Recovery of tax from taxpayer without served assessment order u/s156 held unlawful; refund ordered unless order traced and served

Whether recovery was effected without authority of law: HC held that statutory liability arises only upon issuance and service of an assessment order and demand under s.156; recovery from the taxpayer without supplying the assessment order and without a served demand constitutes recovery without authority of law. Outcome: respondents directed to refund the recovered amount with interest by a specified date, unless they can trace and serve the assessment order by that date, in which event refund is not required. Whether service/notice defect excuses non-production of the order: HC accepted respondent's contention that failure to update PAN address may impede service but nevertheless imposed a duty on the Department to supply a copy when recovery occurred; outcome: non-supply sustained invalidity of recovery. Right to challenge if order served: if the assessment order is served, taxpayer may appeal under s.246A within 30 days of service.

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Issues: (i) Whether recovery of Rs. 11,14,660/- from petitioner in relation to Assessment Year 2001-02 was lawful in absence of supply of the assessment order and creation of a demand notice under Section 156 of the Income-tax Act, 1961; (ii) Whether petitioner is entitled to refund and interim protection against further recovery pending tracing/serving of the assessment order; (iii) Whether, if the assessment order is traced and served, the petitioner may challenge it by appeal under Section 246A with relaxation of limitation.

Issue (i): Whether recovery without supply of assessment order and demand notice under Section 156 is lawful.

Analysis: The recovery relates to AY 2001-02 and the record of assessment order has not been supplied to the petitioner notwithstanding requests and directions. Statutory procedure requires the creation and service of a demand notice under Section 156 to create enforceable liability; absence of supply of the assessment order and accompanying demand particulars prevents the petitioner from knowing or contesting the basis of the demand.

Conclusion: The recovery of the amount without supplying the assessment order amounts to recovery without authority of law and is against the assessee.

Issue (ii): Whether refund and interim protection from further recovery should be granted pending tracing/serving of the assessment order.

Analysis: The petitioner repeatedly sought a copy of the assessment order and the Department has not been able to produce it; further recoveries have been effected from refunds. In light of the absence of the enabling documentation supplied to the petitioner and the need to preserve the assessee's rights pending final determination, equitable relief in the form of refund and temporary restraint on further recoveries is appropriate, subject to the Department's ability to trace and serve the assessment order within a specified time.

Conclusion: The petitioner is entitled to refund of Rs. 11,14,660/- with interest and to an order restraining further recovery until 31.03.2026, unless the assessment order is traced and validly served by that date.

Issue (iii): Whether the petitioner may challenge a subsequently traced and served assessment order by filing an appeal under Section 246A with relaxed limitation.

Analysis: If the Department is able to trace and serve the assessment order by the specified date, the statutory appellate remedy under Section 246A is available to the petitioner. Given the circumstances of non-supply and delayed service, relief from strict limitation is appropriate to preserve the assessee's right to challenge the order.

Conclusion: If the assessment order is traced and served, the petitioner may file an appeal under Section 246A within 30 days of service and the appellate authority shall not raise any objection on limitation grounds; this conclusion is in favour of the assessee.

Final Conclusion: The writ petition succeeds in part by directing refund with interest and granting interim protection against further recovery until 31.03.2026, while preserving the Department's right to trace and serve the assessment order and the assessee's right to appeal if served.

Ratio Decidendi: Where tax recovery has been effected but the assessment order and demand notice underpinning the recovery have not been supplied to the assessee, such recovery lacks authority of law and the assessee is entitled to refund and interim protection until the order is validly traced and served, subject to available appellate remedies.

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