Case Law Details
Trent Ltd. Vs Deputy Commissioner (Bombay High Court)
Bombay High Court ruled in favor of Trent Ltd. against the Deputy Commissioner of Income Tax, quashing the adjustment of ₹4.91 crore from the company’s tax refund against an outstanding demand for Assessment Year 2018-19. The court found that the adjustment was made without following the due process required under Section 245 of the Income Tax Act, 1961. Trent Ltd. was not given a hearing, and no formal order was passed before the adjustment was made. The company had submitted objections in December 2023, which were ignored by the tax authorities. Citing previous judgments, including Hindustan Unilever Ltd. vs. DCIT and Sulzer Pumps India Pvt. Ltd. vs. ACIT, the court reiterated that adjustments under Section 245 must adhere to principles of natural justice.
As a result, the court quashed the refund adjustment and directed the revenue authorities to deposit the amount in court within two weeks. The deposited amount will be held in a nationalized bank and will be subject to the final outcome of the reassessment process. The tax department was instructed to review Trent Ltd.’s objections, provide a hearing, and issue a reasoned order within two months. If no order is passed within this timeframe, Trent Ltd. may apply to withdraw the deposited amount with accrued interest. Additionally, the court directed the Assessing Officer to decide on Trent Ltd.’s pending stay application for AY 2018-19 within four weeks. The ruling underscores the necessity of procedural fairness before making refund adjustments under Section 245.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Heard learned counsel for the parties .
2. The Rule is made returnable immediately at the request of and with the consent of the learned counsel for the parties.
3. The Petitioner complains against the adjustment of refund of an amount of 4,91,45,369/- against the outstanding demand of assessment year 2018-2019 in the purported exercise of powers under Section 245 of the Income Tax Act, 1961 (“ the IT Act”).
4. An intimation proposing an adjustment of 2.82 crores and Rs.72,209/- was sent to the petitioner. However, after that, the petitioner was not granted a hearing, and no formal order was made under Section 245 of the IT Act. Instead, by communication dated 16 March 2024, the Petitioner was informed of the adjustment against the outstanding demand for assessment year 2018-2019. In our judgment, the procedure followed by the Respondents grossly violates the principles of natural justice and fair play.
5. The record shows that the Petitioner addressed communications dated 5 December 2023, 6 December 2023 and 7 December 2023 to the Respondents regarding objections to the proposed adjustments. There was no consideration of these objections. The petitioner was granted no opportunity of a hearing. No formal order was also made dealing with the petitioner’s objections. All this violates the principles of natural justice.
6. In Hindustan Unilever vs. Deputy Commissioner of Income-tax-1(1)1. The Coordinate Bench of this Court has held that the principles of natural justice must be followed before making any orders under Section 245 or making any adjustments under Section 245. We reiterated this position in Sulzer Pumps India Private Limited vs. Assistant Commissioner of Income-tax, Circle (15)(3)(2), Mumbai2 and the connected matters, disposed of on 20 January 2025.
7.In Sulzer Pumps India Private Limited (supra), we found fault with the revenue’s order of adjustment under Section 245 of the IT Act and directed the revenue to deposit the adjusted amount in this A similar course of action will have to be adopted in this case because the impugned adjustment was in gross breach of the principles of natural justice and fair play.
8. Accordingly, we quash the adjustments made in the purported exercise of powers under Section 245 of the IT Act and direct the Respondents to deposit an amount of 4,91,45,369/- in this Court within two weeks from today. The Registry should invest this amount in a nationalised bank and it will abide by the orders of the Respondents under Section 245 of the IT Act after giving reasonable opportunity of hearing to the Petitioner.
9. The Respondents must consider the Petitioner’s objections and afford the Petitioner an opportunity of A reasoned order must be made and communicated to the Petitioner. This exercise must be completed within two months from this order’s uploading date.
10. Suppose no orders are made within two In that case, the Petitioner is granted liberty to apply for withdrawal of the deposited amount together with interest, if any, that shall be accrued on such amount. Otherwise, the deposit will abide by the orders made by the Respondents under Section 245 of the IT Act.
11. The Petitioner’s stay application concerning assessment year 2018-2019 is pending before the assessing The same should be disposed of in accordance with the law within four weeks of today.
12.The Rule is made absolute in the above terms without any cost All concerned to act on an authenticated copy of this order.
Notes:
1[2015] 60 taxmann.com 326 (Bombay)
2Writ Petition No.4891 of 2024
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