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2016 (6) TMI 217 - DELHI HIGH COURT

2016 (6) TMI 217 - DELHI HIGH COURT - [2016] 384 ITR 69 - Grant 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 i .....

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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 .....

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Singh Kadan, the legal heir of late Mr. Randhir Singh Kadan, (hereinafter referred to as the deceased Assessee ) has been constrained to approach the Court for a second time with this writ petition, aggrieved by the non-compliance by the Revenue of the directions issued by this Court on 15th December 2015 in Writ Petition (Civil) No. 10895 of 2015 in a matter of grant of refund due to the deceased Assessee for the Assessment Year ( AY ) 2006-07. 2. The deceased Assessee has filed his return for .....

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03. The AO denied the exemption from capital gains as claimed by the Assessee in its return of income. The appeal filed by the Assessee against the said order was partly allowed by the Commissioner of Income Tax (Appeals) [ CIT (A) ] by an order dated 5th August 2011. Against the said order, both the Assessee and the Revenue filed their respective appeals before the Income Tax Appellate Tribunal ( ITAT ). 4. During the pendency of the aforesaid proceedings, the Revenue is stated to have recovere .....

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ax payment/collection together with the statutory interest thereon. 6. During the pendency of the above proceedings, the Assessee expired and the matter was pursued by his legal heir, Mr. Vijay Singh Kadan, (the Petitioner herein). 7. Soon after the order of the ITAT, the Petitioner submitted an application on 17th December 2014 requesting the Revenue to grant appeal effect to the order of the ITAT and issue the refund along with the statutory interest. 8. The Petitioner sent reminders on 6th Ap .....

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which came to be disposed by the following order on 15th December 2015: The learned counsel for the Respondent informs us that the refund, consequent upon the appeal effect along with interest, in accordance with law, has been processed and the same shall be paid to the Petitioner within two weeks. In view of the statement made by the learned counsel for the Respondent, this writ petition stands disposed of. However, we are granting liberty to the Petitioner to approach this Court in case the r .....

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mately) had been withheld while granting refund. It is further stated that while following up the matter with the Revenue authorities the Petitioner was informed that the aforementioned sum which was adjusted pertained to demand for AY 2008-09. 11. The Petitioner was furnished with a defaced refund adjustment voucher. A copy of the said refund voucher had been annexed to the Petition as Annexure P-3. Inter alia it reveals that the net refund amount payable is shown as ₹ 1,65,35,770. In ano .....

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resulting in the Petitioner being issued a demand draft only for a sum of ₹ 1,29,01,503. The Petitioner s contention is that such adjustment of demand pertaining to AY 2008-09, without prior intimation to the Petitioner or affording him an opportunity of being heard was in gross violation of Section 245 of the Act. Further, the Petitioner states that against the demand raised for AY 2008-09 by the AO, the Petitioner had already filed an appeal before the CIT (A) together with an applicati .....

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e taken. It was further held that the Revenue had to be satisfied that the Assessee would not be in a position to satisfy the demand of tax and that, but for the set off, the outstanding tax amount cannot be recovered at all. Reliance was also placed on the decision in Genpact India v. ACIT (2012) 205 Taxman 51 (Del) and an order dated 16th October 2014 in Writ Petition (Civil) No. 6172 of 2014 (The Oriental Insurance Co. Ltd. v. DCIT). Mr. Kaushik also drew the attention of the Court to Instruc .....

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unpaid outstanding demand for AYs 2008-09 and 2010-11. According to Mr. Manchanda, the question of issuing of notice under Section 245 of the Act did not arise since the Revenue had not 'adjusted' any sum but merely withheld it pending verification. Mr. Manchanda stated that after notice was issued in the present petition on 27th January 2016, a notice under Section 245 of the Act was issued to the Petitioner on 21st March 2016 requiring the Petitioner to file a response within 15 days. .....

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ded, against the sum amount found payable after giving an intimation in writing to such person of the action proposed to be taken under this Section. In Glaxo Smith Kline Asia P. Ltd. v. Commissioner of Income Tax (supra) this Court analyzed Section 245 of the Act in some detail and observed as under: 26. In our view, the power under Section 245 of the Act, is a discretionary power given to each of the tax officers in the higher echelons to set off the amount to be refunded or any part of that a .....

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nder Section 241, as explained judicially, would apply with equal, if not appear, force to Section 245. A mechanical invocation of the power under Section 245 irrespective of the fact situation, can lead to misuse of the power by the Revenue in order to delay the refund till such time a fresh demand for the subsequent assessment years is finalized. If reasonable time limits are not set for the processing of and disposal of an application for refund by the Revenue, it may result in the Assessee n .....

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ment is that the Revenue will have to be satisfied that the Assessee will not be in a position to satisfy the demand of tax and that but for the set off, the outstanding tax amount cannot be recovered at all. 15. Further, it was reiterated in para 38 of the decision in Glaxo Smith Kline Asia P. Ltd. v. Commissioner of Income Tax (supra): 38……. Unless there are sound reasons justifying the formation of an opinion that the tax that has become payable cannot be recovered from the Asse .....

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. 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 recov .....

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