Paresh M Shetti vs Principal Commissioner Of Income Tax ...
2026 Latest Caselaw 3721 Bom

Bombay High Court

Paresh M Shetti vs Principal Commissioner Of Income Tax ... on 15 April, 2026

Author: B. P. Colabawalla

Bench: B. P. Colabawalla

2026:BHC-OS:9914-DB


                                                                       5-WP(L)-10371-2025.doc



                      IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                          ORDINARY ORIGINAL CIVIL JURISDICTION

                              WRIT PETITION (L) NO. 10371 OF 2025

           Paresh M. Shetti                                              .. Petitioner

                    Versus

           Principal Commissioner of Income-Tax
           (PCIT) - 41                                                   .. Respondent


                Adv. Madhavi Nulluri, a/w Trupti Poojary, i/b Vivaka Partners,
                for the Petitioner.

                Adv. Devendra Harnesha, a/w Adv. Paras Harnesha, for the
                Respondent.



                                 CORAM: B. P. COLABAWALLA &
                                              FIRDOSH P. POONIWALLA, JJ.

                                  DATE:       APRIL 15, 2026

           P. C.

1. Rule. Respondents waive service. With the consent of the parties,

Rule is made returnable forthwith and heard finally. The above Writ Petition

is filed seeking the following reliefs:-

"14. The Petitioner further submits that this Hon'ble Court may be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus, or any other appropriate Writ, Order or Direction under Article 226 of the Constitution of India, ordering and directing:

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(i) Direct the Respondent to allow the Petitioner to file revised returns for A.Y. 2008-09;

(ii) The Impugned Demand of Rs. 1,78,494/- as reflected on the income-tax e-portal as on 10 th March 2025 be set aside;

(ii)(a) The interest levied/accrued on Impugned Demand as on the date of filing of the Petitioner be set aside;

(ii)(b) pending the final hearing and disposal of the Petitioner, this Hon'ble Court be pleased to stay any accrual/levy of interest by the Respondent on the Impugned Demand

(iii) a declaration that no dues are payable by the Petitioner to the Income Tax Department for the demand pursuant to returns for A.Y. 2008-09;

(iv) Direct the Respondent and the Income Tax Department to not adjust any further refunds that may be due and payable to the Petitioner as against the impugned demand;

(v) Direct the Respondent to refund/return the wrongly adjusted refunds amounting to Rs.9,312/-;"

2. Brief facts giving rise to the present Writ Petition are that the

Petitioner has been a regular taxpayer for the last 25 years. The Petitioner is

subject to Income Tax Ward 41 and falls within the jurisdiction of the

Respondent. The Petitioner is a Computer Training Institute, a franchisee of

the Computer Management and Information Technology (CMIT).

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3. For the Assessment Year (A.Y.) 2008-2009, the Petitioner filed

his Income Tax Return through his Chartered Accountant on 31st July 2008.

As per the computation of Petitioner's income, the Gross Total Income was

Rs.3,81,713/- and Net Taxable Income, after all allowable deductions, was

Rs.2,81,720/-. The total tax payable on this amount, along with interest

under Section 234 of the Income Tax Act, 1961, was Rs.35,450/-, which was

duly paid by the Petitioner before filing the Return. What is important to note

is that this Assessment Year was the first year of filing e-returns, as the

Income Tax Department had transitioned from paper filing to an e-filing

mode. According to the Petitioner, the online software through which data

was to be entered into the portal, did not generate autopopulated tax

amounts against the declared incomes. This led to errors, and the amount

had to be entered manually.

4. It is the specific case of the Petitioner that the Petitioner's

Return was filed on 31st July 2008, which was the last date for filing the

Return within the due date. According to the Petitioner, for the Assessment

Year in question (A.Y. 2008-2009), the Petitioner did not receive any

intimation under Section 143(1) by post, nor was any intimation visible on

electronically logging into the Petitioner's Income Tax Account.

