2025 (2) TMI 714 - HC - Income Tax

Adjustment of the refundable amount which was adjusted towards the penalty order - writ of mandamus to direct the first respondent to issue a refund due along with interest u/s 244A (1) till the date of grant of refund - HELD THAT - We agree with Petitioner that based upon an order which was digitally signed on 22 May 2024 the Respondents were not entitled to issue the order dated 16 February 2024 adjusting an amount of Rs. 16, 81, 893/- against the alleged dues arising out of this order which was digitally signed only thereafter i.e. on 22 May 2024. As of 16 February 2024 we cannot reasonably hold that any amount was due and payable by the Petitioner which could have been adjusted from out of the refunds that had to be made to the Petitioner. On this short ground we set aside the order and direct the Respondents to refund to the Petitioner within four weeks from today. If the amount is not refunded within four weeks from today it will carry interest as provided under the law. This shall be without prejudice to any action under the Contempt of Courts Act 1971. If so advised the petitioner is free to challenge the penalty order digitally signed on 22 May 2024 and communicated to the Petitioner in these proceedings following law. All parties contentions in this regard are kept open to be decided by the appellate authority in the first instance.

Summary

The High Court of Bombay considered a case where the Petitioner sought a writ of mandamus to direct the first respondent to issue a refund of Rs. 7,69,17,030/- due for the assessment year 2023-2024 along with interest under Section 244A (1) of the Income Tax Act, 1961. The Petitioner's grievance was primarily related to the adjustment of the refundable amount of Rs. 16,81,893/-, which was adjusted towards a penalty order allegedly dated 14 March 2022. The key issue revolved around the validity of this adjustment.The Petitioner argued that during Section 245 proceedings, they were granted an opportunity to show cause against the adjustment made, claiming that no such penalty order was ever served upon them. The Petitioner requested a copy of the alleged order for verification. The Respondent, however, made the adjustment without providing a copy of the penalty order. The Court noted that the penalty order was digitally signed on 22 May 2024, and the adjustment was made on 16 February 2024, before the penalty order was digitally signed.The Respondent contended that since the penalty order was dated 14 March 2022 and the Petitioner had not challenged it, the adjustment made after due compliance with the procedure prescribed under Section 245 should not be interfered with. The Court acknowledged the penalty order but agreed with the Petitioner's argument that the adjustment made before the penalty order was digitally signed lacked jurisdiction. The Court held that as of 16 February 2024, no amount was due and payable by the Petitioner to be adjusted from the refunds owed to them.As a result, the Court set aside the order dated 16 February 2024 and directed the Respondents to refund Rs. 16,81,893/- to the Petitioner within four weeks. Failure to refund within the stipulated time would attract interest as per the law. The Court allowed the Petitioner to challenge the penalty order digitally signed on 22 May 2024 following the appropriate legal procedures. The ruling was made without any cost order, and all parties were instructed to act based on an authenticated copy of the judgment.In summary, the Court found that the adjustment made by the Respondents before the penalty order was digitally signed lacked jurisdiction and ordered the refund of the adjusted amount to the Petitioner. The Court also allowed the Petitioner to challenge the penalty order separately if advised to do so, while keeping all contentions open for appellate review.