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2015 (10) TMI 1770 - UTTARAKHAND HIGH COURT

2015 (10) TMI 1770 - UTTARAKHAND HIGH COURT - [2016] 384 ITR 227 - Refund of entire amount coercively recovered along with 15% interest per annum as per sections 240 and 244(1) seeked - Held that:- In the circumstances of the case, we are inclined to accept the request, namely, that a decision will be taken by the authority regarding the refund in accordance with law, which would include the right to consider whether, under Section 245 of the Act, a case is made out for adjustment of the refund .....

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uestion is, whether, in the circumstances obtaining as a whole, set off should be ordered. We have given sufficient indications, which should guide the authority. It is for the authority concerned to look into all these aspects and, firstly, decide whether it should invoke the power under Section 245 of the Act. If it is of the view that the power should be invoked; then alone, in view of the requirement of giving prior intimation, which we have held entails compliance with natural justice, appe .....

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e assessment completed in 2015-2016 within a period of 10 days from today, then, the amount due by way of refund, along with due interest, shall be paid to the writ petitioner at the earliest. If, on the other hand, it decides to invoke Section 245, then the proceedings must be completed within a period of two weeks from the date of affording an opportunity to the writ petitioner. - Special Appeal No. 525 of 2015 - Dated:- 12-10-2015 - K M Joseph, CJ And V. K. Bist, JJ. For the Petitioner : Mr. .....

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14 along with 15% interest per annum, as per sections 240 and 244(1) of ITA, and, b. Issue any other writ, order or direction in the nature of certiorari quashing letter dated 04-12-2014 (Annexure No. 5) issued by the Respondent No. 3 granting an illusory refund, and instead direct respondent No. 2 and 4 to make actual refund under section 240 and 244(1) along with interest @ 15%." 2. Very briefly put, the case of respondent No. 1 / writ petitioner was as follows: On 18.07.2014, the Income .....

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4,36,57,686/- with interest, which the Department had coercively recovered from the writ petitioner. It is necessary to notice that recovery was effected by proceedings dated 29.03.2014, by which the Department attached the account of the writ petitioner with RBI in a sum of ₹ 44 and odd crores, which amount related to 2013-2014. Writ petitioner further sent communication dated 08.09.2014 (Annexure No. 4) seeking refund. It is, thereafter, that the impugned letter dated 04.12.2014 (Annexur .....

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; 88,73,15,372/- for the AY 2013-14 was created on 12/12/2013. The said demand become nil after giving appeal effect U/s 251 dated 01/12/2014 and a refund of ₹ 46,14,03,993/- is payable to you for the AY 2013-14. The demand of ₹ 97,85,38,937/- for the AY 2014-15 is still pending. The refund of ₹ 46,14,03,993/- is therefore being adjusted U/s 245 against the demand due of ₹ 97,85,38,937/- for the AY 2014-15. Yours faithfully Sd./- (A.K. Sonkar) Dy. Commissioner of Income T .....

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ere is no question of adjustment or set off. We, further, note that the learned counsel for the appellants contended that he was not aware of the judgment dated 03.03.2015 and that, if the amount has been directed to be deleted, the assessee would be entitled to refund of the amount with interest under Section 240, read with Section 244 of the Act. The learned Single Judge held as follows: "I am of the opinion that once I.T.A.T. has opined that Section 194A of the Income Tax Act is not appl .....

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for the Revenue, as to whether order dated 03.03.2015 has been passed by the Commissioner of Income Tax (Appeals), therefore, in the peculiar facts and circumstances of the case, I direct that on the applications of the petitioner seeking refund, an appropriate decision shall be taken within two weeks positively and if it is found that vide order dated 03.03.2015 amount of ₹ 97,85,37,937/- has been deleted against the assessee, amount of ₹ 44,36,57,686/- shall be refunded to the pet .....

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and Mr. Bishwajit Bhattacharya, learned Senior Counsel appearing on behalf of respondent No. 1 / writ petitioner. 7. Mr. Hari Mohan Bhatia would submit that it is true that the assessment for ₹ 97,85,38,937/- for the Assessment Year 2014-2015 has been set aside by the Commissioner of Income Tax (Appeals), as was contended by the writ petitioner; but, he would take exception to the direction of the learned Single Judge that, if the said assessment was indeed cancelled, as was the case of th .....

