P. S. Srijan Height Developers Vs ACIT (Calcutta High Court)
The Calcutta High Court considered a writ petition challenging recovery of disputed tax demand for assessment year 2018-19 through adjustment of refunds under Section 245 of the Income Tax Act, 1961. The petitioner sought refund of Rs.1,16,96,443 adjusted in excess of 20% of the disputed demand along with interest.
The petitioner, a partnership firm, had filed its return for AY 2018-19 declaring income of Rs.1,16,24,230. After scrutiny assessment under Sections 143(3) and 144B, total income was assessed at Rs.6,60,76,120 by order dated 11.09.2021, followed by a demand notice. The petitioner filed an appeal under Section 246A on 22.09.2021, which remained pending.
For AY 2021-22, the petitioner claimed refund of Rs.7,59,274. Though refund was determined on 25.10.2022, an intimation under Section 245 issued the same day adjusted the refund against demands relating to AYs 2009-10 and 2018-19. Similarly, for AY 2022-23, refund of Rs.1,64,03,820 was determined on 27.09.2023. Subsequently, notice dated 10.11.2023 under Section 245 proposed adjustment of refund against outstanding demands, granting 21 days for response. However, on the next day itself, the entire refund was adjusted against the AY 2018-19 demand.
The petitioner contended that CBDT instructions and Office Memorandums restricted recovery during pendency of appeal to 20% of the disputed demand unless specific approval was obtained. It was argued that adjustments beyond 20% without following the prescribed procedure under Section 245 violated law and principles of natural justice. The petitioner also submitted that objections against adjustment were never considered despite Section 245 requiring prior intimation and opportunity to respond. Reliance was placed on several judicial precedents including Rajendra Kumar, Graphite India Limited, Danieli India Limited, and Gaurav Enterprises.
