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2023 (7) TMI 32 - HC - Income TaxUnlawfull adjustment of refund admittedly due against the demand for this AY without prior intimation u/s 254 - stay as granted ignored - HELD THAT - When stay is granted it would continue till the disposal of the Appeal and not only for a period of six months u/s 220(6) of the ITA. This Court in t he case of Hindustan Unilever Ltd. 2015 (7) TMI 366 - BOMBAY HIGH COURT held that in view of the stay u/s 220(6) of the Act, the time to make the payment stands extended till the disposal of the appeal by CIT (Appeals). Non-giving of intimation in writing prior to setting off the amount payable against the amount to be refunded is fatal. This Court in Jet Privilege (P) Ltd. 2021 (8) TMI 593 - BOMBAY HIGH COURT and BPCL 2021 (11) TMI 1158 - BOMBAY HIGH COURT held that the requirement of prior intimation u/s 245 of the ITA was a mandatory requirement and failure to comply with this mandatory requirement of prior intimation would make the entire adjustment wholly illegal. Order - The adjustment for AY 2021-22 against the demand for AY 2015-16 2016-17 and adjustment for AY 2017-18 against the demand for AY 2016-17 are quashed and set aside and refund or such additional amount as may have been determined be paid to the Petitioner within two weeks from the receipt of the order along with interest thereon u/s 244A up to the date that payment is received.
Issues involved:
The issues involved in the judgment are the adjustment of refunds against outstanding demands without prior intimation under the Income-tax Act 1961. Judgment Details: Issue 1: Adjustment of refund for AY 2021-22 against demands for AY 2015-16 and 2016-17 The Petitioner raised a grievance regarding the Respondents unlawfully adjusting a refund due for AY 2021-22 against demands for AY 2015-16 and 2016-17 without prior intimation under section 254 of the ITA. The Petitioner contended that the demands for AY 2015-16 and 2016-17 were stayed by orders, and the adjustment was made without following the required procedures. The Respondent's counsel argued that the adjustment was justified due to the expiry of the stay period for the demand of AY 2015-16. However, the Court held that the stay should continue until the disposal of the appeal and not just for a limited period as per section 220(6) of the ITA. The Court also emphasized the mandatory requirement of prior intimation before adjusting the refund, citing relevant case laws. Consequently, the Court quashed the adjustment and ordered the refund to be paid to the Petitioner with interest. Issue 2: Adjustment of refund for AY 2017-18 against demand for AY 2016-17 The Petitioner also contested the adjustment of a refund for AY 2017-18 against the demand for AY 2016-17 without prior intimation under section 245 of the Act. The Respondent admitted a procedural lapse in this adjustment but argued that it did not invalidate the adjustment due to the outstanding demand for AY 2016-17. However, the Court reiterated the necessity of prior intimation before such adjustments, as established in previous judgments. The Court found the adjustment to be wholly illegal and ordered the quashing of the adjustment, directing the refund to be paid to the Petitioner along with interest.
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