Court rules against refund adjustment without notice, upholds rejection of stay application, orders timely appeal disposal.

The court held that adjusting a refund towards a demand without prior intimation is illegal and set aside the communication, directing compliance with proper procedures. The rejection of the stay application for the assessment year was upheld, with the court directing timely disposal of the appeal by the Commissioner of Income Tax (Appeals).

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Issues:
1. Adjustment of refund towards demand for assessment year 2008-2009 without prior intimation.
2. Rejection of stay application for assessment year 2008-2009 by the assessing officer.

Issue 1: Adjustment of refund towards demand for assessment year 2008-2009 without prior intimation:

The petitioner, an export oriented unit, filed returns of income for the assessment year 2007-2008, claiming deduction under Section 10(B) of the Income Tax Act. The first respondent disallowed the claim, but on appeal, the Commissioner of Income Tax (Appeals) partly allowed it. Subsequently, the first respondent issued a communication adjusting the refund towards the demand for the assessment year 2008-2009 without prior intimation. The court held that such adjustment without prior intimation is illegal and contrary to law, citing the mandatory nature of Section 245 of the Act. The court referred to past judgments emphasizing the necessity of prior intimation before making any adjustments. Therefore, the court set aside the communication adjusting the refund and directed the matter to be remanded to the first respondent to follow the proper procedure under Section 245.

Issue 2: Rejection of stay application for assessment year 2008-2009 by the assessing officer:

The petitioner filed a stay application for the assessment year 2008-2009 after discussions with the assessing officer, seeking to pay the demand in installments. The first respondent rejected the stay application, stating that the petitioner is not entitled to rely on certain circulars and instructions. The court upheld the first respondent's decision, noting that the issues involved in the assessment years 2007-2008 and 2008-2009 are partly similar. The court found no justifiable ground to interfere with the first respondent's reasoning. Additionally, the court directed the Commissioner of Income Tax (Appeals) to dispose of the appeal for the assessment year 2008-2009 within three months, subject to the petitioner complying with the specified installments.

In conclusion, the court partly allowed the writ petitions, quashing the adjustment of refund without prior intimation and remanding the matter for proper procedure under Section 245. The court also upheld the rejection of the stay application for the assessment year 2008-2009 and directed the timely disposal of the appeal by the Commissioner of Income Tax (Appeals).

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