2020 (9) TMI 158 - HC - Income Tax

Demands order passed under Section 143(1) - Set off/ adjust refund against demands for next assessment years - HELD THAT - There was no response to the adjustment of demand by the petitioner, yet the objections had been filed in writing with the AO on 29th May, 2020 as well as online with the Centralized Processing Centre by the petitioner before the impugned order was passed. Consequently, as the impugned order dated 03rd July, 2020 has been passed under Section 143(1) of the Income Tax Act, 1961 in violation of principles of natural justice i.e. without dealing with the objections filed by the petitioner either before the Assessing Officer or before the Centralized Processing Centre, the same is set aside. The AO is directed to decide the petitioner s objections to adjustment of refund arising out of assessment year 2019-20 afresh within a period of six weeks by way of a reasoned order after giving an opportunity of hearing to the petitioner. All rights and contentions of the parties are left open. It is made clear that in the event the objections filed by the petitioner are not decided within the stipulated period, the petitioner shall be entitled to release of refund amounting to ₹ 11,23,33,263/- with applicable interest, if any, forthwith.

Summary

Issues:
Challenging adjustment made by respondents against pending demands for assessment years 2011-12 and 2013-14, and release of refund for assessment year 2019-20.
Challenging legality and validity of notice/intimation proposing to set off/adjust refund against alleged demands for assessment years 2014-15, 2015-16, and 2016-2017.

Analysis:
The petitions were heard via video conferencing. One petition challenged the adjustment made by the respondents against pending demands for specific assessment years and sought the release of a substantial refund for a different assessment year. The other petition contested the legality and validity of a notice proposing to set off or adjust a refund against alleged demands for different assessment years.

During the proceedings, the petitioner's counsel argued that the impugned order was passed without considering objections filed with the Deputy Commissioner of Income Tax and online with the Centralized Processing Centre. It was revealed that objections were indeed submitted before the impugned order was issued, indicating a violation of natural justice principles as the objections were not addressed. Consequently, the impugned order was set aside as it was passed without dealing with the objections, and the Assessing Officer was directed to reconsider the objections within six weeks, providing a reasoned order and an opportunity for the petitioner to be heard. All rights and contentions of the parties were left open for further consideration.

Furthermore, it was clarified that if the objections were not resolved within the specified period, the petitioner would be entitled to the release of the significant refund amount immediately, along with any applicable interest. The order was to be promptly uploaded on the website, and a copy was to be sent to the petitioner's counsel via email for reference and compliance.