2022 (2) TMI 881 - HC - Income Tax

Validity of intimation u/s 245 - adjustment of demand of assessment year 2015-16 in excess of 20 % from the refund of assessment year 2008-09 - HELD THAT - The impugned action of the assessing officer under Section 245 of the Income Tax Act, 1961 making adjustment of demand of assessment year 2015-16 in excess of 20 % from the refund of assessment year 2008-09 without disposing of the objection of the petitioner against the intimation under Section 245 of the Act and taking any formal decision on the said objection is bad and not sustainable in law and the impugned action under Section 245 of the Act without disposing of and taking any decision on application of the petitioner under Section 220 (6) of the Act and acting contrary to the aforesaid office memorandum of CBDT dated 29th February, 2016 and 31st July, 2017 is bad in law. Accordingly the Assessing officer concerned is directed to refund the amount adjusted in excess of 20% of the demand arising out of the assessment order relating to assessment year 2015-16 from the refundable amount from the assessment relating to assessment year 2008-09 within four weeks from the date of communication of this order.

Summary

Issues:
1. Challenge to the assessing officer's action under Section 245 of the Income Tax Act, 1961 for the assessment year 2015-16.
2. Validity of adjusting the demand for 2015-16 with the refund for 2008-09 without considering objections and without passing formal orders.

Analysis:
1. The petitioner challenged the assessing officer's action under Section 245 of the Income Tax Act, 1961, regarding the adjustment of demand for the assessment year 2015-16 with the refund for the assessment year 2008-09. The key legal question was whether this action, made without considering and disposing of the petitioner's objections, was legal and valid. The court emphasized the mandatory nature of affording the petitioner an opportunity of hearing before making any adjustment under Section 245. The court referred to relevant case laws emphasizing the discretionary power of the assessing officer, the need for a written intimation to the assessee, and the requirement for the revenue to be satisfied that the tax demand cannot be recovered. The court held that the assessing officer's failure to pass a formal order on the petitioner's objections and application under Section 220 (6) was not sustainable in law.

2. The second issue revolved around the validity of adjusting the whole amount of demand for the assessment year 2015-16, which exceeded 20% of the demand, from the refund of the assessment year 2008-09. The court considered whether this action was contrary to office memorandums issued by the Central Board of Direct Taxes. The court noted that the assessing officer's failure to pass any formal order on the petitioner's application under Section 220 (6) and the adjustment of an amount exceeding 20% of the demand without proper consideration were against the law. The court directed the assessing officer to refund the excess amount adjusted from the refundable amount within a specified timeframe.

3. The court highlighted the importance of following legal procedures and giving due consideration to objections raised by taxpayers before making adjustments under Section 245 of the Act. The judgment emphasized the mandatory nature of providing an opportunity of being heard to the assessee and the necessity for the assessing officer to pass formal orders on objections and applications under relevant sections of the Act. Failure to adhere to these legal requirements was deemed unsustainable and contrary to the law. The court's decision aimed to ensure fairness and adherence to legal standards in tax assessments and adjustments.