The Assessing Officer adjusted the refund without giving any prior intimation. On writ allowing the petition the Court held that where a party raises objection in response to the intimation , the Assessing Officer exercising powers under section 245 of the Act must record reasons why the objection was not sustainable and also communicate it to the assessee and this would ensure that the power of adjustment under section 245 of the Act is not exercised arbitrarily. On facts of the case the Court held that action of the Assessing Officer making the adjustment without prior intimation is bad in law and illegal hence quashed . ( AY. 2008 -09) ( WP.No. 1476 of 2022 dt . 18 -7 -2022)
Greatship (India) Ltd v . ACIT ( 2022) 289 Taxman 334 ( Bom)(HC). www.itatonline .org
S. 245 : Refund- Set off of refunds against tax remaining payable -Adjustment made without prior intimation is held to be bad in law .[ Art , 226 ]
ESSENCE :”The Assessing Officer exercising powers under section 245 of the Act MUST RECORD REASONS WHY the objection was not sustainable and ALSO also COMMUNICATE IT to the assessee and this would ensure that the power of adjustment under section 245 of the Act is not exercised arbitrarily.”
FACTS , in a given case :
AY 2020-21 – GIST:
Refund claim for AY 2020-21 (marginally over Rs 5000) was duly allowed as per INTIMATION u/s 143 received ; also a cheque was stated to have been issued. However, obviously on a change of mind of the CPC in-charge, the refund cheque was not issued. But, instead, THAT WAS , only on a further inquiry, in response, claimed to have been adjusted against an alleged ‘arrears of demand’ (with interest added) way back for as old as AY 1999-2000 per an Intimation claimed to have been issued – of which taxpayer had no knowledge at all.
REASON for such a Demand, was not clarified / made known for, impliedly / admittedly, the original record for AY 1999-2000 was not available with the Department ; but that was because , as came to inferred by the aggrieved, after doing his own home work , – the claim for CREDIT was NOT ALLOWED FOR TDS on BANK INTEREST .>
Calling for a spl. mention: Assessee was not given any prior notice of the above stated adjustment of refund !