Facts of the Case

The petitioner, BT Global Communications India Private Limited, filed two writ petitions challenging actions of the Income Tax Department regarding adjustment of refunds.

  • In W.P.(C) 5415/2020, the petitioner challenged an order dated 03 July 2020 passed under Section 143(1) of the Income Tax Act, 1961, whereby refund for Assessment Year 2019–20 amounting to ₹11,23,33,263/- was adjusted against alleged pending tax demands for earlier assessment years (2011–12 and 2013–14).
  • In W.P.(C) 5414/2020, the petitioner challenged the notice/intimation dated 09 May 2020 issued under Section 245, proposing adjustment of refund for AY 2019–20 against demands for AYs 2014–15, 2015–16, and 2016–17.

The petitioner contended that objections were duly filed both before the Assessing Officer and through the Centralized Processing Centre (CPC), but the same were not considered before passing the impugned order.

Issues Involved

  1. Whether adjustment of refund under Sections 143(1) and 245 without considering objections violates principles of natural justice.
  2. Whether the Assessing Officer can proceed with adjustment despite pending objections filed by the assessee.
  3. Whether the impugned order is liable to be set aside for non-consideration of objections.

Petitioner’s Arguments

  • The impugned order dated 03 July 2020 was passed without considering objections submitted on 29 May 2020.
  • Objections were filed both:
    • In writing before the Assessing Officer, and
    • Online through the CPC portal.
  • The action of adjusting refunds without addressing objections amounts to violation of principles of natural justice.
  • The adjustment of a substantial refund amount without due consideration is arbitrary and unlawful.

Respondent’s Arguments

  • The Revenue contended that the system reflected no response from the petitioner at the time of processing the adjustment.
  • The adjustment was carried out as per statutory provisions under Section 143(1) and Section 245 of the Income Tax Act.

Court’s Findings / Order

The Delhi High Court observed:

  • It was admitted that objections had in fact been filed by the petitioner prior to passing of the impugned order.
  • The impugned order dated 03 July 2020 was passed without considering those objections, thereby violating principles of natural justice.

Order:

  • The impugned order was set aside.
  • The Assessing Officer was directed to:
    • Consider the petitioner’s objections afresh,
    • Pass a reasoned order within six weeks,
    • Provide an opportunity of hearing to the petitioner.

Important Clarification by the Court

  • If objections are not decided within the stipulated period, the petitioner shall be entitled to:
    • Immediate release of refund,
    • Along with applicable interest.
  • All rights and contentions of both parties were kept open.

Sections Involved

  • Section 143(1), Income Tax Act, 1961 – Processing of returns
  • Section 245, Income Tax Act, 1961 – Set-off of refunds against tax demand

 Link to download the order - https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:3951-DB/MMH01092020CW54142020_144535.pdf

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