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5. It transpires that for A.Y. 2018-2019, the Petitioner had claimed

a refund of Rs.9,040/- in the Return filed with the Income Tax Department.

This Return was duly computed under Section 143(1) by accepting the

income as filed, and the said refund amount, along with interest under

Section 244, was approved. However, the Petitioner did not get credit for this

refund because it was purportedly adjusted against an alleged demand for

earlier years. This came as a big shock to the Petitioner. The Petitioner has no

knowledge that such a demand was pending. It was at this time that the

Petitioner came to know from the portal that a huge demand of Rs.96,812/-

for A.Y. 2008-2009 was pending. To ascertain the factual situation, the

Petitioner addressed a communication dated 26th November 2019 to the

Income Tax Officer, to which there was no reply. In fact, it is the case of the

Petitioner that his Chartered Accountant also visited the Income Tax

Department, and on speaking to the concerned ward officials, he was told to

lodge a complaint/grievance through the online portal.

6. Accordingly, the Petitioner filed a grievance on the e-Nivaran

portal on 24th January 2020 and requested rectification to nullify the

demand. Thereafter, due to the COVID-19 pandemic, from March 2020, all

offices were closed, and the Petitioner's case with respect to the above

rectification was temporarily paused. It has been stated in the Petition that

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during the period of 2020-2021, the Petitioner and his family faced a lot of

misfortune, and the Petitioner was diagnosed with COVID-19 twice during

the aforesaid period. Since the Petitioner's case was quite severe, it took him

a long time to heal and recover from the COVID-19 virus infection. In fact,

the Petitioner also lost some close relatives during this period. It is because of

all this that the Petitioner could not focus on any work-related matters, and

as a result, the Petitioner could not follow up with the aforesaid grievance

with the Income Tax Department.

7. It appears that the grievance of the Petitioner filed on the portal

was closed on 26th May 2020. The resolution for the Petitioner's grievance

application stated that the Return for A.Y. 2008-2009 declared the income at

Rs.5,31,714/- and credit for prepaid taxes of Rs.35,450/- has already been

given. Since the Petitioner had contended that the income for that year was

Rs.2,81,713/-, the office was unable to process the Petitioner's request for

rectification because of the difference, namely, between Rs.5,31,714/- and

Rs.2,81,713/-

8. Thereafter, the Petitioner, on closely examining the Return filed

for A.Y. 2008-2009, found that there was a clear mistake in the original

computation, namely, that the Loss from House Property of Rs.1,50,000/-,

was not included in the Return. This was because the Petitioner availed of a

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housing loan at that time, and for many years, the Petitioner had claimed

deductions not only for the Assessment Years prior thereto but also for

subsequent years. However, it was missed out for A.Y. 2008-2009.

9. It is in these circumstances that the Petitioner finally filed an

application under Section 119(2)(b) dated 12th October 2023 with the

PCIT-41 seeking liberty to file a revised Return for A.Y. 2008-2009 for

bringing on record the correct figures. This was rejected by order dated 25th

November 2024, and hence the present Petition.

10. In this factual backdrop, it was argued by the Petitioner that

notwithstanding the fact that the Respondent had rejected the application of

the Petitioner for filing a revised Return, since no intimation under Section

143(1) was either issued or served upon the Petitioner, no demand can exist.

If the demand does not exist, then the question of adjusting the refund for

Assessment Year 2018-2019 against a non-existent demand of A.Y. 2008-

2009 cannot and does not arise. It is on this basis that the learned counsel for

the Petitioner submitted that the impugned demand of Rs.1,78,495/-, as

reflected on the Income Tax e-portal on 10th March 2025, be set aside and

consequently even the interest levied/accrued on the impugned demand as

on date be quashed.

