Mig Co-Op. Housing Society Group-Ii Ltd. v. Assistant Commissioner Of Income Tax-23(2) And ANR.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 875 OF 2018 M/s. MIG Co-operative Housing Society Group-II Ltd.

..Petitioners v/s.

The Asst. Commissioner of Income Tax-23(2) Mumbai & Anr.

..Respondents Mr. Madhur Agarwal i/b Atul Jasani for the petitioners Mr. A.R. Malhotra for the respondent CORAM : M.S. SANKLECHA & SANDEEP K. SHINDE, J.J.

DATED : 8th JUNE, 2018.

P.C.

1.

At the request of the parties, the petition itself is being disposed of finally at the stage of admission.

2.

This petition under Article 226 of the Constitution of India challenges the action of respondent no.1 - the Assistant Commissioner of Income Tax in adjusting the refund for the Assessment Year 2011-12 with pending demands for Assessment Years 2012-13, 2013-14 and 2014-15. The petitioners were communicated the aforesaid adjustment by a communication dated 11th September, 2017 i.e. in its order giving

effect to the order dated 17th February, 2017 of the Income Tax Appellate Tribunal.

3.

On 17th July, 2017, the respondent no.1 issued an intimation to the petitioners under Section 245 of the Income Tax Act, 1961 (Act) intimating the petitioners that the refund due to the petitioners for Assessment Year 2011-12 consequent to the order of the Tribunal is being proposed to be adjusted to the pending demands for Assessment Years 2012-13, 2013-14 and 2014-15.

4.

On 27th July, 2017, the petitioners objected to the proposed adjustment of refund due for Assessment Year 2010-11 with the demands payable for Assessment Years 2012-13, 2013-14 and 2014-15. This objection was on the ground that the appeals had been filed from orders of Assessment for Assessment Years 2012-13, 2013-14 and 201415 and they are still awaiting disposal. Besides, the issue for which the demand was raised in Assessment Years 2012-13, 2013-14 and 2014-15 are now covered by order of the Tribunal in its favour. Moreover, stay application in respect of the above demands, are still awaiting disposal.

5.

The petitioners objections dated 27th July, 2017 were not dealt with and the adjustment made of the refund due for Assessment Year 2011-12 with pending demands payable for Assessment Years 2012-13, 2013-14 and 2014-15 by intimating the same to the petitioner on 11th September, 2017. Admittedly, there is no separate order passed disposing of the petitioner's objections dated 27th July, 2017 to the intimation under Section 245 of the Act dated 17th July, 2017 served by the respondent no.1 upon the petitioners.

6.

This Court had occasion to deal with an identical issue in Hindustan Unilever Ltd. Vs. Deputy Commissioner of Income Tax1(1) & Ors. 377 ITR 281 wherein the scope of powers to be exercised under Section 245 of the Act were considered as under :- "14. Section 245 of the Act, empowers the revenue to adjust refunds due to an assessee against any tax Payable (of the same character as the refund due) by him. The exercise of this power is discretionary as is evident from the use of the word "may" therein. Besides the requirement of giving notice/intimation of the proposed action of adjustment out of the refund due is also an indication of discretionary nature of power not andatory.

This notice/intimation is required to be given so as to enable a party to point out not only factual errors but also point out why such a power should not be exercised in the facts of the case, such as the demand sought to be adjusted is still a subjectmatter of appeal and the issue is covered by decisions of higher forums etc. On consideration of the same, it is open to the officer of the revenue concerned to exercise its discretion, to adjust or not.

this Court in A.N Shaikh, Sixteenth ITO v. Suresh B Jain [1987] 165 ITR 86/[1986] 29 Taxman 191 to be mandatory before any adjustment can be made. The exercise of powers under Section 245 of the Act being discretionary has also been so held by the Delh High Court in Glaxo Smith Kline Asia (P) Ltd. v. CIT [2007] 290 ITR 35/160 Taxman 259. We respectfully concur with the above view of the Delhi high Court that the power under Section 245 of the Act is discretionary. Thus the exercise of a power of adjusting demands out of refund due would depend upon the facts and circumstances of each case.

15.

In view of the above, as held by this Court in A.N. Shaikh, Sixteenth ITO's case (supra) the giving of prior intimation under Section 245 of the A ct is mandatory. The purpose being to enable the party to point out that there are factual crrors or some further developments, if any, for example a stay of the demand, Supreme Court decision covering the demand which is still a subject-matter of a pending appeal etc. which would warrant not adjusting the refund against the pending demand. Thus when a party does raise such issues in response to a prior intimation, the Officer of the revenue exercising powers under Section 245 of the Act must apply his mind to it and must record reason why the objection is not 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 prejudice to the party entitled to the refund.

16.

........ The entire object of giving prior intiation as provided under the Act has been rendered superfluous. Thus the decision making process was flawed and the adjustment of the refund against the demands due as well as the consequent demand for interest are unsustainable."

7.

In the above view, the adjustment of the refund due for the Assessment Year 2011-12 with pending demands for Assessment Years 2012-13, 2013-14 and 2014-15 without dealing with the specific objections of the petitioner is unsustainable being contrary to the decision of this Court in Hindustan Unilever Ltd. (supra). Thus, the adjustment of refund for Assessment Year 2011-12 with the demands of Assessment Years 2012-13, 2013-14 and 2014-15 are quashed and set aside.

8.

The petitioners' objections dated 27th July, 2017 to the intimation under Section 245 of the Act dated 17th July, 2017 is restored to the respondent no.1 for fresh consideration and disposal in accordance with law.

9.

The petition is disposed of in the above terms. No order as to costs.

(SANDEEP K. SHINDE J.) (M.S. SANKLECHA, J.)