Generate professional replies to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
Step 1 – Issue Identification & Review
The AI analyses your query, notice, order, or uploaded documents and identifies the key issues involved.
• Review the issues identified by the AI • Add, edit, remove, or refine issues as required
Step 2 – Draft Generation
Once you approve the issues, the AI performs issue-wise legal research and prepares a structured draft response.
• Relevant statutory provisions • Judicial precedents and Supreme Court, High Court and other citations • Issue-wise legal analysis • Practical arguments and supporting content • Professionally structured draft ready for further review.
Court orders refund for excessive tax adjustment violating natural justice and statutory limits The Court found that the respondents violated natural justice by adjusting the petitioner's refund without issuing a notice under Section 245 of the ...
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Provisions expressly mentioned in the judgment/order text.
Court orders refund for excessive tax adjustment violating natural justice and statutory limits
The Court found that the respondents violated natural justice by adjusting the petitioner's refund without issuing a notice under Section 245 of the Income Tax Act. Despite a stay order on the demand, the adjustment was made prematurely. The Court held that the adjustment exceeded the 10% limit of the disputed tax demand and directed the respondents to refund the excess amount with statutory interest within four weeks. The writ petition was disposed of in favor of the petitioner.
Issues: Seeking refund of excess recovery of tax demand, violation of natural justice in adjusting refund without notice under Section 245 of the Income Tax Act.
Analysis: The petitioner filed a writ petition to seek a refund of Rs.1,52,240, which was recovered in excess of 10% of the total disputed tax demand for the Assessment Year 2017-18 against refunds due for the Assessment Year 2020-21. The petitioner had obtained a stay order on the demand till the disposal of the first appeal or 30th September 2020, whichever was earlier. Despite this, the respondents adjusted the refund without issuing a notice under Section 245 of the Act, which is a mandatory requirement before such adjustments. The petitioner's application for extension of the stay of demand was pending, and no opportunity of being heard was provided before the adjustment was made.
The respondents argued that an adjustment order under Section 245 of the Act was passed, and as the stay order was limited in time, they were within their rights to adjust the refund. However, the Court found that the restrictive stay order issued by the respondents was in violation of the directions of the CBDT and previous orders of the Court, which required the Assessing Officer to grant stay till the disposal of the first appeal. The Court noted that the adjustments were made before the issuance of the set-off of refund order under Section 245, and thus, the petitioner was entitled to a refund of the excess adjustment made in violation of the 10% limit of the disputed tax demand.
Consequently, the Court directed the respondents to refund the amount adjusted in excess of 10% of the disputed tax demands for the Assessment Year 2017-18 within four weeks, along with statutory interest. The writ petition and applications were disposed of with this direction.
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