2017 (3) TMI 1336 - HC - Income Tax

Adjustment of amount refundable for the Assessment Year 2012-13 against the tax demands raised for the Assessment Years 2013-14 and 2014-15 - Held that - In respect of an argument that demand for the Assessment Year 2013-14 was stayed by the Assessing Officer in exercise of powers conferred under Section 220(6) of the Act we do not find any merit. A perusal of the order of stay passed by the Assessing Officer on 12.09.2016 in terms of Section 220(6) of the Act shows that even in the said order an amount of 144, 08, 49, 460/- has been adjusted. After adjustment the balance amount was stayed for a period of 6 months or upto the decision of the first appeal whichever is earlier. After passing of such order the assessment for the Assessment Year 2014-15 was finalized on 28.12.2016. The order under Section 220(6) of the Act as well as the intimation under Section 245 of the Act was issued by the same Assessing Officer. Therefore the argument of the learned counsel for the petitioner that the Assessing Officer should have modified its order of 12.09.2016 before the order of adjustment is not tenable as the order of stay was not passed by any other superior authority but by the Assessing Officer himself. Quashing of the order results in restoration of the position as stood on the date of passing of the order which has been quashed but the stay of operation of the order does not however lead to such a result. In view thereof the order of Assessing Officer not to recover the demand for the Assessment Year does not lead to setting aside of the demand itself. The said demand could very well be adjusted against the refund due for the previous year 2012-13. Section 245 of the Act infact permits the Revenue to set off any demand from the amount to be refunded but the only condition is of intimation in writing to such person against whom action is proposed to be taken. We find that demand having been raised against the petitioner for the Assessment Years 2013-14 and 2014-15 and intimation having been sent to the petitioner on 05.01.2017 the mandate of Section 245 of the Act was satisfied by the Revenue before making adjustment from the refund due to the assessee from the tax due to the assessee for the subsequent years. In view thereof we do not find any merit in the writ petition the same is dismissed.

Summary

Issues:
Adjustment of refund against tax demands for different assessment years, validity of the action taken by the Revenue, legality of adjusting refund against stayed demand, applicability of Delhi High Court judgment on adjustment under Section 245 of the Income Tax Act.

Analysis:
1. The writ petition challenged the Revenue's action of adjusting a refundable amount for the Assessment Year 2012-13 against tax demands for the Assessment Years 2013-14 and 2014-15. The Income Tax Appellate Tribunal allowed the petitioner's appeal for 2012-13, leading to a refund. The Revenue proposed to set off this refund against tax demands, triggering the legal dispute.

2. The petitioner argued that the Assessing Officer stayed the demand for 2013-14, and thus, the refund should not have been adjusted against this stayed demand. However, the court found no merit in this argument. The order of stay allowed for adjustment, and the Assessing Officer had the authority to adjust the refund against the tax demand.

3. For the tax demand of 2014-15, the petitioner claimed that the demand notice was issued after the assessment was finalized, and thus, the demand was not due and payable. The court disagreed, stating that the demand was valid as it was issued within the statutory period, allowing the Revenue to adjust the refund against this demand.

4. The petitioner relied on judgments from the Delhi and Bombay High Courts regarding adjustment under Section 245 of the Act. The court examined the Delhi High Court's judgment, emphasizing that the Revenue can adjust refunds against demands as per the law's provisions. The court upheld the legality of the adjustment made by the Revenue in this case.

5. The court dismissed the writ petition, finding no merit in the petitioner's arguments. However, considering the petitioner's concern over delayed appeals, the court directed the Commissioner of Income Tax (Appeal) to expedite the decision on the petitioner's appeals for the Assessment Years 2013-14 and 2014-15 within six months.

6. The judgment clarified the legal provisions governing the adjustment of refunds against tax demands and highlighted the importance of complying with statutory requirements while making such adjustments.