Commissioner Of Income Tax (Cpc)Centralised Processing Cellcpc – Bangalore, Prestige Alpha,Post Box v. Oral Judgment : (Per : K.r. Shriram, J

Digitallysigned by IN THE HIGH COURT OF JUDICATURE AT BOMBAYPURTIPURTIPRASADPRASADPARABORDINARY ORIGINAL CIVIL JURISDICTIONPARABDate:2021.08.1311:36:24+0530 WRIT PETITION NO. 40 OF 2021 Jet Privilege Private LimitedUnit No.2, 2[nd] Floor, A Wing,Tines Square, Andheri Kurla Road,Opp. Mittal Estate,Mumbai – 400 059. V/s.1. Deputy Commissioner of IncomeTax - 5 (2) (1)Room No.571, 5[th] Floor, Aaykar Bhavan, New Marine Lines, Mumbai – 400 026. ….Petitioner 2. Commissioner of Income Tax (CPC)Centralised Processing CellCPC – 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 : 9[th] AUGUST 2021 ORAL JUDGMENT : (PER : K.R. SHRIRAM, J.) 1.Rule. Rule made returnable forthwith. Respondents waive service.Taken up for final disposal. 2. 2.Petitioner is seeking issuance of writ of certiorari or a writ in thenature of certiorari or any other appropriate writ or order or direction underArticle 226 and 227 of the Constitution of India, calling for records ofpetitioner’s case so far as related to the adjustment of refund againstoutstanding demand for A.Y. 2019-20. Petitioner says respondent is yet torefund a sum of Rs.37,63,57,620/- for A.Y. 2019-20 alongwith applicablestatutory 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 intimationdated 17[th] March, 2020 under Section 143 (1) of the Act. Thereafter, petitionerreceived a communication dated 13[th] May, 2020 being intimation under Section245 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 theoutstanding demand as shown in “Outstanding Demand table” annexed to the said communication. The Outstanding Demand table reads as under : Petitioner had 30 days to respond or take action. Petitioner, by its letter dated 21[st] May, 2020 responded to thiscommunication and informed respondent that no amount was adjustableand no recovery should be made with respect to outstanding demandsreflected in the table, as demands have been stayed for recovery in appealswhich were pending or erroneous (pending rectification). Mr. Pardiwalla states that the amount of outstanding demandof Rs.64,37,110/- for A.Y. 2018-19 has already been rectified and thedispute is now restricted to amount of outstanding demand ofRs.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 thedemand for A.Y. 2015-16 and 2016-17, Stay Applications were also filed andorders have been stayed upon petitioner depositing 20% of the demandamounts. The fact of petitioner depositing 20% has not been disputedthough Mr. Walve states that extension to deposit 20% for A.Y. 2016-17 wasnot granted but petitioner still went ahead and deposited it. In our viewthat should not really matter because 20% has been deposited andrespondents have accepted the same. The stay for both A.Y. 2015-16 and2016-17 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 4.Mr. Pardiwalla states that alongwith appeal challenging thedemand for A.Y. 2015-16 and 2016-17, Stay Applications were also filed andorders have been stayed upon petitioner depositing 20% of the demandamounts. The fact of petitioner depositing 20% has not been disputedthough Mr. Walve states that extension to deposit 20% for A.Y. 2016-17 wasnot granted but petitioner still went ahead and deposited it. In our viewthat should not really matter because 20% has been deposited andrespondents have accepted the same. The stay for both A.Y. 2015-16 and2016-17 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 to whom the refund is due of the proposed action. In this case, admittedly,and we say admittedly because the affidavit in reply/additional affidavitfiled by respondent confirms that the intimation under Section 245 of theAct was given only on 13[th] May, 2020. At this point, if one refers to Form 26AS which is the annaul tax statement under Section 203 (AA) of the Act forthe A.Y. 2015-16 and for A.Y. 2016-17, adjustment against the refund duehas been made on 5[th] May, 2020, whereas the mandatory notice underSection 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 thismandatory requirement of prior intimation would make the entireadjustment as wholly illegal and therefore, respondent could not have madethe adjustment as they wanted to. Mr. Pardiwalla also submitted in any event, petitioner havingdeposited 20% amount and stay having been granted under Section 220 (6)of the Act, it would mean that the time to make payment stands extendedand petitioner shall not be treated to be an assessee in default for therecovery provisions to be set in motion and therefore, the entire amountrefundable after giving credit to the amount already refunded becomespayable together with accumulated interest. 6.Mr. Walve for respondent in fairness and in view of the affidavitin reply filed fairly accepted that intimation required under Section 245 ofthe Act was given only on 13[th] May, 2020. But his explanation is that the process for intimating petitioner under Section 245 of the Act aboutoutstanding demand and interest payable was initiated on 17[th] March, 2020but due to technical error, the intimation got stuck and could not bedelivered to the assessee’s registered E-mail id. Mr. Walve submitted that on13[th] May, 2020 technical error got rectified in CPC portal and intimationunder 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 2Where under any of the provisions of this Act, a refund isfound to be due to any person, the [Assessing] Officer,DeputyCommissioner (Appeals)],Commissioner (Appeals)] orChiefCommissioner or Commissioner], as the case may be, may, inlieu of payment of the refund, set off the amount to berefunded or any part of that amount, against the sum, if any,remaining payable under this Act by the person to whom therefund is due, after giving an intimation in writing to suchperson 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 therefund, 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 towhom the refund is due. The officer may set off the amount to be refundedor any part of that amount only after giving an intimation in writing to theassessee of the action that he proposed to take under this section.Therefore, it clearly requires the intimation to be given prior to the officer sets off the amount payable against the amount to be refunded. It can beneither simultaneous nor subsequent. 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 therefund, 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 towhom the refund is due. The officer may set off the amount to be refundedor any part of that amount only after giving an intimation in writing to theassessee of the action that he proposed to take under this section.Therefore, it clearly requires the intimation to be given prior to the officer sets off the amount payable against the amount to be refunded. It can beneither 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 courtin A.N. Shaikh, Sixteenth Income-tax Officer Vs. Suresh B. Jain[2] and inHindustan Unilever Limited Vs. Deputy Commissioner of Income-tax-1 (1)3relied upon by Mr. Pardiwalla. 9.The fact that respondent has not followed the mandatory priorrequirement of intimation under Section 245 of the Act would make theadjustment wholly illegal and therefore, respondent was clearly in error innot refunding the amount. 10.As per the Office Memorandum [F. No. 404/72/93 – ITCC]issued dated 29[th] February, 2016, amended by another Office Memorandumdated 25[th] August, 2017 the assessing officer shall grant stay of demandwhere the outstanding demand is disputed on assessee paying 20% of thedisputed demand. Admittedly, petitioner has filed an appeal disputing theoutstanding demand for A.Y. 2015-16 and A.Y. 2016-17 and have deposited20% of the amount demanded. Therefore, there is a stay of demand inforce. The effect of this deposit would mean that the time to make thepayment 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.) default for the recovery provisions to be set in motion [(Hindustan Unilever (supra)]. 11.Respondent to refund the amounts to petitioner as determinedfor A.Y. 2019-20 under intimation issued under Section 143 (1) of the Actwith interest thereon as per law within a period of four weeks from the dateof 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.)