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No doubt, he does not dispute that the writ petitioner has preferred an appeal before the Commissioner of Income Tax (Appeals), Dehradun, and it is pending. It is, in fact, pointed out by Mr. Hari Mohan Bhatia that this fact, which was well-known to the writ petitioner, was not brought to the notice of the learned Single Judge. The counsel was also not aware of the said assessment and the judgment was rendered on 31.08.2015 after the assessment for the year 2015-2016 dated 12.05.2015. Therefore .....

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e learned Single Judge that, unless and until the Tribunal s order is set aside or stayed, refund cannot be refused, cannot be sustained. 8. Per contra, Mr. Bishwajit Bhattacharya would submit that this is a case, where the appeal is filed without any basis. He would contend that this is an affront to the rule of law, which, he would point out, has been held by the 13 Judges Bench of the Hon ble Apex Court in Kesavananda Bharati Sripadagalvaru & others vs. State of Kerala & another, repo .....

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He points out that, for Assessment Year 2013-2014, an amount of ₹ 44 and odd crores came to be recovered by the Department by attaching the account of the Bank. While so, the Income Tax Appellate Tribunal, vide judgment dated 18.07.2014 (Annexure No. 2 to the writ petition), allowed the appeals filed by the writ petitioner for the Assessment Years 2010-2011, 2011-2012 & 2012-2013. Thereafter, for Assessment Year 2014-2015, even though the matter stood concluded by the judgment of the .....

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a hierarchy of authorities must be followed by the authority at the bottom of the pyramid. It is contrary to the same that, however, the Assessing Officer, on an issue which stood concluded, again sought to assess the writ petitioner by assessing him for the Assessment Year 2014-2015 and this has finally resulted in the impugned order being passed, by which, even without complying with the mandatory requirement of prior intimation under Section 245 of the Act, the amount, which became payable by .....

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d in (2012) 347 ITR 43 (Delhi); iv. Suri Sons vs. Commissioner of Income Tax & another, reported in (1988) 169 ITR 320; v. Shreyans Industries Ltd. vs. Commissioner of Income Tax & another, reported in (2001) 252 ITR 544; vi. Vijay Kumar Bhati vs. Commissioner of Income Tax & another, reported in (1994) 205 ITR 110; vii. Commissioner of Income Tax vs. J.K. Industries Ltd., reported in (2000) 245 ITR 457; viii. A.N. Shaikh & others vs. Suresh B. Jain, reported in (1987) 165 ITR 86 .....

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thereafter, the authority resorting to Section 245 of the Act for making adjustment. This is apart from his contention that, as far as the impugned order is concerned, there is no prior intimation as required under Section 245 of the Act. 10. In order to appreciate the contentions of the parties, we deem it necessary to refer to the scheme of the Act in regard to refunds. Refunds figure under Chapter XIX of the Act. Section 237 provides, inter alia, that, if a person satisfies the Assessing Off .....

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assed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf: Provided that where, by the order aforesaid,- (a) an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment; (b) the ass .....

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lows: "242. Correctness of assessment not to be questioned. - In a claim under this Chapter, it shall not be open to the assessee to question the correctness of any assessment or other matter decided which has become final and conclusive or ask for a review of the same, and the assessee shall not be entitled to any relief on such claim except refund of tax wrongly paid or paid in excess." 13. Section 243 provides for interest on delayed refunds. Section 244 deals with interest on refun .....

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als), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section." 14. Having set out the statutory framework, we pass on to the consideration of the case law, which .....

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Sri Reddy overlooks is that we are not concerned here with the correctness or otherwise of their conclusion or of any factual mala fides but with the fact that the officers, in reaching in their conclusion, by-passed two appellate orders in regard to the same issue which were placed before them, one of the Collector (Appeals) and the other of the Tribunal. The High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the .....

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nd the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been sus .....

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er on the ground that it fell under Heading 85.47. An order in respect of another plant was distinguished by the Assistant Collector. In appeal, the Collector (Appeals) observed that the reason given for not following the order of the Collector (Appeals) was totally untenable and directed the Assistant Collector to pass a speaking order. When the matter went back, the Assistant Collector reiterated the conclusion reached by his predecessor. No reason was given why the appellate authority s order .....

