2015 (7) TMI 55 - HC - Income Tax

Adjustment of Refund with the demand without proper information to assessee - Stay under Section 220(6) - Held that - On a careful consideration of respective contentions and this Court taking note of the entire gamut of the attended facts and circumstances of the instant case in an integral manner comes to an inevitable conclusion that Section 245 of the Income Tax Act, 1961 makes it crystalline clear that the Income Tax Officer might, in lieu of payment of refund set-off the amount to be refunded against the sum payable by an individual, but only after furnishing information in writing to him of the proposed action. Admittedly, the 1st Appellant/Department had confirmed and sanctioned the refund due to the Respondent as per Refund Order, but, had not issued the cheque in this regard. One cannot brush aside a primordial fact that ingredients of Section 245 of the Income Tax Act cannot be pressed into service either as a Lever or Premium in favour of the Revenue, in the considered opinion of this Court. As such, this Court to prevent an aberration of justice and to promote substantial cause of justice, quashes the intimation dated 24.03.2014 under Section 245 of the Income Tax Act in respect of Assessment Year 2008-2009 (Against dues of Assessment year 2011-2012) the intimation dated 22.04.2014 for Adjustment of Refund in respect of Assessment Years 2009-2010 and 2010-2011 (Against dues of Assessment Year 2011-2012); the intimation dated 24.03.2014 for adjustment of Refund for Assessment Year 2012-2013 (Against dues of Assessment Year 2011-2012). At this stage, this Court makes it abundantly clear that it has not dealt with the merits of the matter pertaining to the Stay Application against recovery of taxes etc. Therefore, this Court disposes of the Writ Appeals only by quashing the Intimation Notices issued under Section 245 of the Income Tax Act for Adjustment of Refund in respect of Assessment Years mentioned supra and leaving it open to the respective parties to raise all factual and legal issues in respect of the subject matter in issue, i.e., aspect of payment / Retention of Refund etc., and it is open to the Concerned Authority / Department to take into consideration of the same, in a fair, just, dispassionate, practical, pragmatic, purposeful and meaningful manner and to pass a fresh speaking orders on merits by outlining the process of reasoning in an objective, qualitative and quantitative fashion in the interest of justice.

Issues Involved:
1. Adjustment of refunds against outstanding dues under Section 245 of the Income Tax Act.
2. Validity of intimation and adjustment procedures under Section 245.
3. Consideration of Stay Petition under Section 220(6) of the Income Tax Act.
4. Judicial discipline and adherence to appellate orders.

Issue-wise Analysis:

1. Adjustment of Refunds Against Outstanding Dues Under Section 245 of the Income Tax Act:
The Appellants contended that the Assessing Officer is empowered by Section 245 to adjust refunds due to the assessee against any outstanding dues. They argued that despite refunds being due for Assessment Years 2008-2009, 2009-2010, 2010-2011, and 2012-2013, there was a subsisting demand for the Assessment Year 2011-2012, justifying the adjustment. The court, however, emphasized that such adjustments must be preceded by proper intimation to the assessee, which was not adequately followed in this case.

2. Validity of Intimation and Adjustment Procedures Under Section 245:
The court highlighted that Section 245 mandates a written intimation to the assessee before any adjustment of refunds against outstanding dues. The Appellants failed to provide such intimation properly, making the adjustments invalid. The court cited various precedents emphasizing the necessity of intimation and the procedural fairness required under Section 245, including the decisions in Cognizant Technology Solutions India P. Ltd. v. Deputy Commissioner of Commercial Tax and Suresh B. Jain v. A.N. Shaikh.

3. Consideration of Stay Petition Under Section 220(6) of the Income Tax Act:
The Appellants argued that the Stay Petition under Section 220(6) could not be considered as no appeal was pending at the time of the petition. The court noted that the Stay Petition was filed before the statutory appeal, which was later submitted on 25.04.2014. The court found that the Appellants should have considered the Stay Petition appropriately, especially since the statutory appeal was filed subsequently.

4. Judicial Discipline and Adherence to Appellate Orders:
The Respondent's counsel argued that the Income Tax Appellate Tribunal had repeatedly decided in favor of the Respondent for previous assessment years, and the Appellants had not obtained a stay against these orders. The court agreed that the Appellants' actions violated the doctrine of judicial discipline by ignoring binding appellate orders. The court emphasized that the Appellants should have adhered to the tribunal's decisions unless overturned by a higher authority.

Conclusion:
The court quashed the intimation notices issued under Section 245 for the adjustment of refunds for the relevant assessment years, citing non-compliance with procedural requirements. It directed the concerned authority to reconsider the matter fairly and pass fresh speaking orders on merits. The court did not delve into the merits of the Stay Application against tax recovery, leaving it open for the parties to address all factual and legal issues in subsequent proceedings. Consequently, the connected miscellaneous petitions were closed.

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