High Court upholds decision on Income-tax Act, stresses prior intimation for adjustment. Strict compliance is crucial.

The High Court of BOMBAY dismissed the appeal, upholding the decision that the officer's actions did not comply with the statutory provision of u/s 245 of the Income-tax Act. The court emphasized the requirement of a prior intimation for adjustment under u/s 245 and criticized the Department's interpretation. Despite an equity argument, the court held that strict adherence to the law is essential in tax matters. The Department was given until 5 p.m. on the day of dismissal to provide the necessary refund order to avoid contempt proceedings, with an application for more time being rejected.

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Issues Involved: Interpretation of u/s 245 of the Income-tax Act regarding adjustment of tax liability and refund.

Judgment Summary:

The High Court of BOMBAY dismissed the appeal, upholding the decision of the single judge who found that the officer's actions were not in line with the statutory provision of u/s 245 of the Income-tax Act. The court emphasized that u/s 245 requires a previous intimation of proposed action for adjustment, not a simultaneous intimation. The Department's argument was criticized for its perverse interpretation of the law.

The court acknowledged the equity argument presented by Mr. Dhanuka but noted that the strict letter of the law governs income tax matters. Despite Mr. Dhanuka's assertion that the amount would not be recovered if a refund was made, the blame was placed on the officer for ignoring the clear provisions of u/s 245 and persisting in justifying his actions.

Regarding compliance with the writ, the court clarified that the Department had until 5 p.m. on the day of the appeal's dismissal to send the necessary refund order or cheque to the advocate for the respondent-assessee to avoid contempt proceedings. The appeal was summarily dismissed, and an application for more time was rejected due to lack of substance in the Department's plea.

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