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by the Government of India. 16. Next, the learned Senior Counsel for the writ petitioner referred us to the judgment of the Bench of the Delhi High Court in Glaxo Smith Kline Asia P. Ltd. vs. Commissioner of Income Tax & others, reported in (2007) 290 ITR 35 (Delhi). The judgment was rendered in a writ petition under Article 226 filed seeking a mandamus to the respondents to give effect to the order of the Tribunal and grant refund with interest. The petitioner therein entered into an agree .....

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rges was not fully and exclusively for the purpose of the business of the petitioner and justifiable only to the extent of 7 per cent of the net sales. The order was confirmed by the appellate authority. Similar approach was taken in Assessment Year 1999-2000 also by the Assessing Officer and the appellate authority. The petitioner therein successfully appealed before the Tribunal and the Tribunal deleted the disallowance for Assessment Years 1998-1999 and 1999-2000. The said order of the Tribun .....

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al seeking refund of the amount recovered pending disposal of the appeal by the Tribunal. By order dated 03.03.2005, the Tribunal directed the Revenue to refund the amount within two weeks from the date of receipt of the order. The said order was challenged by the Revenue in a writ petition. The said order was stayed by the High Court by order dated 27.04.2005. Ultimately, the Revenue withdrew the said petition, as the assessee s appeals for Assessment Years 2000-2001 and 2001-2002 were allowed .....

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that, till the next date of hearing, the respondents should not adjust the amount of refund, if any, due to the petitioner Company without the leave of the court. On 05.04.2006, the Revenue filed an application seeking permission to set off the refund against the demand raised / to be raised against the assessee relying on Section 245 of the Act, noting in their application that after giving effect to the order of the Tribunal for the Assessment Years 2000-2001 and 2001-2002, amounts of ₹ .....

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9 crores for the Assessment Years 2002-2003 and 2003-2004. An excess amount of ₹ 1.10 crores was withheld without any justification. The said amount was directed to be refunded along with interest and the same was paid. Thereafter, the question related to the refund of ₹ 10.69 crores. The issue which finally fell for decision was, whether the petitioner was entitled to refund for the Assessment Year 2001-2002 of the amount already computed by the Revenue by its orders dated 28.12.200 .....

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under Sub-section (1) of Section 142 and the Assessing Officer is of the opinion, having regard to the fact that- (i) a notice has been issued, or is likely to be issued, under Sub-section (2) of Section 143 in respect of the said return; or (ii) the order is the subject matter of an appeal or further proceedings; or (iii) any other proceeding under this Act is pending; and (iv) that the grant of the refund is likely to adversely affect the revenue, the Assessing Officer may, with the previous o .....

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by the Assessing Officer with the previous approval of the Chief Commissioner or Commissioner. Thirdly, the refund could be withheld for any indefinite time on the formation of an opinion that the grant of the refund was going to adversely affect the Revenue. On a plain reading of the two provisions, it is clear that Section 241 gave the Revenue a much wider power than Section 245. 24. A Division Bench of the Punjab and Haryana High Court has in Naurata Ram [1998] 100 Taxman 266 held that the p .....

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cy of the proceedings cannot by itself be a ground to deny the refund on the assumption that such refund would adversely affect the revenue. The competent authority has to form an opinion on the basis of relevant material for coming to the conclusion that the order of refund will necessarily cause prejudice to the revenue of the State. If the Legislature had intended to prohibit the refund of the amount due to the assessed only on the ground that the Revenue has preferred an appeal/revision, etc .....

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er echelons to "set off the amount to be refunded or any part of that amount against the same, if any, remaining payable under this Act by the person to whom the refund is due." That this power is discretionary and not mandatory is indicated by the word "may". Secondly, the set off is in lieu of payment of refund. Thirdly, before invoking the power, the officer is expected to give an intimation in writing to the assessed to whom the refund is due informing him of the action p .....

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g of and disposal of an application for refund by the Revenue, it may result in the assessee not being able to get the refund at all. Also, the statute by stipulating the payment of interest on refunds (Section 244A) and interest on delayed refunds (Section 243) has underscored the importance of timely processing of refund claims. 28. As already noticed, this discretionary power has to be exercised after giving an opportunity to the assessed of being heard preceded by an intimation to the assess .....

