Danieli India Limited Vs ACIT (Calcutta High Court)
The Calcutta High Court considered a writ petition challenging the Income Tax Department’s adjustment of admitted refunds under Section 245 of the Income Tax Act, 1961. The petitioner contended that the Income Tax Authority adjusted refunds due for Assessment Years (AYs) 2010-11 and 2017-18 against tax demands relating to AYs 2011-12, 2012-13 and 2013-14 without complying with the mandatory requirement of prior intimation under Section 245. The petitioner also argued that, since appeals against the assessment orders for AYs 2011-12, 2012-13 and 2013-14 were pending before the CIT (Appeals), the Income Tax Authority could not recover more than 20% of the disputed demand by adjusting refunds from other assessment years. The Court recorded the undisputed facts that the petitioner was entitled to refunds for AYs 2010-11 and 2017-18, that statutory appeals against the assessment orders for AYs 2011-12, 2012-13 and 2013-14 were pending before the CIT (Appeals), and that the amount adjusted from the refunds exceeded 20% of the disputed demand.
The principal legal issue before the Court was whether the Income Tax Authority could recover more than 20% of the disputed demand, during the pendency of appeals before the CIT (Appeals), by adjusting admitted refunds relating to other assessment years. The petitioner relied on the Calcutta High Court’s earlier decision in Graphite India Ltd. vs. Deputy Commissioner of Income Tax & Ors., contending that the issue was already settled in its favour. After considering the facts, the submissions of the parties, and the earlier decision, the Court held that the Assessing Officer’s action of recovering an amount exceeding 20% of the disputed demand through adjustment of admitted refunds from other assessment years was arbitrary and not sustainable in law. Accordingly, the Court directed the Income Tax Authority to refund the amount recovered in excess of 20%, after verification of the actual amount recovered, within four weeks from the date of communication of the order. The Court further directed that the petitioner be afforded an opportunity of hearing, if required, for clarification regarding the claim before processing the refund. With these observations and directions, the writ petition was disposed of.
