Brief of the Case
Uttarakhand High Court held In the case of CIT (TDS) & others vs. State Bank of India & others that every authority of discretionary power would be obliged to act, in the first place, being guided by relevant considerations and ignoring irrelevant considerations. The relevant considerations, in this case, would be the fact that there is no stay obtained by the assessee in the appeal against the assessment for the year 2015-2016; but, equally, the authority would be bound to consider the fact that, for the Assessment Years 2010-2011, 2011-2012 and 2012- 2013, the Tribunal has ruled in favour of the assessee in regard to the applicability of the issue. The officer is duty bound not to invoke Section 245 without application of mind.
Facts of the Case
On 18.07.2014, the Income Tax Appellate Tribunal, Delhi Bench, in three appeals, passed a judgment and allowed the appeals filed by the writ petitioner and dismissed the appeals filed by the Income Tax Department holding that the provision of Section 194A(1) is not applicable to the SRF deposit made. On 30.07.2014, on the basis of the said judgment, writ petitioner applied for refund of Rs. 44,36,57,686/- with interest, which the Department had coercively recovered from the writ petitioner.
Writ petitioner further sent communication dated 08.09.2014 seeking refund. It is, thereafter, that the impugned letter dated 04.12.2014 was issued. In this letter department acknowledge the refund due to the assessee and the same time informed that a demand of Rs. 97,85,38,937/- for the AY 2014-15 is still pending. The refund of Rs. 46,14,03,993/- is therefore being adjusted U/s 245 against the demand due of Rs. 97,85,38,937/- for the AY 2014-15. The assessee filed a writ petition agains such orders. The learned Single Judge allowed the writ petition. It was held that once I.T.A.T. has opined that Section 194A of the Income Tax Act is not applicable against the Bank on SRF deposit, then the same legal position would be applicable in the subsequent assessment years as well, unless of course, Section 194A is amended or is substituted by any new law. Also held that unless and until order passed by the Income Tax Appellate Tribunal has been stayed or set aside by the higher Forum, refund shall not be denied to the petitioner. Accordingly this appeal is filed by the revenue agaisnt this order.
Contention of the Assessee
The ld counsel for the assessee submitted that this is a case, where the appeal is filed without any basis. He would contend that this is an affront to the rule of law, which, he would point out, has been held by the 13 Judges Bench of the Hon’ble Apex Court in Kesavananda Bharati Sripadagalvaru & others vs. State of Kerala & another, reported in (1973) 4 SCC 225, as also by the Constitution Bench in Indira Nehru Gandhi vs. Shri Raj Narain & another, reported in AIR 1975 SC 2299, to be a basic feature of the Constitution. He would complain of arbitrariness on the part of the Department in refusing to grant refund of the amount, which was illegally attached.
He would point out that, actually, there is only a single deposit made by ONGC with the Bank and, in regard to the said deposit, Section 194A of the Act is not applicable. He points out that, for Assessment Year 2013-2014, an amount of ` 44 and odd crores came to be recovered by the Department by attaching the account of the Bank. While so, the Income Tax Appellate Tribunal, vide judgment dated 18.07.2014 (Annexure No. 2 to the writ petition), allowed the appeals filed by the writ petitioner for the Assessment Years 2010-2011, 2011-2012 & 2012-2013. Thereafter, for Assessment Year 2014-2015, even though the matter stood concluded by the judgment of the Tribunal, the Assessing Officer, by order dated 15.09.2014, assessed the writ petitioner again in respect of the very same deposit made by ONGC on the basis of the non deduction under Section 194A of the Act, an issue which stood concluded by the order of the Income Tax Appellate Tribunal. It was this order, which was set aside in appeal by order dated 03.03.2015. He would submit that it is absolutely necessary for the upkeep of the rule of law that the decisions taken by the superior forums in a hierarchy of authorities must be followed by the authority at the bottom of the pyramid.
It is contrary to the same that, however, the Assessing Officer, on an issue which stood concluded, again sought to assess the writ petitioner by assessing him for the Assessment Year 2014-2015 and this has finally resulted in the impugned order being passed, by which, even without complying with the mandatory requirement of prior intimation under Section 245 of the Act, the amount, which became payable by way of refund, came to be adjusted against the illegal demand raised for the Assessment Year 2014-2015. The learned Senior Counsel would submit the various case law in support of his contentions.