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la v. CIT and Sabeta Detergents Ltd. v. CIT are to the same effect. This apart, while proposing to invoke the power under Section 245, the Revenue should, as far as possible, adopt a consistent approach. Of course, if the fact situation in the particular assessment year is so different so as to justify the changed stance of the Revenue, the Revenue should, while filing an appeal to the higher forum, seek a stay from that forum itself of the refund due to the assessed before straightaway invoking .....

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st level by the Assessing Officer for the particular assessment year, the requirement of Section 245 stands satisfied, this argument, cannot in the context of Section 245 itself, be accepted without qualification. The decision in S. RM. AR. RM. Ramanathan Chettiar v. AMI ITO [1956] 29 ITR 683 (Mad), upon which reliance was placed by the Revenue, was in a different context. The relevant provision considered in the said case was Section 49E, which read as under: "Section 49E : Where under any .....

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rior intimation has been sent to the assessed of the action proposed to be taken by the Revenue. Therefore, the mere liability to pay tax, which was never in issue in the above case, is not sufficient to attract the provision of Section 245." It is, however, also important to notice the following observations in paragraphs 34 & 35: "34. Turning to the facts of the present case, we find that no notice under Section 245 was issued to the assessed proposing to set off the demand again .....

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pelled to come to this court assailing the delay in processing this application for refund. The application moved by the Revenue in this court appears to be a device to pass the responsibility of taking a decision under Section 245 on to the court only because the petitioner had come to this court. To us, this does not appear to be a sufficient justification for by-passing the procedural requirement under Section 245. 35. If the Department has decided to issue a refund voucher for the assessment .....

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making any adjustment of the amount of refund "without the leave of this court." This did not mean that the procedure under Section 245 was to be dispensed with. It is, therefore, strange that by the application filed, the Revenue was seeking permission from this court to straightaway set off the refund against the outstanding demand without following the procedure under Section 245. The Revenue seeks to justify invoking the power under Section 245 only on the ground that its appeals .....

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dgment, it was, inter alia, held that the pendency of appeal proceedings by itself cannot be a ground to not refunding the amount due and payable and it is not sufficient to pass an order of adjustment for demand on issues, which have been decided against the Revenue. Therein, the court was dealing with the question, whether Section 220(6) of the Act was applicable when appeal is preferred before the Tribunal. It was held that the Tribunal had power to stay recovery. It was, further, noted that .....

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overy was made in respect of additions on issues, which were covered against them by the earlier orders of the Tribunal or the Commissioner (Appeals). 18. In Suri Sons vs. Commissioner of Income Tax & another, reported in (1988) 169 ITR 320, a Bench of the Punjab & Haryana High Court was dealing with the case, where the assessment for the year 1979-1980 was annulled by the Appellate Tribunal and the same was questioned under Section 256(1) of the Act. On the basis of the annulment, refun .....

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ason that the proceedings initiated by the Revenue questioning the validity of the order under which the refund has become due are pending before the appropriate authority. Accordingly, for the reasons given by us in our judgment in Writ Petition No. 4378 of 1986 [Leader Valves Private Ltd. vs. CIT (1987) 167 ITR 542], the petition succeeds and is allowed. The respondents are directed not to withhold the refund which has become due to the petitioner as a result of the annulment of its assessment .....

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thhold the refund with the previous approval of the Commissioner of Income-tax for such time as may be determined by the Commissioner of Income-tax, but some facts are required to be brought on record to justify the withholding of refund. The mere fact and the only fact that the order is under challenge either before the High Court or before the Tribunal is no ground to withhold the refund or to reach a conclusion that the refund would adversely affect the Revenue. Held, that, in the present cas .....

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the same time sought permission to withhold the refund as refunding the amount at this stage would adversely affect the interest of the Revenue. A huge amount had been withheld only on the ground that the appeal against the order of the Commissioner of Income-tax (Appeals) was pending before the Tribunal. No material was forthcoming on the record in this case which could justify the withholding of the refund. The petitioner who was an assessee was not shown to be in default in the payment of inc .....

