upheld the stay order, stating that when the appellate authority considered the adjustments while granting stay, there was no basis to set aside the order.

Issue 3: Application of Finance Act provision for stay of collection of tax
The petitioner invoked a provision of the Finance Act, 2016, allowing for an application for stay of tax collection upon remitting 15% of the demand. The court observed that this provision might not apply when a right to set off is available to the Department under Section 245 of the IT Act. The court emphasized the Department's power to set off refunds against payable amounts.

Issue 4: Power of assessing officer to set off refunds against payable amounts under IT Act
The respondents relied on Section 245 of the IT Act, which empowers the assessing officer to set off refunds against any remaining payable amounts under the Act. The court acknowledged that the refund order came after the demand order, but held that irregularities in procedure did not warrant a direction for refund as requested by the petitioner.

Issue 5: Issuance of notice for setting off refund against dues
The petitioner raised concerns about the notice for setting off the refund against dues, arguing that the notice was not served before the adjustment. The court noted the sequence of orders and notices, stating that even if there were procedural irregularities, it did not justify issuing the requested direction for refund.

In conclusion, the court dismissed the writ petition, upholding the adjustments made by the Department under the IT Act and emphasizing the authority's power to set off refunds against payable amounts.