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TMI Blog2024 (8) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer having regard to the fact that the proceedings for assessment or reassessment are pending, forms an opinion that the grant of a refund is likely to adversely affect the Revenue, he may, after recording reasons in writing and with the previous approvals of the Principal Commissioner, as the case may be, withhold the refund up to the date on which that assessment or reassessment is made. There are also relevant circulars of 2013 in regard to compliance of Section 245 before making any adjustment of a refund. The Affidavit in Reply on behalf of the Revenue is exceedingly peculiar. From paragraph 5.5 there are several sub-paragraphs that deal with the various assessment proceedings and the pendency of the stay proceedings. However, sub-paragraph (1) at internal page 6 clearly says that the adjustment by the CPC was effected without issuing a Notice under Section 245 of the IT Act. Sub-paragraphs (2) and (3) deal with a question of Tax Deducted at Source ( TDS ) credit but also mention an adjustment of the refund. It is therefore undisputed that no intimation under Section 245 of the IT Act was ever issued to the Petitioners. As decided in Hindustan Unilever Ltd. [ 2015 (7) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for AY 2017-18, against demand for AY 2018-19, wherein stay applications were pending and without issuing any intimation to the Petitioner under Section 245 of the Income Tax Act, 1961; (ii) the action of Respondent No. 3 on 10th March 2023, of adjusting the refund of Rs.2,30,52,355/- and Rs.80,74,925/- for AY 2022-23, against stayed tax demand for AY 2018-19, wherein stay applications were pending and without issuing any intimation to the Petitioner under Section 245 of the Act; and (iii) the inaction of the Respondent No. 1 in disposing off the stay application and rectification application for AY 2018-19 and rectification application for AY 2017-18 and AY 2022-2023 filed by the Petitioner. (b) that this Hon ble Court may be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus, or any other appropriate Writ, order or direction under Article 226 of the Constitution of India, directing the Respondents to issue consequential refunds of Rs.3,53,99,815/- and Rs.2,30,52,355/- and Rs.80,74,925/- for AY 2017-18 and AY 2022-23 respectively aggregating to Rs.6,65,27,095/- to the Petitioners along with interest under Section 244A of the Act up to the date of payment withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to such person of the action proposed to be taken under this sub section. (2) Where a part of the refund is set off under the provisions of sub section (1), or where no such amount is set off, and refund becomes due to a person, and the Assessing Officer, having regard to the fact that proceedings for assessment or reassessment are pending in the case of such person, is of the opinion that the grant of refund is likely to adversely affect the revenue, he may, for reasons to be recorded in writing and with the previous approval of the Principal Commissioner or the Commissioner, as the case may be, withhold the refund up to the date on which such assessment or reassessment is made. 9. As Section 245(1) shows, it is permissible for the Revenue to set off a refund that is found due against a demand but only after an intimation is given in writing to the person of the action proposed, i.e., the proposed set off or adjustment. Sub section (2) of Section 45 was introduced by an amendment. It speaks of a set off of part of a refund or an alternative scenario where there is no set off and a refund becomes due. In that situation, if the Assessing Officer having regard to the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Hon ble Income Tax Appellate Tribunal (hereinafter referred to as Tribunal ) for the AY 2016 17 and 2017 18, it shows non application of mind, which is wholly erroneous, arbitrary and contrary to law. Hereto annexed and marked as Exhibit A and B is a screenshot of the TIN NSDL website and corresponding challan status as per OLTAS reflecting the status of the income tax refund for AY 2017 18 as adjusted against the demand for AY 2018 19; (b) On 10 March 2023, Respondent No 3 adjusted the refunds of Rs.2,30,52,355/ and Rs.80,74,925/ for AY 2022 23 against the demands for AY 2018 19 without issuing any intimation to the Petitioner under section 245 of the Act and without disposing off the stay application dated 23 September 2021 and letter dated 9 November 2022 filed by the Petitioner for AY 2018 19 which is wholly erroneous, arbitrary and contrary to law and judicial precedents. Further, without considering that the issues are covered in favour of the Petitioner by the order passed by the Hon ble Tribunal for the AY 2016 17 and 2017 18, it shows non application of mind, which is wholly erroneous, arbitrary and contrary to law. Hereto annexed and marked as Exhibit C and D is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for AY 2022 23 amounting to Rs.3,11,27,280/ (refund determined in the intimation issued under section 143(1) of Rs.3,18,77,915/ less Taxes Deducted at Source of Rs.7,50,635/ on interest) entirely against the demand including interest under section 220 of he Act for AY 2018 19 (wherein the issues are entirely covered in favour of the Petitioner by the order passed by the Hon ble Tribunal in earlier AYs and the stay application were pending disposal). 