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o material forthcoming, which would justify the withholding of the refund. It was found that the petitioner, who was an assessee, was not shown to be in default in the payment of income tax dues or even in the matter of filing of returns. 20. In Vijay Kumar Bhati vs. Commissioner of Income Tax & another, reported in (1994) 205 ITR 110, a Division Bench of the Delhi High Court was, again, dealing with the case under Section 241 of the Act. The petitioner was a non-resident Indian and he sough .....

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ibunal. A petition under Section 256(2) before the High Court was also dismissed. So was the fate of the complaint filed under Sections 276C and 277 of the Act. With six months intervals, orders were being passed under Section 241. There were penalty proceedings for the Assessment Year 1988-1989. The officer found that certain amount is due to the petitioner as interest on the refund. The writ petition was amended seeking further relief. The court proceeded to deal with Section 241 after its sub .....

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r Section 261 making it a case fit for appeal to the Supreme Court. Therefore, the matter under Section 256(2) had come to an end and, thereafter, the court proceeded to find that, if the Revenue wanted to withhold the refund after the filing of the petition under Section 136, it has to obtain a stay from the Supreme Court and cannot rely on Section 241. There was nothing to show the pendency of the Special Leave Petition itself and thwarting the right of the petitioner to refund by merely filin .....

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case of the Revenue to claim any set of. This order purporting to be under section 245 of the Act is neither fair, nor just, nor reasonable and has to be ignored. This order also shows scant respect by the authorities for the pendency of these proceedings in this court and this does not commend itself to us, to say the least. We have not been told by the Revenue any reason as to why assessments for years subsequent to the assessment year 1988-89 were not taken though interest was accruing all t .....

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t the interest accrued on non-resident account maintained in foreign exchange is not liable to tax. There had been no answer to this by the Revenue." The writ petition was allowed. 21. In Commissioner of Income Tax vs. J.K. Industries Ltd., reported in (2000) 245 ITR 457, a Bench of the Calcutta High Court declared that intimation should be given in writing before set off is made under Section 245. The court, in this regard, also relied on the judgment of the Bombay High Court in A.N. Shaik .....

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he same view. 22. In State Bank of Patiala vs. Commissioner of Income Tax & another, reported in (1999) 239 ITR 421, a Bench of the Punjab & Haryana High Court was dealing with a petition seeking refund. The intimation, which was given, read as follows: "Sub.: Adjustment of refund - Assessment year 1996-97 - Intimation under section 245 of the Income Tax Act - Regarding. Return of income for the assessment year 1996-97 was processed under section 143(1)(a) on March 19, 1997, and a r .....

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sum remaining payable under the Act by the person to whom the refund is due. In the Indian Income-tax Act, 1922 (for short "the 1922 Act"), similar provision regarding set-off existed in section 49E. Requirement regarding intimation to the assessee did not, however, find place in section 49E of the 1922 Act. Section 245 reproduces section 49E of the 1922 Act with the addition of the requirement that the Assessing Officer shall give intimation to the assessee before making the adjustme .....

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after intimation, in writing, of such proposed action to that person. In the present case, the first two conditions stand fulfilled, but the third condition is missing. No intimation, in writing, was given by the assessing Officer prior to the proposed action of set-off. When the third condition in terms requires that intimation in writing has to be given about the proposed action that must be strictly followed. This course was not adopted by the Assessing Officer. A perusal of the intimation d .....

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on 245 of the Act. Obviously, the object was to inform the assessee about the proposed action of set-off so as to enable him to put forward his objection, if he so desired. There cannot be any other object behind a prior intimation regarding the proposed action. If the legislative intent was simply to give an intimation about the set-off to the assessee, there would not be a requirement of giving intimation before making the adjustment. It would defeat the purpose of the provision if it is said .....

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Assistant Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded, or any part of that amount against the tax, interest or penalty, if any, remaining payable by the person to whom the refund is due." 24. We may, at once, notice the fact that, while there are a number of similarities in the provisions, it does contain differences. Apart from the fact that the persons, who may make use of the power, being different, which may .....

