TSI Business Parks Hyderabad Pvt. Ltd. Vs Assistant Director of Income Tax (Telangana High Court)
The Telangana High Court has delivered a judgment against the Income Tax Department in two writ petitions filed by TSI Business Parks Hyderabad Pvt. Ltd., an IT park developer. The cases, W.P. No. 19243 of 2020 and W.P. No. 19259 of 2020, involved disputes over the adjustment of income tax refunds due to the company against alleged outstanding tax demands for assessment years 2017-18 and 2008-09. The court found the actions of the Income Tax Department to be illegal and in violation of Section 245 of the Income Tax Act, 1961, and binding instructions issued by the Central Board of Direct Taxes (CBDT).
In W.P. No. 19243 of 2020, the petitioner challenged the adjustment of its refund for Assessment Year 2018-19 against demands for Assessment Years 2017-18 and 2008-09. The court noted that the adjustment of ₹1,86,38,333 was made on April 15, 2020, without any prior written intimation to the petitioner as mandated by Section 245 of the Act. This procedural lapse was deemed a violation of the assessee’s right to raise objections. The court cited the Andhra Pradesh High Court’s decision in Japson Estates (P) Ltd. vs. Dy. Commissioner of Income Tax [(2006) 285 I.T.R. 40 (A.P.) (D.B.)], which held that prior intimation is a necessary prerequisite for adjusting refunds, and a post-facto intimation is invalid.
Furthermore, the court observed that the Assistant Commissioner of Income Tax had already granted a stay on the demand for Assessment Year 2017-18 subject to the petitioner depositing 20% of the disputed amount. The petitioner had deposited ₹80,00,000 and requested the adjustment of the remaining 10% (₹80,31,593) from the refund of Assessment Year 2018-19. Instead, the department adjusted a larger sum of ₹1,30,45,813 towards the 2017-18 demand and ₹55,92,520 against an alleged demand for 2008-09, for which the petitioner had already claimed payment. The court also referred to a CBDT Office Memorandum clarifying that while granting a stay, the Assessing Officer can reserve the right to adjust refunds against the demand to the extent required for the stay, subject to Section 245. The excessive adjustment and the lack of prior intimation were held to be illegal.
In W.P. No. 19259 of 2020, the petitioner contested the adjustment of its refund for Assessment Year 2019-20 against the outstanding demand for Assessment Year 2017-18, especially after a stay order had been granted on July 23, 2020. The department had issued a notice under Section 245 on July 8, 2020, proposing the adjustment, but proceeded to adjust the entire refund of ₹6,25,70,390 on July 24, 2020, even before the 30-day period for the petitioner to respond had expired and despite objections already filed by the petitioner. The court relied on the Delhi High Court’s judgment in Maruti Suzuki India Ltd. vs. D.C.I.T. [(2011) 347 I.T.R. 43 (DELHI)], which stated that it is improper for the revenue to recover money through refund adjustments once a stay on the demand has been granted.
Concluding both cases, the Telangana High Court allowed the writ petitions with costs. The court directed the Income Tax Department to refund ₹1,06,06,740 for Assessment Year 2018-19 and ₹6,25,70,390 for Assessment Year 2019-20 (after deducting ₹54.78 lakhs already refunded for the 2008-09 demand), along with interest at 15% per annum from the dates of adjustment until the date of payment. The refunds are to be made within four weeks from the receipt of the court order.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
