By TIOL News Service
MUMBAI, APRIL 12, 2018: THE ISSUE BEFORE THE BENCH IN THIS CASE WAS - Whether the Assessing Officer can adjust outstanding tax dues pertaining to some AYs, against refund payable to the assessee, while not considering the assessee's objections to such adjustment as well as in ignorance of a binding High Court precedent on the issue. NO IS THE VERDICT.
Facts of the case
The assessee-company is a leading provider of telecommunication services. The assessee was due to receive some amount as refund. However, during assessment in the relevant AY, the AO adjusted such refund available against the outstanding tax demands for some other AYs. The assessee claimed that such actions were taken u/s 245 of the Act. Later, the DCIT passed an order, which gave effect to an order passed by the CIT(A) resulting in the assessee being granted refund of about Rs 128.16 crores. Thereupon, the assessee was served an Income Tax computation form which reiterated that the refund granted was being adjusted against outstanding tax demands for three other AYs. Later, the assessee received an intimation u/s 245 from the DCIT, also stating the same thing. The assessee was also granted three days time to reply. Although the assessee filed objections to such adjustment and also cited judgments in its favor, it claimed that its submissions were not considered. It also claimed that the refund due to it was not granted. Hence the present writ.
the High Court held that,
++ the Counsel for the Revenue had been asked whether the adjustment of the refund with the arrears of tax was by a speaking order. In response, he stated that it is mere noting in the file and no detailed order has been passed. Thus the adjustment was done according to the Respondent no.1 on 15th September 2017 only after having received the assessee's objections to the adjustment on 12th September, 2017. This in the background of the fact that the notice dated 22nd August, 2017 issued u/s 245 of the Act was received by the assessee only on 8th September, 2017. Thus, neither the AO or the approval of the Commissioner of Income Tax as endorsed on order sheet dated 8th September, 2017 at all consider the assessee's objections. Also, the assessee had specifically invited the attention of the respondent no.1 to the decision of this Court in Hindustan Unilever Ltd. setting out the manner and procedure by which the refunds are to be adjusted against the pending demands u/s 245 of the Act. However, the Respondent no.1 chose to completely ignore the binding decision of this Court and proceeded to adjust the refund due for AY 2005-06 with the demands payable for the AYs 2004-05, 2006-07 and 2008-09 without considering the assessee's contentions.
++ in these circumstances, the approval obtained by the Respondent no.1 from the Commissioner of Income Tax so as to adjust the refund as recorded in the order sheet dated 8th September, 2017 is premature. Therefore, the action of the Respondent no.1 adjusting the refund due against the tax arrears as is evidenced from the computation of income accompanying the order dated 14th August, 2017 and as evidenced by the communication dated 15th September, 2017 addressed to the Bank are set aside. So also, the endorsement of the Commissioner of Income Tax approving the adjustment as found in the order sheet dated 8th September, 2017 are quashed and set aside. This for the reason that they are in defiance of the directions of this Court in Hindustan Unilever Ltd. Vs. Deputy Commissioner of Income Tax-1(1).
++ it would only be appropriate that the Revenue examine and consider the assessee's response dated 12th September, 2017 to the intimation dated 22nd August, 2017 by a speaking order before refund is adjusted against the demands of tax outstanding. However, the manner in which the Respondent no.1 has dealt with the assessee's refund claim by having it adjusted against the arrears of tax without having followed the due process of law as reiterated by the binding decision of this Court in Hindustan Unilever Ltd. , the apprehension of the assessee that it would get no justice at her hands in this case, seems justified. Therefore, the Counsel appearing for the Revenue is asked to suggest or nominate any other Officer of the Revenue who would consider the assessee's response dated 12th September, 2017 to the intimation dated 22nd August, 2017 in accordance with the decision of this Court in Hindustan Unilever Ltd . On instructions, The Counsel for the Revenue states that the entire issue of adjustment in terms of Section 245 of the Act as called upon the assessee to show cause by letter dated 22nd August, 2017 would be considered by the Additional Commissioner of Income Tax, Range 8(3). The assessee is granted one week's time to file a further submission before him. Needless to state that the Additional Commissioner of Income Tax will dispose of the assessee's responses to the intimation dated 22nd August, 2017 in accordance with principles of natural justice as expeditiously as possible and preferably within five weeks from today.
(See 2018-TIOL-682-HC-MUM-IT)