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ection. The words used therein are "after giving an intimation in writing". Such a requirement was not there in Section 49E. 25. We have already adverted to Section 241 of the Act. The same stands deleted w.e.f. 01.06.2001. In the decision of the Delhi High Court rendered in Glaxo Smith Kline Asia P. Ltd. vs. Commissioner of Income Tax & others (supra), the Bench, after adverting to the same, has taken the view that the restriction on the power under Section 241 would apply with eq .....

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ent Years 1998-1999 and 1999-2000 by the dismissal of the appeals in the High Court by order dated 20.07.2005. 26. Time is, now, ripe to consider the purport of Section 245 of the Act. Section 237, which is the first Section in Chapter XIX relating to Refunds, provides that when a person satisfies the Assessing Officer that he has paid an amount in excess of the amount with which he is properly chargeable, he will be entitled to a refund of the excess. Section 239 provides for the form of the cl .....

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ned in the proviso. In a claim for refund, the assessee is not entitled to question the correctness of any assessment or other matter decided finally or to seek a review of the same. He is entitled only to the relief of refund. This is the purport of Section 242. When an order is passed within the meaning of Section 240, the Assessing Officer is obliged to refund the amount within three months from the end of the month, in which the order is passed. Failure to do so casts a liability on the Cent .....

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on in Chapter XIX. It is all embracing, as it takes in all cases, where refund is found due. It enables the setting off of any amount remaining payable under the Act by a person to whom the refund is due as against the refund, no doubt, after prior intimation in writing. We have already set out the provisions of Section 241, as it stood prior to its deletion. We are of the view that Sections 241 and 245 operate in different fields. The objects of the provisions are different. As far as Section 2 .....

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refund could be for a long period of time. 27. But, we should notice, however, that withholding of refund was, nonetheless, essentially ancillary or incidental in the sense that it was to be interlocutory in nature. It was substantially an interim arrangement. It was to be done during the pendency of the various contingencies, which were provided for. Furthermore, the exercise of power under Section 241 was subjected to the condition that, besides the contingencies provided therein being presen .....

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ce. Under Chapter XVII-D, a bunch of Sections starting with Section 220, provides for the other modes of recovery of tax. Section 222 provides for certificate being issued to the Tax Recovery Officer for recovery as provided thereunder. Section 226 contemplates other modes of recovery. Section 226 includes recovery by garnishee proceedings, inter alia. 28. On the other hand, Section 245 of the Act does not contain the restrictions, which are embedded in Section 241. The object of Section 245 is .....

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overnment with the liability to pay interest as provided. It is as an exception to this law to make the payment and, by way of effecting recovery of any amount remaining payable under the Act from the very same person, that Section 245 vests authority to adjust the refund against any sum remaining payable. Therefore, Section 245 is, essentially, intended for the purpose of enabling extinguishment of the right to the refund on the basis of adjusting the refund against the sum remaining payable fr .....

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9. We must, further, examine what is the meaning of the words "in lieu of" found in Section 49E of the earlier enactment and also in Section 245 of the Act. Does Section 245 provide for a two-way traffic? In other words, does it enable the assessee to demand a set off of the refund due against any amount payable by him? This question is no longer res integra and it is profitable that we advert to some of the case law in this regard. We may, however, begin by noting the following commen .....

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d is due to the assessee, without there being a prior adjudication of the claim to refund. However, a set-off under this section cannot be demanded, if the claim to refund is itself barred." 30. The question arose in Hindustan Construction Co. Ltd. vs. V.S. Gaitonde, Income Tax Officer, Companies Circle I(3), Bombay & another, reported in (1965) 56 ITR 241 (Supreme Court). Therein, an application for refund was made by the assessee, but beyond the time. Thereafter, the assessee was serv .....

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court proceeded to discuss the effect of the words in the statute and it concluded as follows: "The question then arises as to whether there should be a prior adjudication existing before a set-off can be allowed under section 49E, and whether there is any other condition which is necessary to be fulfilled before the section becomes applicable. We are of the opinion that it is not necessary that there should be a prior adjudication before a claim can be allowed under section 49E. There is .....

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red under rule 5 of the Indian States Rules but that this is not the correct meaning is made clear by the expression "in lieu of payment". This expression, according to us, connotes that payment is outstanding, i.e., that there is subsisting obligation on the Income-tax Officer to pay. If a claim to refund is barred by a final order, it cannot be said that there is a subsisting obligation to make a payment. The expression "in lieu of" was construed in Stubbs v. Director of Pu .....