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11. In support of the submissions canvassed on behalf of the

Petitioner, the learned Counsel relied upon the decision of this Court in

Udayan Bhaskaran Nair Vs. Deputy Commissioner of Income

Tax-42(3)(1), Mumbai and Ors. (Writ Petition No. 1363 of 2025

decided on 13th January 2026) as well as in the case of Capegemini

Technology Services India Ltd. Vs. Deputy Commissioner of

Income Tax, Circle-1(1), Pune and Ors. (Writ Petition No. 16068 of

2024 decided on 24th March 2026).

12. On the other hand, in the affidavit in reply, the Revenue has

contended that there has been negligence on the part of the Petitioner in

approaching the Respondent under Section 119(2)(b) for filing the revised

Return, and hence the Respondent has correctly not entertained the

application filed by the Petitioner. Despite this, we had asked the learned

Counsel for the Respondent to take instructions as to whether the intimation

under Section 143(1) was ever served upon the Petitioner. The learned

Counsel for the Revenue has today tendered an email dated 15th April 2026,

enclosing a screenshot of the Income Tax Department portal which seems to

suggest that the intimation under Section 143(1) was passed/issued on 22nd

September 2009, and the same was served on 2nd October 2009. However,

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the actual intimation has not been brought on record and nor is there any

proof of service. This is an admitted position before us.

13. It is in these facts that we have to decide whether the Petitioner

is justified in contending that the impugned demand, as supposedly reflected

in the intimation under Section 143(1), along with the interest, ought to be

quashed and set aside.

14. We find that the issue is no longer res integra. This very Bench,

in the case of Udayan Bhaskaran Nair (supra), has taken a view that it is

mandatory for the department to serve the intimation under Section 143(1)

for a demand to be raised on the Assessee. This Court has held that in the

absence of any intimation under Section 143(1) raising a demand, or any

other independent notice of demand, recovery of such a non-existent demand

cannot be made against the Assessee. The relevant portion of this decision

reads thus:-

"17. Further, on perusal of the affidavit in reply of Respondent No.1 dated 01.12.2025 we find that in paragraph 7 it is stated that as per the records of the income tax department the date of service of notice of demand is 25.06.2011 [in support of which the Respondent No.1 has placed extract/screen-shot of the portal of department (Exhibit R3) which mentions the date of service of notice as 25.06.2011]. On reading of Exhibit R/3A (placed at page 146 of the affidavit in reply of the Respondent No.1) it becomes

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evident that Respondent No.1 has attempted to fetch the details about proof/acknowledgement of service of notice of demand from the Centralized Processing Centre (CPC). The CPC vide its email dated 27.11.2025 submitted that the said details were not available on the CPC portal but can be fetched only from the jurisdictional Assessing Officer. Thereafter, Respondent No.1 explains in paragraph 7 of the Affidavit in reply that if any order/intimation is passed/issued prior to October, 2019 under the legacy ATS system, then in a such case, the officer issuing/passing it was required to print the order/intimation and dispatch it physically to the Assessee. Accordingly, the details of service of demand was not available with the CPC. Accordingly, Respondent No. 1 entered into correspondence with the then Jurisdictional Assessing Officer vide his email dated 28.11.2025 (Exhibit- R3A) and asked for details about the mode of service and acknowledgement thereof. However, Respondent No.1 has fairly stated in Paragraph 7 that he has not received the details of the mode of service or acknowledgement of the service of notice of demand from the then Assessing Officer.

Further, even in paragraph 17, Respondent No.1 states that physical acknowledgement of service of the notice of demand was not available with him. Mr. Sharma, the learned counsel appearing on behalf of the Respondents, fairly states that at this stage it would be difficult for the department to retrieve such an old record of the notice of demand dated 25.06.2011. He, however, fairly agrees that the alleged impugned demand was raised merely on account of difference in approach of reporting the foreign tax credit.

