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2016 (6) TMI 217 - HC - Income TaxGrant of refund due to the deceased Assessee - Adjustment of demand with the refund - Held that:- In the present case although the refund voucher uses the word ‘adjustment to be made’ as far as the Petitioner is concerned, the refund issued was after the adjustment was made. The explanation offered by the Revenue that it was merely 'withholding' ₹ 36,34,267 pending verification and not ‘adjusting' it is not acceptable. The Revenue is fully aware that the demand raised for AY 2008-09 had been challenged by the Petitioner before the CIT (A) and an application for stay of recovery of the demand had also been filed. The Revenue in fact does not dispute that both the appeal and the application are pending for disposal before the CIT (A). Therefore, it cannot be said that the withholding of the above amount was pending ‘verification’ of the demand for AY 2008-09 or AY 2010-11. Incidentally the show cause now issued to the Assessee under Section 245 of the Act is dated 21st March 2016, i.e., two months after notice had been issued by this Court in the present petition. Whatever the demand may be for the AYs 2008-09 and 2010-11, the fact remains that prior making the adjustment of such demand against the refund due to the Petitioner, no notice was issued to the Petitioner as mandatorily required under Section 245 of the Act. By issuing a notice on 21st March 2016 under Section 245 of the Act, two months after the notice was issued in the present petition, the Revenue cannot seek to correct the fatal error arising from the clear violation of the mandatory requirement under Section 245 of the Act. - Refund allowed with directions to CIT(A) - Decided in favor of assessee.
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