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nd, therefore, the claim of the appellant must fail." The position at law under Section 245 of the Act cannot be different, as, when the Legislature repeats the same words, which have been interpreted by the court, the Legislature must be deemed to have accepted the interpretation placed by the court. 31. N.C. Mukherjee & Co. vs. Union of India & another, reported in (1968) 68 ITR 500 (SC) was a case, where the court directed to set off the amounts due from the assessee as against t .....

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payable by him. Will it be open to the officer to deny the benefit of Section 245? Will it remain a matter of discretion? We would think that, in such circumstances, it would not only be a power, but would be a power coupled with a duty, as Section 245 is intended to benefit both, the Revenue and the assessee. 32. Likewise, let us take a situation, where, again, a refund is due for a certain year. An assessment order is passed. The matter, in the meantime, received the attention of the jurisdict .....

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ue not adjust the refund against the amount becoming payable under the order of assessment? 33. There is one more aspect, which is relevant. Governments cannot run except with funds. Achievement of various targets, ambitiously proclaimed, flounders in the face of paucity of funds. Collection of revenue due to the Government becomes its imperative duty, inasmuch as, it sub serves the larger public good of arming the Government with the requisite funds to carry out various welfare schemes, apart f .....

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sessee. The assessee pursues the matter before the higher forum and, undoubtedly, he may obtain an order of stay, in which case, of course, there cannot be any scope for invoking the power to adjust the refund. We must keep in our minds that the effect of an adjustment under Section 245 is the extinguishment of the duty to refund the amount and the loss of the right of the assessee to refund. Therefore, when the assessment order, itself, is stayed, it could not then be said truly that the amount .....

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, the assessee rushed to the court. What is stated in Annexure No. 5 is that the refund is being adjusted. No doubt, in the cases, which we have adverted to at the instance of the assessee, the words, which have been used, would suggest that adjustment is made and the intimation adverts only to the fait accompli of the adjustment having been made and, therefore, it was held that it would amount to a simultaneous intimation and not prior intimation, as was required by law. 36. This brings up the .....

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her, reported in (1994) 205 ITR 110, which we have already adverted to; the decision of the Bombay High Court in Suresh B. Jain vs. A.N. Shaikh, reported in (1987) 165 ITR 151; and the decision of the Calcutta High Court in Bank of Tokyo Mitsubishi Ltd. vs. Commissioner of Income Tax, reported in (1999) 240 ITR 331, held, inter alia, as follows: "There is nothing in section 245 of the Income-tax Act, 1961, to warrant the conclusion that the task of adjusting the refund towards the arrears o .....

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uired to go beyond what the section itself requires them to do." 38. We may also notice the recent judgment of the Bombay High Court in Hindustan Unilever Limited vs. Deputy Commissioner of Income Tax-1(1) & others, reported in (2015) 279 CTR (Bom) 71. It was held in paragraph 15 as follows: "15. In view of the above, as held by this Court in A.H. Shaikh (supra) the giving of prior intimation under Section 245 of the Act is mandatory. The purpose being to enable the party to point .....

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t sustainable and also communicate it to the party. This before or at the time of adjusting the refund. This alone would ensure that that the power of adjustment under Section 245 of the Act is not exercised arbitrarily. Such a procedure would cause no prejudice to the revenue as the occasion to grant the refund would not arise till the objection to the intimation is disposed of. Of course the objections should be disposed of expeditiously as undue delay in granting of refund would cause prejudi .....

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he assessment itself. The question, therefore, may be academic; but, in view of the course we intend to adopt in this case, it is necessary to lay down the true purport of the words in question. A quasi-judicial authority is obliged to comply with the principles of natural justice. Rights cannot be adjudicated without opportunity of either making a representation or, if the situation so warrants, an opportunity of personal hearing. Even if the order is an administrative order, as long as the adm .....

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that it does not affect the right of the party. In the first place, when the power is invoked, the right of the concerned party to get the amount by way of refund will stand extinguished. The very words in Section 245 indicate that an amount must be due by way of refund. Therefore, there is a right with the party to claim the amount as such. Secondly, as noted in the decision of the Bombay High Court in Hindustan Unilever Limited vs. Deputy Commissioner of Income Tax-1(1) & others (supra), .....