18. We observe that clause (d) of Section 143(1) requires that the intimation should be prepared/generated and be sent to the assessee specifying the sum determined to be payable by the assesssee or the sum due as refund to the assessee. Further, the second proviso to Section 143(1) [as applicable to A.Y.2010-11] reads as under:-

"Provided further that no intimation under this sub- section shall be sent after the expiry of one year from the end of the financial year in which the return is made."

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19. Further, sub Section (1) of Section 156 of the Act reads as under:-

"156. (1) When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable :

Provided that where any sum is determined to be payable by the assessee or the deductor or the collector under sub-section (1) of section 143 or sub-section (1) of section 200A or sub-section (1) of section 206CB, the intimation under those sub- sections shall be deemed to be a notice of demand for the purposes of this section."

20. Sub Section (1) of Section 156 mandates the service of notice of demand upon the assessee so as to enforce it. The proviso to Section 156(1) provides that in case of demand raised pursuant to intimation under Section 143(1) the said intimation itself would be considered as the notice of demand. Thus, when the intimation under Section 143(1) is to be considered as a notice of demand as referred to in Section 156, then as per sub Section (1) of Section 156, it is mandatorily required to be served upon the assessee. The use of the words "shall" in Section 156(1) emphasize on mandatory service.

21. Admittedly it is now the case before us that even though it is claimed by the Respondents that the intimation under Section 143(1) was issued for the relevant Assessment year 2010-11, however the Respondents have failed to bring on record any such intimation claimed to have been issued under Section 143(1) or the notice of demand claimed to have been served upon the Petitioner. Even the Petitioner had asked for the same from the Respondents vide his rectification application dated 07.11.2017 but the same was never furnished to the Petitioner. Even in the affidavit in

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reply dated 01.12.2025, Respondent No.1 has not produced the intimation under Section 143(1) which he claims is issued. It was not produced even before the Commissioner of Income Tax (Appeals) or the Tribunal.

22. Thus, we are of the view that in the absence of any intimation under Section 143(1) raising the demand or any independent notice of demand, recovery of such non- existent demand cannot be made against the Petitioner."

(emphasis supplied)

15. Further, this decision in Udayan Bhaskaran Nair (supra) was

once again followed by this Bench in the case of Capegemini Technology

Services India Ltd. (supra). The relevant portion of this decision reads this:-

"45. In Bharat Serums and Vaccines Limited V/S DCIT [Writ Petition (L) No. 3498 of 2024 decided on 02.04.2024], this Court, held that where the Department failed to produce the order giving rise to the demand despite RTI applications and court directions, the demand was liable to be quashed. The relevant portion of this decision reads thus:-

"5. On perusal of the portal sometime in April 2021, it was found that a demand of Rs.46,84,750/- was appearing in the portal as against the erstwhile entity. It appeared that the demand arose out of an order passed under Section 154 of the Act on 31st March 2021 for Assessment Year 2013-2014. As no communication had been received with regard to the said order, representations were made to respondent no.1 to provide copy of the rectification order dated 31st March 2021 passed under Section 154 of the Act. As no response was received, petitioner even filed an application under the RTI Act, 2005. In response to the application, petitioner was served with a copy of the computation sheet. Petitioner,

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therefore, preferred an appeal under Section 19(1) of the RTI Act, 2005 before the First Appellate Authority. Petitioner's application was disposed by the First Appellate Authority by an order dated 18th July 2023 and respondents were directed to re- examine the matter and furnish full and appropriate information sought within 15 days from the date of receipt of the order. Notwithstanding this direction by the First Appellate Authority, petitioner received from the Assessing Officer, by a letter dated 4th August 2023, the same documents which were provided earlier. Though the forwarding letter dated 4th August 2023 provides for copy of order passed under Section 154 of the Act, it is petitioner's case, and which has not been controverted, that only the same computation sheet was provided but not an order. Even the screenshot of the order sent through email is illegible.

