Court orders full refund to oil corporation in tax dispute, deems adjustment by tax department illegal.

The court ruled in favor of the petitioner, an oil corporation, ordering the refund of the full amount claimed of Rs. 306,70,93,992 from the Income Tax department. The court held that the adjustment made by the Respondents without providing mandatory intimation under Section 245 of the Income Tax Act was illegal. Additionally, the court directed Respondent No.2 to provide a personal hearing to the petitioner regarding a separate refund issue and emphasized the importance of complying with the mandatory procedures under the Income Tax Act for adjustments and stays of demand.

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Issues:
1. Whether Respondent provided the mandatory intimation under Section 245 of the Income Tax Act before adjusting the refund against the demand.
2. The effect of the failure to provide such intimation.
3. The consequence of the outstanding demand on the refund to be made to the Petitioner.

Issue 1:
The petitioner, an oil corporation, claimed a refund of Rs. 306,70,93,992 from the Income Tax department, which the Respondent had not refunded, stating their right to adjust it against a demand. The petitioner argued that no mandatory intimation under Section 245 of the Income Tax Act was provided before the adjustment. Respondent No.1 did not deny this claim. Respondent No.2 stated that notices for adjustment were issued, but they pertained to a different entity before a merger, not the petitioner's refunds.

Issue 2:
The judgment cited the case of Jet Privilege Private Limited, emphasizing the mandatory requirement of prior intimation under Section 245 of the Act before setting off any payable amount against the refund. Failure to comply with this requirement renders the adjustment illegal. The court held that the adjustment made by the Respondents without proper intimation was wholly illegal, entitling the Petitioner to the full refund within six weeks.

Issue 3:
Regarding the outstanding demand against the petitioner for three assessment years, the petitioner had paid 20% of the demand for a stay, as per the relevant Office Memorandum. This payment extended the time for making the full payment and prevented the petitioner from being considered in default. The court directed Respondent No.2 to provide a personal hearing to the petitioner regarding a separate refund issue, ensuring compliance with the law.

In conclusion, the court ruled in favor of the petitioner, ordering the refund of the full amount claimed, highlighting the importance of following the mandatory procedures under the Income Tax Act for adjustments and stays of demand.

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