The learned Senior Counsel would stress that the principle that Section 194A of the Act is not applicable to the deposit made by ONGC stands concluded, as things stand, by the order passed by the Income Tax Appellate Tribunal and there is no rhyme or reason for the lower authorities to take a different view for the subsequent assessments and to generate illegal demands as it were and, thereafter, the authority resorting to Section 245 of the Act for making adjustment. This is apart from his contention that, as far as the impugned order is concerned, there is no prior intimation as required under Section 245 of the Act.
Contention of the Revenue
The ld counsel of the revenue submitted that while the appellants had no objection in considering the application for refund filed by the writ petitioner, the judgment must be modified so that the direction must be to direct the officer to take a decision in accordance with law and this would take in Section 245 of the Act. It is furntehr submitted that Section 245 of the Act enables the authority to adjust any amount due to the Department against the refund. He would also submit that the observation in the judgment of the learned Single Judge that, unless and until the Tribunal’s order is set aside or stayed, refund cannot be refused, cannot be sustained.
Held by High Court
Section 245 of the Act, undoubtedly, vests a discretion with the authorities concerned, except in those circumstances, where the discretion would be one, where there is a power coupled with a duty. We have pointed out the circumstances, in which, the assessee could, in fact, demand, as a matter of right, to adjust the refund against any assessment, which he accepts; and, if the refund is not barred, as was held by the Hon’ble Apex Court in Hindustan Construction Co. Ltd. vs. V.S. Gaitonde, Income Tax Officer, Companies Circle I(3), Bombay & another, reported in (1965) 56 ITR 241, the Department may not be justified in refusing to accede to the request.
We cannot possibly pronounce on the legality of the assessment for the year 2015-2016. We cannot even, in any manner, pronounce on the question whether the assessment is to be sustained or not. In fact, an appeal is pending consideration before the appellate Assistant Commissioner. There is no order of stay obtained by the writ petitioner. But, at the same time, there is a clear case that the issue at hand is one squarely covered, as things stand, at the hands of the appellate Tribunal in favour of the assessee and there is absolutely no difference in facts.
In the circumstances of the case, we are inclined to accept the request, namely, that a decision will be taken by the authority regarding the refund in accordance with law, which would include the right to consider whether, under Section 245 of the Act, a case is made out for adjustment of the refund against the demand for the year 2015-2016. We have adverted to the various principles and situations, in which Section 245 can operate. It may not be exhaustive. The officer is duty bound not to invoke Section 245 without application of mind.
Every repository of discretionary power would be obliged to act, in the first place, being guided by relevant considerations and ignoring irrelevant considerations. The relevant considerations, in this case, would be the fact that there is no stay obtained by the assessee in the appeal against the assessment for the year 2015-2016; but, equally, the authority would be bound to consider the fact that, for the Assessment Years 2010-2011, 2011-2012 and 2012- 2013, the Tribunal has ruled in favour of the assessee in regard to the applicability of the issue.
If it is found that the issue considered by the Tribunal for the years 2010-2011, 2011-2012 and 2012-2013 is absolutely the same, which fell for consideration by the Assessing Officer for the year 2015-2016, particularly when it is not stayed by the High Court in the appeal pending against the same, it may amount to abuse of the discretionary power to satisfy the demand under the assessment order, which, though not stayed, has not been accepted by the assessee, but, instead, challenged before the competent forum.
It is for the authority concerned to look into all these aspects and, firstly, decide whether it should invoke the power under Section 245 of the Act. If it is of the view that the power should be invoked; then alone, in view of the requirement of giving prior intimation, which we have held entails compliance with natural justice, appellants must issue a notice indicating the proposal to invoke Section 245. If the authority finds, in the facts of this case, that no case is made out for invoking Section 245 on the basis of the assessment completed in 2015-2016 within a period of 10 days from today, then, the amount due by way of refund, along with due interest, shall be paid to the writ petitioner at the earliest.