6. No affidavit in reply has been filed. Mr. Gupta appearing for respondents informed the Court that he has instructions from respondent no.1- Mr. Basant Kumar Arya that the demand has been uploaded by the erstwhile Deputy Commissioner of Income Tax on the portal but the Department does not have any file relating to that matter. Mr. Gupta states that his instructions are to inform the Court that respondent no.1 or the Department has no document to show that any notice was issued under Section 154 or even an order was passed under Section 154 of the Act. Mr. Gupta also states that if the Court directs respondents, they shall remove the pending demand from the Income Tax Portal pertaining to petitioner.

7. In view of the statement made by Mr. Gupta as recorded above, we have to quash and set aside the demand of Rs.46,84,750/- for Assessment Year 2013- 2014 as appearing on petitioner's portal and the computation sheet under Section 154 of the Act dated 31st March 2021, which we hereby do. The demand appearing on the portal shall also be removed. This

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has to be completed within two weeks of this order being uploaded."

46. Similarly, in Udayan Bhaskaran Nair V/S DCIT [(2026) 183 taxmann.com 47 (Bom)], this very Bench held that in the absence of any intimation or order raising the demand, recovery of such non-existent demand cannot be made. Relevant paragraphs of the said judgment are reproduced hereunder:-

"21. Admittedly it is now the case before us that even though it is claimed by the Respondents that the intimation under Section 143(1) was issued for the relevant Assessment year 2010-11, however the Respondents have failed to bring on record any such intimation claimed to have been issued under Section 143(1) or the notice of demand claimed to have been served upon the Petitioner. Even the Petitioner had asked for the same from the Respondents vide his rectification application dated 07.11.2017 but the same was never furnished to the Petitioner. Even in the affidavit in reply dated 01.12.2025, Respondent No.1 has not produced the intimation under Section 143(1) which he claims is issued. It was not produced even before the Commissioner of Income Tax (Appeals) or the Tribunal.

22. Thus, we are of the view that in the absence of any intimation under Section 143(1) raising the demand or any independent notice of demand, recovery of such non-existent demand cannot be made against the Petitioner."

47. In the present case, there is absolutely no material on record to substantiate the existence of valid orders giving rise to the impugned demands. The Respondents have failed to produce the orders and service records, despite repeated opportunities. The failure of Respondent No.2 to respond and

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the inability of the Pune Officer to locate records leads to the inevitable conclusion that no such valid orders exist or were ever served upon the Petitioner. An adverse inference must necessarily be drawn against the Respondents. Old matters and demands cannot be allowed to suddenly surface on the portal without the underlying orders being available and served. Consequently, the impugned demands cannot be sustained."

16. As can be seen from the aforesaid two decisions reproduced by

us above, it is mandatory for the Income Tax Department to serve the

intimation under Section 143(1) on the Assessee before any demand can be

raised on the Assessee. In the facts of the present case, admittedly, apart from

the screenshots that were produced before us, there is no intimation under

Section 143(1) that is brought on record, and neither has any material been

placed on record that the said demand was in fact served on the Petitioner.

17. Once these are the facts before us, we are clearly of the view that

no refund could have been adjusted against a non-existent demand.

Accordingly, the petition is allowed in terms of prayer clauses 14(ii), 14(ii)(a),

14(iii), 14(iv) and 14(v) respectively.

18. Rule made absolute in the aforesaid terms and the Writ Petition

is also disposed of in terms thereof. However, there shall be no order as to

costs.

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19. The income tax department shall give effect to this order as

expeditiously as possible, and in any event, within a period of three months

from the date of this order being uploaded on the High Court website.

20. This order will be digitally signed by the Private Secretary/

Personal Assistant of this Court. All concerned will act on production by fax

or email of a digitally signed copy of this order.

[FIRDOSH P. POONIWALLA, J.] [B. P. COLABAWALLA, J.]

APRIL 15, 2026 Darshan Patil

Signed by: Darshan Patil Designation: PA To Honourable Judge Date: 20/04/2026 12:54:50