The Oriental Insurance Co. Ltd. v. Deputy Commissioner of Income-tax & Anr
[Citation -2014-LL-1016-31]

Citation 2014-LL-1016-31
Appellant Name The Oriental Insurance Co. Ltd.
Respondent Name Deputy Commissioner of Income-tax & Anr
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 16/10/2014
Assessment Year 2013-14
Judgment View Judgment
Keyword Tags opportunity of being heard • adjustment of refund • discretionary power • outstanding demand • speaking order • demand of tax
Bot Summary: WP(C) 6172/2014 Page 1 of 4 b) A Writ of Mandamus or Writ, order or direction in the nature of Mandamus, or any other appropriate Writ, order of direction under Article 226/227 of the Constitution of India directing the Respondents to dispose off the petition u/s 220(6) filed by the Petitioner on 28.04.2014 by passing a speaking order either accepting / rejecting the prayers made therein after granting a proper opportunity of being heard to the Petitioner. Insofar as prayer is concerned the petition under Section 220(6) of the Income Tax Act, 1961 has already been decided by a speaking order dated 23.09.2014. With regard to prayer, he submits that the adjustment was made without giving an opportunity to the assessee as is the requirement under Section 245 of the said Act as interpreted by this court in Glaxo Smith Kline Asia Ltd v. CIT: 290 ITR 35. In our view, the power under section 245 of the Act, is a discretionary power given to each of the tax officers in WP(C) 6172/2014 Page 2 of 4 the higher echelons to set off the amount to be refunded or any part of that amount against the same, if any, remaining payable under this Act by the person to whom the refund is due. Thirdly, before invoking the power, the officer is expected to give an intimation in writing to the assessee to whom the refund is due informing him of the action proposed to be taken under this section. As already noticed, this discretionary power has to be exercised after giving an opportunity to the assessee of being heard preceded by an intimation to the assessee in writing of the action proposed to be taken under section 245. The aforesaid statement reflects the correct position in law as Section 245 mandates and envisages prior intimation to the assessee so that he/she can respond before any adjustment of refund is made towards the demand relating to any other assessment year.


IN HIGH COURT OF DELHI AT NEW DELHI Judgment delivered on: 16.10.2014 W.P.(C) 6172/2014 & CM 14938/2014 ORIENTAL INSURANCE CO. LTD. ..... Petitioner versus DEPUTY COMMISSIONER OF INCOME TAX & ANR. ..... Respondents Advocates who appeared in this case: For Petitioner : Mr M.S.Syali, Sr. Advocate with Mr Tarandeep Singh and Mr Mayank Nagi. For Respondents : Ms Suruchi Aggarwal. CORAM: HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE SIDDHARTH MRIDUL JUDGMENT BADAR DURREZ AHMED, J (ORAL) 1. In this writ petition following prayers have been made:- a) Writ of Certiorari or Writ, order or direction in nature of Certiorari, or any other appropriate Writ, order of direction under Article 226/227 of Constitution of India quashing adjustment of refund of Rs 89,16,28,190/- pertaining to AY 2013-14 against outstanding penalty demand of AY 2005-06 and directing Respondents to grant said refund to Petitioner. WP(C) 6172/2014 Page 1 of 4 b) Writ of Mandamus or Writ, order or direction in nature of Mandamus, or any other appropriate Writ, order of direction under Article 226/227 of Constitution of India directing Respondents to dispose off petition u/s 220(6) filed by Petitioner on 28.04.2014 by passing speaking order either accepting / rejecting prayers made therein after granting proper opportunity of being heard to Petitioner. 2. Insofar as prayer (b) is concerned petition under Section 220(6) of Income Tax Act, 1961 has already been decided by speaking order dated 23.09.2014. Mr Syali, learned senior counsel appearing for petitioner, states that in view of this development, prayer (b) does not survive. He will take his independent remedy under Section 264 of said Act. With regard to prayer (a), he submits that adjustment was made without giving opportunity to assessee as is requirement under Section 245 of said Act as interpreted by this court in Glaxo Smith Kline Asia (P.) Ltd v. CIT: 290 ITR 35 (Del). same sentiment is reiterated in Genpact India v. ACIT: 205 Taxman 51 (Del) and Court on its Own Motion v. CIT: 352 ITR 273 (Del). 3. In Glaxo Smith Kline Asia (P.) Ltd (supra) Division Bench of this court held as under:- 25. In our view, power under section 245 of Act, is discretionary power given to each of tax officers in WP(C) 6172/2014 Page 2 of 4 higher echelons to set off amount to be refunded or any part of that amount against same, if any, remaining payable under this Act by person to whom refund is due. That this power is discretionary and not mandatory is indicated by word may . Secondly, set off is in lieu of payment of refund. Thirdly, before invoking power, officer is expected to give intimation in writing to assessee to whom refund is due informing him of action proposed to be taken under this section. 26. xxxx xxxx xxxx xxxx 27. As already noticed, this discretionary power has to be exercised after giving opportunity to assessee of being heard preceded by intimation to assessee in writing of action proposed to be taken under section 245. further implicit requirement is that revenue will have to be satisfied that assessee will not be in position to satisfy demand of tax and that but for set off, outstanding tax amount cannot be recovered at all. 4. In Genpact India (supra) this court held as under:- 3. It is not in dispute that no such notice under Section 245 of Act was issued. It was also conceded by learned counsel for respondent at time of hearing that procedure prescribed under Section 245 of Act, namely, advance intimation and opportunity of hearing, is mandatory. It, therefore, clearly follows that impugned adjustment was made in violation of provisions of Section 245 of Act and this adjustment is liable to be quashed on this ground itself. 5. In Court on its Own Motion (supra) this court held asunder:- 20 In one of paragraphs of counter affidavit, respondents have stated as under: Accordingly, it was again reiterated that provisions of section 245 of I.T. Act, 1961 must be followed and written intimation must be sent to assessees before adjusting refund of outstanding demand and any lapse WP(C) 6172/2014 Page 3 of 4 in this regard shall be viewed seriously. CCsIT/DGsIT/CsIT were direct to ensure compliance of aforesaid direction. Thus, enough safeguards have been provided not only in I.T. Act, 1961 but also in Instructions issued by CBDT (emphasis supplied) 21. aforesaid statement reflects correct position in law as Section 245 mandates and envisages prior intimation to assessee so that he/she can respond before any adjustment of refund is made towards demand relating to any other assessment year. Thus, opportunity of response/reply should be given and after considering stand and plea of assessee, justified and valid order or direction for adjustment of refund can be made. Section postulates two stage action; prior intimation and then subsequent action when warranted and necessary for adjustments of refund towards arrears. 6. It is evident from record of case that on same date on which intimation was issued adjustment was made simultaneously. This is contrary to spirit of provisions of Section 245 as interpreted by this court in above decisions inasmuch as no opportunity of hearing was given to assessee before adjustment was made. Therefore, on this ground alone adjustment order would have to be quashed. It is so directed. writ petition is allowed to aforesaid extent. BADAR DURREZ AHMED, J SIDDHARTH MRIDUL, J * OCTOBER 16, 2014 /mk * Corrected vide order dated 07.11.2014 passed in WP(C) 6172/2014. WP(C) 6172/2014 Page 4 of 4 Oriental Insurance Co. Ltd. v. Deputy Commissioner of Income-tax & Anr
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