TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
1. Whether the Assessing Officer (ITO) acted within authority and in accordance with law by adjusting/refunding amounts pertaining to Assessment Years 2021-22, 2022-23, 2023-24, and 2024-25 against the outstanding demand for Assessment Year 2018-19 without issuing prior intimation or opportunity of hearing as mandated under Section 245 of the Income Tax Act, 1961 ("IT Act").
2. Whether the adjustment of refunds against outstanding demand during pendency of statutory appeal, despite compliance with conditional stay orders and partial payment of demanded amount, was legally justified.
3. The scope and interpretation of the requirement of "intimation" under Section 245 of the IT Act before set-off of refunds against outstanding tax dues.
4. The applicability and effect of Central Board of Direct Taxes (CBDT) Office Memoranda dated 29.02.2016 and 31.07.2017 regarding the quantum of payment (20% of disputed demand) as a pre-condition for stay of demand and the limits on adjustment of refunds beyond such amount.
5. Whether excess adjustment of refunds beyond 20% of disputed demand during pendency of appeal is impermissible and requires refund to the assessee.
6. Whether the failure of the assessee to deposit the balance amount within stipulated time affects the legality of refund adjustment by the ITO.
7. Whether the principles of natural justice require issuance of further opportunity or intimation beyond the initial intimation under Section 245 before adjustment of refunds.
2. ISSUE-WISE DETAILED ANALYSISIssue 1 & 3: Requirement of Intimation under Section 245 of the IT Act before Adjustment of Refunds
Relevant Legal Framework and Precedents:
Section 245 of the IT Act authorizes the Assessing Officer or other specified authorities to set off refunds against any sum remaining payable under the Act, "after giving an intimation in writing to such person of the action proposed to be taken under this section." The statute uses the phrase "an intimation," implying at least one written notice must be issued prior to adjustment.
The Court examined the significance of the article "an" in the phrase "an intimation," referring to authoritative interpretations of indefinite articles in legal context, emphasizing that issuance of at least one intimation is mandatory but not necessarily multiple or repeated notices.
Key Evidence and Findings:
It was undisputed that no intimation was issued before adjustment of refunds for Assessment Years 2021-22, 2022-23, and 2023-24. However, for Assessment Year 2024-25, an intimation dated 21.10.2024 was issued by e-mail with a 21-day period for response, which the petitioner did not reply to, awaiting further communication.
Court's Interpretation and Reasoning:
The Court held that the statutory requirement is satisfied by issuance of "an intimation" and no further or repeated intimation or opportunity of hearing is mandated before adjustment. The absence of response by the assessee to the intimation for AY 2024-25 empowered the ITO to proceed with adjustment. For other years where no intimation was issued, the Court recognized the deficiency but reserved detailed factual inquiry for the competent authority.
Conclusions:
The ITO was justified in adjusting the refund for AY 2024-25 after issuing the statutory intimation and in absence of any response. However, the question of adjustment without intimation for other years requires further factual verification and compliance with Section 245.
Issue 2 & 6: Legality of Adjustment of Refunds during Pendency of Appeal and Effect of Delay in Payment
Relevant Legal Framework and Precedents:
Under Section 220(6) of the IT Act and CBDT's Office Memoranda dated 29.02.2016 and 31.07.2017, stay of recovery of disputed demand pending appeal is granted on payment of 20% of the disputed demand, subject to conditions including cooperation for early disposal and reservation of right to adjust refunds against the demand as per Section 245.
Key Evidence and Findings:
The petitioner filed appeals and sought stay of demand. The ITO granted conditional stay subject to payment of 20% of the demand. The petitioner deposited Rs.16,91,930/- initially but delayed payment of balance Rs.6,77,330/- beyond stipulated date (paid on 08.11.2023 against deadline 06.11.2023). No evidence was produced that the petitioner informed the ITO of the delayed payment.
Court's Interpretation and Reasoning:
The delay in payment beyond the stipulated time without informing the ITO was held to affect the entitlement to stay. The ITO reserved the right to adjust refunds arising against outstanding demand as per Section 245. Given the delay and non-compliance with conditions, the ITO's action to adjust refunds was not impermissible.
Conclusions:
Adjustment of refunds during pendency of appeal is lawful if conditions for stay, including timely payment, are not fully complied with. Delay in payment and failure to notify the authority justified the ITO's set-off of refunds against outstanding demand.
Issue 4 & 5: Applicability of CBDT Office Memoranda on Quantum of Payment and Limits on Refund Adjustment
Relevant Legal Framework and Precedents:
The CBDT Office Memorandum dated 29.02.2016, modified by 31.07.2017, prescribes that stay of demand pending appeal shall be granted on payment of 20% of disputed demand unless special circumstances warrant higher or lower payment. It also provides that refunds may be adjusted only to the extent necessary for granting stay, subject to Section 245.
Precedents cited include Skyline Engineering Contracts (India) Pvt Ltd, Essjay Ericson Pvt Ltd, and Jindal Stainless Ltd, which held that adjustment of refunds beyond 20% of disputed demand during pendency of appeal is not permissible and excess amounts must be refunded with interest.
Key Evidence and Findings:
The petitioner contended that refunds adjusted exceeded the 20% threshold prescribed by the Office Memoranda. The ITO did not produce evidence that any such excess adjustment was authorized or justified.
Court's Interpretation and Reasoning:
The Court acknowledged the binding nature of the Office Memoranda and the precedents requiring refund of amounts adjusted beyond 20% of disputed demand. However, the Court noted absence of factual clarity on whether excess adjustment occurred for AYs 2021-22, 2022-23, and 2023-24, necessitating further inquiry.
Conclusions:
Any adjustment of refunds exceeding 20% of disputed demand during pendency of appeal is unauthorized and must be restored to the assessee. The ITO is directed to verify compliance and refund excess amounts if found.
Issue 7: Requirement of Further Opportunity or Intimation beyond Initial Intimation under Section 245
Relevant Legal Framework and Precedents:
Section 245 mandates issuance of "an intimation" prior to adjustment. The principles of natural justice require notice and opportunity to be heard before adverse action.
Court's Interpretation and Reasoning:
The Court held that the statutory language requires only one intimation before adjustment and does not mandate further notices or repeated opportunities. Once the assessee fails to respond to the intimation, the authority may proceed with adjustment. The petitioner's contention for further opportunity was rejected as uncalled for.
Conclusions:
Issuance of a single intimation under Section 245 suffices to meet natural justice requirements prior to refund adjustment. No further opportunity is legally required before set-off.
3. ADDITIONAL DIRECTIONS AND ORDERSi. The Assessing Officer/competent authority shall issue intimation within one week to the petitioner regarding the adjustment of refunds for AYs 2021-22, 2022-23, and 2023-24, if not already issued.
ii. Upon appearance, the authority shall afford opportunity of hearing to the petitioner and examine whether any refunds were adjusted in excess of 20% of disputed demand during pendency of appeal.
iii. If excess adjustment is found, the authority shall restore the excess amount to the petitioner along with applicable interest.
iv. The writ petition is allowed to the extent above and pending interlocutory applications stand disposed of. No order as to costs.
TaxTMI 
