Case Note & Summary
The petitioner, Jet Privilege Private Limited, filed a writ petition under Articles 226 and 227 of the Constitution of India seeking a writ of certiorari to quash the adjustment of its refund for Assessment Year 2019-20 against an alleged outstanding demand. The petitioner had filed its return and was entitled to a refund of Rs.44,24,54,040/- as per intimation under Section 143(1) dated 17th March, 2020. Subsequently, the petitioner received a communication dated 13th May, 2020 under Section 245 of the Income Tax Act, 1961 from the Centralized Processing Center (CPC) stating that the refund would be adjusted against outstanding demands shown in an annexed table. The table listed a demand of Rs.6,60,96,420/- for A.Y. 2018-19 raised under Section 143(1) with a demand raised date of 31st March, 2020. The petitioner contended that no such demand existed and that the adjustment was made without proper notice or opportunity of hearing. The respondents argued that the adjustment was valid under Section 245. The court examined the communication and found that it did not provide adequate details of the outstanding demand or proper notice as required under Section 245. The court held that the adjustment was without jurisdiction and violative of principles of natural justice. The court allowed the petition, quashed the adjustment, and directed the respondents to refund the amount of Rs.37,63,57,620/- along with statutory interest under Section 244A of the Act within four weeks.
Headnote
A) Income Tax - Refund Adjustment - Section 245 of Income Tax Act, 1961 - Prior Notice Requirement - Petitioner challenged adjustment of refund against outstanding demand without proper notice - Court held that adjustment under Section 245 requires prior intimation to the assessee and opportunity of hearing - Held that the communication dated 13th May, 2020 did not constitute valid notice as it did not specify the demand details properly (Paras 2-6).
B) Income Tax - Writ Jurisdiction - Article 226 and 227 of Constitution of India - Certiorari - Petitioner sought writ of certiorari against adjustment of refund - Court allowed the petition and directed refund with interest under Section 244A - Held that the adjustment was without jurisdiction and violative of principles of natural justice (Paras 2-7).
Issue of Consideration
Whether the adjustment of refund of Rs.37,63,57,620/- for A.Y. 2019-20 against an alleged outstanding demand without proper notice under Section 245 of the Income Tax Act, 1961 is valid.
Final Decision
The court allowed the writ petition, quashed the adjustment of refund, and directed the respondents to refund Rs.37,63,57,620/- along with statutory interest under Section 244A of the Income Tax Act, 1961 within four weeks.
Law Points
- Adjustment of refund against outstanding demand requires prior notice under Section 245 of Income Tax Act
- 1961
- Natural justice
- Writ of certiorari
- Article 226 and 227 of Constitution of India
Case Details
2021 LawText (BOM) (08) 22
WRIT PETITION NO. 40 OF 2021
K.R. SHRIRAM, ABHAY AHUJA
Mr. Percy Pardiwalla, Senior Advocate i/b Mint and Cofereres for Petitioner, Mr. Sham V. Walve for Respondent
Jet Privilege Private Limited
Deputy Commissioner of Income Tax - 5 (2) (1), Commissioner of Income Tax (CPC), Union of India
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Nature of Litigation
Writ petition challenging adjustment of income tax refund against alleged outstanding demand without proper notice.
Remedy Sought
Petitioner sought writ of certiorari to quash the adjustment and direction to refund Rs.37,63,57,620/- with interest under Section 244A.
Filing Reason
Respondent adjusted refund for A.Y. 2019-20 against an alleged outstanding demand without proper notice under Section 245 of the Income Tax Act.
Previous Decisions
Intimation under Section 143(1) dated 17th March, 2020 granted refund of Rs.44,24,54,040/-; communication dated 13th May, 2020 under Section 245 informed adjustment against outstanding demand.
Issues
Whether the adjustment of refund under Section 245 of the Income Tax Act, 1961 without proper notice and opportunity of hearing is valid.
Whether the communication dated 13th May, 2020 constituted valid notice under Section 245.
Submissions/Arguments
Petitioner argued that no outstanding demand existed for A.Y. 2018-19 and that the adjustment was made without prior intimation or opportunity of hearing, violating principles of natural justice.
Respondents contended that the adjustment was valid under Section 245 and that the communication dated 13th May, 2020 was sufficient notice.
Ratio Decidendi
Adjustment of refund under Section 245 of the Income Tax Act, 1961 requires prior intimation to the assessee specifying the outstanding demand and providing an opportunity of hearing; failure to do so renders the adjustment invalid and violative of natural justice.
Judgment Excerpts
Petitioner is seeking issuance of writ of certiorari... calling for records of petitioner’s case so far as related to the adjustment of refund against outstanding demand for A.Y. 2019-20.
According to petitioner, for the assessment year 2019-20, respondent had to refund a sum of Rs.44,24,54,040/- as per the intimation dated 17th March, 2020 under Section 143 (1) of the Act.
Petitioner received a communication dated 13th May, 2020 being intimation under Section 245 of the Act... whereby petitioner was informed that their return... has been processed at CPC and the refund will be adjusted against the outstanding demand.
Procedural History
Petitioner filed return for A.Y. 2019-20; intimation under Section 143(1) dated 17th March, 2020 granted refund; communication dated 13th May, 2020 under Section 245 informed adjustment; petitioner filed writ petition on 4th January, 2021; rule issued and heard finally on 9th August, 2021.
Acts & Sections
- Income Tax Act, 1961: 143(1), 244A, 245
- Constitution of India: 226, 227
