Tax Department Must Hear Objections Before Adjusting Refunds Against Demands Under Section 245 of Income Tax Act

HC found adjustment of tax refund against outstanding demand invalid due to procedural violations of natural justice under Section 245 of IT Act. Despite taxpayer submitting objections on December 5-7, 2023, revenue authorities proceeded with adjustment on March 16, 2024, without granting hearing or issuing formal order addressing objections. Court quashed the adjustment noting gross violation of principles of natural justice and fair play, directing authorities to deposit Rs. 4,91,45,369/- within two weeks. Decision emphasizes mandatory requirement of proper hearing and reasoned order before exercising adjustment powers under Section 245. .....

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