Jet Privilege Pvt. Ltd vs Deputy Commissioner Of Income Tax ...
2021 Latest Caselaw 10576 Bom

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                              IN THE HIGH COURT OF JUDICATURE AT BOMBAY
         Digitally
         signed by
         PURTI
PURTI
PRASAD
         PRASAD
         PARAB                   ORDINARY ORIGINAL CIVIL JURISDICTION
PARAB    Date:
         2021.08.13
         11:36:24

                                       WRIT PETITION NO. 40 OF 2021
         +0530




         Jet Privilege Private Limited
         Unit No.2, 2nd Floor, A Wing,
         Tines Square, Andheri Kurla Road,
         Opp. Mittal Estate,
         Mumbai - 400 059.                                            ....Petitioner
                       V/s.

         1. Deputy Commissioner of Income
         Tax - 5 (2) (1)
         Room No.571, 5th Floor, Aaykar Bhavan,
         New Marine Lines, Mumbai - 400 026.

         2. Commissioner of Income Tax (CPC)
         Centralised Processing Cell
         CPC - Bangalore, Prestige Alpha,
         Post Box No.2, Electronic City Post,
         Bengaluru - 560 500.

         3. Union of India,
         Through the Secretary,
         Department of Revenue,
         Ministry of Finance, Govt. of India,
         North Block, New Delhi - 110 001.                            ...Respondents

                                             ----
         Mr. Percy Pardiwalla, Senior Advocate i/b Mint and Cofereres for Petitioner.
         Mr. Sham V. Walve for Respondent.
                                             ----
                                                CORAM : K.R. SHRIRAM &
                                                          ABHAY AHUJA, JJ.

DATED : 9th AUGUST 2021

ORAL JUDGMENT : (PER : K.R. SHRIRAM, J.)

1. Rule. Rule made returnable forthwith.

Respondents waive service.

Taken up for final disposal.

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2. Petitioner is seeking issuance of writ of certiorari or a writ in the

nature of certiorari or any other appropriate writ or order or direction under

Article 226 and 227 of the Constitution of India, calling for records of

petitioner's case so far as related to the adjustment of refund against

outstanding demand for A.Y. 2019-20. Petitioner says respondent is yet to

refund a sum of Rs.37,63,57,620/- for A.Y. 2019-20 alongwith applicable

statutory interest under Section 244 (A) of the Income Tax Act, 1961 (the Act).

3. 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. Thereafter, petitioner

received a communication dated 13th May, 2020 being intimation under Section

245 of the Act from the Centralized Processing Center, Income Tax Department,

whereby petitioner was informed that their return for the assessment year 2019-

20 has been processed at CPC and the refund will be adjusted against the

outstanding demand as shown in "Outstanding Demand table" annexed to the

said communication. The Outstanding Demand table reads as under :

 SL           PAN         The     Demand        DIN      Demand     Demand     Demand           Rectificati
 No.                  Outstanding Raised                  Raised    Amount    Uploaded By       on rights
                       demand      under                   Date                                   with
                      pertains to section
                        the AY
1      AACCJ9147J 2015           154        20182015100 11-07-     14802770   Jurisdictional AO
                                            00470981C   2018                  AO
2      AACCJ9147J 2016           143 (3)    20182016370 30-12-     313182800 CPC               AO
                                            47134700C   2018
3      AACCJ9147J 2018           1431a      20192018370 16-10-     6437110    CPC              AO
                                            51947354C   2019




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Petitioner had 30 days to respond or take action.

Petitioner, by its letter dated 21st May, 2020 responded to this

communication and informed respondent that no amount was adjustable

and no recovery should be made with respect to outstanding demands

reflected in the table, as demands have been stayed for recovery in appeals

which were pending or erroneous (pending rectification).

Mr. Pardiwalla states that the amount of outstanding demand

of Rs.64,37,110/- for A.Y. 2018-19 has already been rectified and the

dispute is now restricted to amount of outstanding demand of

Rs.1,48,02,770/- for A.Y. 2015-16 and Rs.31,31,82,800/- for A.Y. 2016-17.

4. Mr. Pardiwalla states that alongwith appeal challenging the

demand for A.Y. 2015-16 and 2016-17, Stay Applications were also filed and

orders have been stayed upon petitioner depositing 20% of the demand

amounts. The fact of petitioner depositing 20% has not been disputed

though Mr. Walve states that extension to deposit 20% for A.Y. 2016-17 was

not granted but petitioner still went ahead and deposited it. In our view

that should not really matter because 20% has been deposited and

respondents have accepted the same. The stay for both A.Y. 2015-16 and

2016-17 have to be in force.

