Delhi High Court
The Oriental Insurance Co. Ltd. vs Deputy Commissioner Of Income Tax ... on 16 October, 2014
IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment delivered on: 16.10.2014
W.P.(C) 6172/2014 & CM 14938/2014
THE ORIENTAL INSURANCE CO. LTD. ..... Petitioner
versus
DEPUTY COMMISSIONER OF INCOME TAX & ANR.
..... Respondents
Advocates who appeared in this case:
For the Petitioner : Mr M.S.Syali, Sr. Advocate with Mr Tarandeep Singh and Mr Mayank
Nagi.
For the Respondents : Ms Suruchi Aggarwal.
CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SIDDHARTH MRIDUL
JUDGMENT
BADAR DURREZ AHMED, J (ORAL)
1. In this writ petition the following prayers have been made:-
"a) A Writ of Certiorari or Writ, order or direction in the
nature of Certiorari, or any other appropriate Writ,
order of direction under Article 226/227 of the
Constitution of India quashing adjustment of refund of
Rs 89,16,28,190/- pertaining to AY 2013-14 against
outstanding penalty demand of AY 2005-06 and
directing the Respondents to grant the said refund to
Petitioner.
b) A Writ of Mandamus or Writ, order or direction in the
nature of Mandamus, or any other appropriate Writ,
order of direction under Article 226/227 of the
Constitution of India directing the Respondents to
dispose off the petition u/s 220(6) filed by the
Petitioner on 28.04.2014 by passing a speaking order
either accepting / rejecting the prayers made therein
after granting a proper opportunity of being heard to
the Petitioner."
2. Insofar as prayer (b) is concerned the petition under Section 220(6) of
the Income Tax Act, 1961 has already been decided by a speaking order
dated 23.09.2014. Mr Syali, the learned senior counsel appearing for the
petitioner, states that in view of this development, prayer (b) does not
survive. He will take his independent remedy under Section 264 of the said
Act. With regard to prayer (a), he submits that the adjustment was made
without giving an opportunity to the assessee as is the requirement under
Section 245 of the said Act as interpreted by this court in Glaxo Smith Kline
Asia (P.) Ltd v. CIT: 290 ITR 35 (Del). The same sentiment is reiterated in
Genpact India v. ACIT: 205 Taxman 51 (Del) and Court on its Own
Motion v. CIT: 352 ITR 273 (Del).
3. In Glaxo Smith Kline Asia (P.) Ltd (supra) a Division Bench of this
court held as under:-
"25. In our view, the power under section 245 of the Act,
is a discretionary power given to each of the tax officers in
the higher echelons to "set off the amount to be refunded or
any part of that amount against the same, if any, remaining
payable under this Act by the person to whom the refund is
due." That this power is discretionary and not mandatory is
indicated by the word „may‟. Secondly, the set off is in lieu
of payment of refund. Thirdly, before invoking the power,
the officer is expected to give an intimation in writing to
the assessee to whom the refund is due informing him of
the action proposed to be taken under this section.
26. xxxx xxxx xxxx xxxx
27. As already noticed, this discretionary power has to be
exercised after giving an opportunity to the assessee of
being heard preceded by an intimation to the assessee in
writing of the action proposed to be taken under section
245. A further implicit requirement is that the revenue will
have to be satisfied that the assessee will not be in a
position to satisfy the demand of tax and that but for the set
off, the outstanding tax amount cannot be recovered at all."
4. In Genpact India (supra) this court held as under:-
"3. It is not in dispute that no such notice under Section
245 of the Act was issued. It was also conceded by learned
counsel for the respondent at the time of hearing that the
procedure prescribed under Section 245 of the Act, namely,
advance intimation and opportunity of hearing, is
mandatory. It, therefore, clearly follows that the impugned
adjustment was made in violation of the provisions of
Section 245 of the Act and this adjustment is liable to be
quashed on this ground itself."
5. In Court on its Own Motion (supra) this court held asunder:-
"20.........In one of the paragraphs of the counter affidavit,
the respondents have stated as under:
"Accordingly, it was again reiterated that the provisions of
section 245 of the I.T. Act, 1961 must be followed and
written intimation must be sent to the assessees before
adjusting refund of the outstanding demand and any lapse
in this regard shall be viewed seriously. The
CCsIT/DGsIT/CsIT were direct to ensure compliance of
the aforesaid direction. Thus, enough safeguards have been
provided not only in the I.T. Act, 1961 but also in the
Instructions issued by the CBDT" (emphasis supplied)
21. The aforesaid statement reflects the correct position in
law as Section 245 mandates and envisages prior intimation
to the assessee so that he/she can respond before any
adjustment of refund is made towards the demand relating
to any other assessment year. Thus, an opportunity of
response/reply should be given and after considering the
stand and plea of the assessee, justified and valid order or
direction for adjustment of refund can be made. The
Section postulates two stage action; prior intimation and
then subsequent action when warranted and necessary for
adjustments of the refund towards arrears."
6. It is evident from the record of the case that on the same date on which
the intimation was issued the adjustment was made simultaneously. This is
contrary to the spirit of the provisions of Section 245 as interpreted by this
court in the above decisions inasmuch as no opportunity of hearing was
given to the assessee before the adjustment was made. Therefore, on this
ground alone the adjustment order would have to be quashed. It is so
directed. The writ petition is allowed to the aforesaid extent.
BADAR DURREZ AHMED, J
SIDDHARTH MRIDUL, J
*
OCTOBER 16, 2014 /mk
*
Corrected vide order dated 07.11.2014 passed in WP(C) 6172/2014.
