Case Note & Summary
The petitioner, Bharat Petroleum Corporation Limited, a public sector undertaking, filed a writ petition under Article 226 of the Constitution before the Bombay High Court. The grievance was that the respondents had unlawfully adjusted a refund of ₹1,66,84,74,041 for Assessment Year (AY) 2021-22 against demands for AY 2015-16 and AY 2016-17, and a refund of ₹44,58,24,745 for AY 2017-18 against a demand for AY 2016-17, without prior intimation under Section 245 of the Income Tax Act, 1961. The petitioner argued that Section 245 mandates prior intimation before any adjustment of refund against outstanding demand, and the failure to do so violated the principles of natural justice. The respondents, represented by Mr. N. C. Mohanty, conceded that no prior intimation was given and submitted that the matter could be remanded for fresh consideration. The court, after hearing both sides, held that the adjustment was illegal and without jurisdiction as it contravened the mandatory requirement of Section 245. The court directed the respondents to refund the adjusted amounts with interest at the rate applicable under the Act, within four weeks. The petition was allowed in those terms.
Headnote
A) Income Tax - Refund Adjustment - Section 245 of the Income Tax Act, 1961 - Prior Intimation - The petitioner, a public sector undertaking, challenged the adjustment of its refund for AY 2021-22 and AY 2017-18 against demands for AY 2015-16 and AY 2016-17 without prior intimation under Section 245. The court held that the adjustment was illegal as no prior intimation was given, violating the mandatory requirement of Section 245. The respondents were directed to refund the adjusted amounts with interest. (Paras 1-6) B) Income Tax - Natural Justice - Section 245 of the Income Tax Act, 1961 - Prior Notice - The court emphasized that the requirement of prior intimation under Section 245 is a facet of natural justice, ensuring the assessee has an opportunity to object before adjustment. The failure to provide such intimation renders the adjustment void. (Paras 3-5)
Issue of Consideration
Whether the adjustment of a refund due to the petitioner for Assessment Years 2021-22 and 2017-18 against demands for earlier assessment years without prior intimation under Section 245 of the Income Tax Act, 1961 is lawful.
Final Decision
The court allowed the petition, holding that the adjustment of refund without prior intimation under Section 245 of the Income Tax Act, 1961 was illegal. The respondents were directed to refund the adjusted amounts with interest at the rate applicable under the Act within four weeks.
Law Points
- Adjustment of refund without prior intimation under Section 245 of the Income Tax Act
- 1961 is illegal
- Natural justice requires prior notice before adjustment of refund against demand
- Section 245 of the Income Tax Act
- 1961 mandates prior intimation for adjustment of refunds