5. Mr. Pardiwalla submitted that before any adjustment is made,

it is mandatory to give intimation under Section 245 of the Act to the person

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to whom the refund is due of the proposed action. In this case, admittedly,

and we say admittedly because the affidavit in reply/additional affidavit

filed by respondent confirms that the intimation under Section 245 of the

Act was given only on 13th May, 2020. At this point, if one refers to Form 26

AS which is the annaul tax statement under Section 203 (AA) of the Act for

the A.Y. 2015-16 and for A.Y. 2016-17, adjustment against the refund due

has been made on 5th May, 2020, whereas the mandatory notice under

Section 245 of the Act has been given only on 13 th May, 2020.

Mr.Pardiwalla submits that it is settled law that failure to comply with this

mandatory requirement of prior intimation would make the entire

adjustment as wholly illegal and therefore, respondent could not have made

the adjustment as they wanted to.

Mr. Pardiwalla also submitted in any event, petitioner having

deposited 20% amount and stay having been granted under Section 220 (6)

of the Act, it would mean that the time to make payment stands extended

and petitioner shall not be treated to be an assessee in default for the

recovery provisions to be set in motion and therefore, the entire amount

refundable after giving credit to the amount already refunded becomes

payable together with accumulated interest.

6. Mr. Walve for respondent in fairness and in view of the affidavit

in reply filed fairly accepted that intimation required under Section 245 of

the Act was given only on 13th May, 2020. But his explanation is that the

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process for intimating petitioner under Section 245 of the Act about

outstanding demand and interest payable was initiated on 17 th March, 2020

but due to technical error, the intimation got stuck and could not be

delivered to the assessee's registered E-mail id. Mr. Walve submitted that on

13th May, 2020 technical error got rectified in CPC portal and intimation

under Section 245 of the Act was sent to the assessee.

7. For ease of reference, we shall quote Section 245 of the Act,

which read as under ;

245. Set off of refunds against tax remaining payable 2 Where under any of the provisions of this Act, a refund is found to be due to any person, the [Assessing] Officer, Deputy Commissioner (Appeals)], 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.

8. Mere perusal of the section makes it clear that the officers

mentioned in the section, 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 the Act by the assessee to

whom the refund is due. The officer may set off the amount to be refunded

or any part of that amount only after giving an intimation in writing to the

assessee of the action that he proposed to take under this section.

Therefore, it clearly requires the intimation to be given prior to the officer

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sets off the amount payable against the amount to be refunded. It can be

neither simultaneous nor subsequent.

We find support for this view in Suresh B. Jain Vs. A.N. Shaikh,

Sixteenth Income-tax Officer 1, confirmed by the Division Bench of this court

in A.N. Shaikh, Sixteenth Income-tax Officer Vs. Suresh B. Jain 2 and in

Hindustan Unilever Limited Vs. Deputy Commissioner of Income-tax-1 (1) 3

relied upon by Mr. Pardiwalla.

9. The fact that respondent has not followed the mandatory prior

requirement of intimation under Section 245 of the Act would make the

adjustment wholly illegal and therefore, respondent was clearly in error in

not refunding the amount.

10. As per the Office Memorandum [F. No. 404/72/93 - ITCC]

issued dated 29th February, 2016, amended by another Office Memorandum

dated 25th August, 2017 the assessing officer shall grant stay of demand

where the outstanding demand is disputed on assessee paying 20% of the

disputed demand. Admittedly, petitioner has filed an appeal disputing the

outstanding demand for A.Y. 2015-16 and A.Y. 2016-17 and have deposited

20% of the amount demanded. Therefore, there is a stay of demand in

force. The effect of this deposit would mean that the time to make the

payment stands extended and petitioner is not deemed to be an assessee in 1 [1987] 165 ITR 151 (Bom.) 2 [1987] 165 ITR 86 (Bom.) 3 [2015] 377 ITR 281 (Bom.)

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default for the recovery provisions to be set in motion [( Hindustan Unilever

(supra)].

11. Respondent to refund the amounts to petitioner as determined

for A.Y. 2019-20 under intimation issued under Section 143 (1) of the Act

with interest thereon as per law within a period of four weeks from the date

of receipt of this order.

12. Petition accordingly stands disposed.

13. Appeals filed by petitioner be disposed expeditiously.

14. All to act on authenticated copy of this order.

(ABHAY AHUJA, J.)                                          (K.R. SHRIRAM, J.)




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