19. Reliance is placed by the Petitioners on the following authorities: Jet Privilege (P) Ltd v Deputy Commissioner of Income Tax 5(2)(1), Mumbai, (2021) 131 taxmann.com 119; 2021 SCC OnLine Bom 1799 decided by a Division Bench of this Court and Hindustan Unilever Ltd v Deputy Commissioner of Income Tax 1(1), (2015) 60 taxmann.com 326; 2015 SCC OnLine Bom 6006 also decided by a Division Bench of this Court. 20. In Hindustan Unilever Ltd, the Division Bench referenced Section 245 read with Section 220 of the IT Act. The relevant findings of the Division Bench in paragraphs 14, 15, 24 and 26 are reproduced hereunder. 14. Section 245 of the Act, empowers the revenue to adjust refunds due to an assessee against any tax payable(of the same c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue as the occasion to grant the refund would not arise till the objection to the intimation is disposed of. Of course the objections should be disposed of expeditiously as undue delay in granting of refund would cause prejudice to the party entitled to the refund. 24. The Delhi High Court in the case of Maruti Suzuki India Ltd. (supra) had an occasion to deal with a similar contention as is being raised by the Revenue in the present case namely the recovery of tax cannot and would not include adjustment under Section 245 of the Act and the stay of recovery under Section 220(6) of the Act would not fetter the rights of the Revenue to adjust the demands out of refund due to the assessee. This submission was negatived by the Delhi High Court holding that recovery could be made by various modes including adjustment under Section 245 of the Act. The Delhi High Court held that where an authority grants a stay of recovery under Section 220(6) of the Act, it could provide in that order granting stay of the recovery that the same would not be extended to adjustment of refund. In cases where the stay order is in absolute terms, it would be inappropriate on the part of the Revenue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edly because the affidavit in reply/additional affidavit filed by respondent confirms that the intimation under Section 245 of the Act was given only on 13th May, 2020. At this point, if one refers to Form 26 AS which is the annaul tax statement under Section 203 (AA) of the Act for the A.Y. 2015 16 and for A.Y. 2016 17, adjustment against the refund due has been made on 5th May, 2020, whereas the mandatory notice under Section 245 of the Act has been given only on 13th May, 2020. Mr. Pardiwalla submits that it is settled law that failure to comply with this mandatory requirement of prior intimation would make the entire adjustment as wholly illegal and therefore, respondent could not have made the adjustment as they wanted to. Mr. Pardiwalla also submitted in any event, petitioner having deposited 20% amount and stay having been granted under Section 220 (6) of the Act, it would mean that the time to make payment stands extended and petitioner shall not be treated to be an assessee in default for the recovery provisions to be set in motion and therefore, the entire amount refundable after giving credit to the amount already refunded becomes payable together with accumulated intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axmann.com 326/233 Taxman 353/377 ITR 281 (Bom.) relied upon by Mr. Pardiwalla. 9. The fact that respondent has not followed the mandatory prior requirement of intimation under Section 245 of the Act would make the adjustment wholly illegal and therefore, respondent was clearly in error in not refunding the amount. 10. As per the Office Memorandum [F. No. 404/72/93 ITCC] issued dated 29th February, 2016, amended by another Office Memorandum dated 25th August, 2017 the assessing officer shall grant stay of demand where the outstanding demand is disputed on assessee paying 20% of the disputed demand. Admittedly, petitioner has filed an appeal disputing the outstanding demand for A.Y. 2015 16 and A.Y. 2016 17 and have deposited 20% of the amount demanded. Therefore, there is a stay of demand in force. The effect of this deposit would mean that the time to make the payment stands extended and petitioner is not deemed to be an assessee in default for the recovery provisions to be set in motion [(Hindustan Unilever Limited., case (supra)]. ( Emphasis added ) 23. Accordingly, even in that matter Rule was made absolute. 24. Before us therefore there are now two issues. The first is that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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