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e the effect of rendering the assessment completely vulnerable in law and in a matter where he is pursuing the statutory remedies within the time. He may point out that, though an order of stay was not granted by the appellate authority, it is not so granted on the basis that the appeal, itself, will be heard on a very near date. When there is no interim order obtained, then, certainly, in terms of the assessment order passed, the amount, as per law, when it falls due, will become payable and, t .....

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d violation of the principles of natural justice. Benefits do flow from compliance with the principles of natural justice, as they tend to advance the cause of justice. They would make the proceedings of the authority fair. Therefore, we would think that, in keeping with the object of the provision and the change in the law brought about by the Parliament, the intention was clearly not to reduce it to an empty formality; but, it was intended that a bare opportunity of hearing against the propose .....

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erned, the adjustment of the refund was sought to be done with reference to the assessment made for the year 2014-2015 and that was the subject matter of the writ petition. But, there is no dispute that, much prior to the judgment delivered before the learned Single Judge, assessment was completed against respondent No. 1 / writ petitioner in a sum of over ₹ 105 crores. This fact was, admittedly, not brought to the notice of the learned Single Judge either by the writ petitioner or by the .....

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essing Officer, in the sense, the principle was settled by the Tribunal and there being no difference in the facts, as the issue related to non-applicability of Section 194A to the deposit and, every year, the issue will remain the same and, therefore, there cannot be a resort to Section 245. 40. We must remind ourselves that there is an assessment order passed for the Assessment Year 2015-2016. That assessment order is not challenged before us. It is not even before us. In fact, it is not the s .....

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tatement that, if it is found that the assessment for 2014-2015 had been cancelled, the amount would be paid. In that sense, under normal circumstances, in the light of the fact that it is admitted that the assessment for 2014-2015 was, indeed, cancelled by proceeding dated 03.03.2015, as contended by the learned Senior Counsel for the writ petitioner and in view of the statement made by the learned counsel for the Revenue / appellants, we would have had no occasion to entertain the appeal. 41. .....

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at it will be in the interest of parties that we took note of the development and dealt with the arguments of the parties in the appeal. 42. Even according to respondent No. 1 / writ petitioner, Section 245 vests a discretion. Section 245 uses the word "may". This is a case, which attracts Section 240 of the Act, as the refund became due by virtue of the order passed in assessee s appeal for three years dated 18.07.2014. Writ petitioner has also moved an application for refund, as alre .....

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al High Court even for a single year, unlike the facts in Glaxo Smith Kline Asia P. Ltd. (supra). But, at the same time, the order of the Income Tax Appellate Tribunal is rendered in favour of the assessee, in the sense that it was held that Section 194A does not apply to the deposit in question. No stay is obtained by the appellants. As regards 2013-2014, in respect of which an amount of nearly ₹ 44 crores is attached and which is the subject matter of the refund claimed, a second appeal .....

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on Co. Ltd. vs. V.S. Gaitonde, Income Tax Officer, Companies Circle I(3), Bombay & another, reported in (1965) 56 ITR 241, the Department may not be justified in refusing to accede to the request. We cannot possibly pronounce on the legality of the assessment for the year 2015-2016. We cannot even, in any manner, pronounce on the question whether the assessment is to be sustained or not. In fact, an appeal is pending consideration before the appellate Assistant Commissioner. There is no orde .....

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covery of the tax or other amount due and remaining payable under the Act. The request of the appellants is that the officer concerned will decide the application for demand of refund bearing in mind Section 245 and also taking into consideration the amount assessed for the year 2015-2016 by order dated 12.05.2015. 44. In the circumstances of the case, we are inclined to accept the request, namely, that a decision will be taken by the authority regarding the refund in accordance with law, which .....

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ing irrelevant considerations. The relevant considerations, in this case, would be the fact that there is no stay obtained by the assessee in the appeal against the assessment for the year 2015-2016; but, equally, the authority would be bound to consider the fact that, for the Assessment Years 2010-2011, 2011-2012 and 2012- 2013, the Tribunal has ruled in favour of the assessee in regard to the applicability of the issue. If it is found that the issue considered by the Tribunal for the years 201 .....

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