SHIV NARAIN SHIVHARE VS ASSISTANT COMMISSIONER OF INCOME-TAX (INVESTIGATION), 1998 PTD-MADHYA-PRADESH-HIGH-COURT-INDIA 3076 (1995)

Income-tax---

----Refund---Rectification of mistakes---Notice---Set-off of refund against amounts due from assessee---Rectification reducing refund---Notice must be given to assessee before passing orders under Ss. 154 & 245---Indian Income Tax Act, 1961, Ss. 154 & 245.

The assessee filed a writ petition claiming that refunds due to him had not been paid in spite of his applications. It was contended on behalf of the Revenue Authorities that the assessment order had been rectified and the refund was refused and that a refund had been granted on June 9, 1992, and adjusted against outstanding demands of penalty:

Held, that no notice as required under section 154(3) as well as under section 245 of the Income Tax Act, 1961, were served on the petitioner. The income-tax Authorities had to refund the amount due forthwith. If they wanted to set-off the refund it was open to them to proceed in accordance with law. The petitioner was also entitled to interest for the illegally withheld amount according to law.

P.N. Gupta for Petitioner.

R.D. Jain for Respondents.

JUDGMENT

A.K. MATHUR, ACTG. C. J.---The petitioner, in this writ petition, has prayed that the respondents may be directed to refund the amount of Rs.1,14,886 with interest.

The petitioner is an assessee and he was assessed for tax liability by the respondent to the tune of Rs.1,45,710 vide assessment order, dated March 27, 1989. The petitioner, being aggrieved against this order, filed an appeal before the Commissioner of Income-tax (Appeals), Bhopal, and the Commissioner by his order, dated March 7, 1990, directed the Assessing officer to allow the claim of interest under section 67(3) of the Income Tax Act, 1961 (for short, "the Act"). In Pursuance of the aforesaid order the respondent reassessed the income of the petitioner to the tune of Rs.1,04,070 by the assessment order dated April 11, 1991. The petitioner, in compliance with that order, deposited Rs.50,943 by the challan, dated December 13, 1989, and Rs.72,000 by the challan, dated December 20, 1989. The petitioner also deposited a sum of Rs.5,000 by the challan, dated December 6, 1990. The respondent by its order waived the interest under section 139(8) of the Act for the assessment year 1982-83 to the tune of Rs.14,330, a copy of which is placed on record as Annexure "P-V-C". Initially, the petitioner was assessed at Rs.1,45,710, whereas this was reduced by the appellate authority vide Annexure "P/III" and he was reassessed to the tune of Rs.1,04,070. The respondent further waived interest to the tune of Rs.14,330 by the order dated nil, but served on the petitioner on November 30, 1993. But, even after reassessment of the income, no demand notice was ever issued to the petitioner and the petitioner was not refunded the excess amount paid by him. Therefore, the petitioner has submitted that he is entitled to refund of Rs.98,451. In addition to the principal amount of refund, i.e., Rs.98,451, he is entitled to interest under section 244(1-A) of the Act with effect from February 1, 1990, to April 11, 1991, which according to the petitioner, cones to Rs.16,435. Thus, the petitioner claims a refund of Rs.1,14,886. The petitioner submitted an application to the respondent for refund of the amount of Rs. 90,797. The petitioner submitted that the respondent is under duty to refund this amount under section 240 of the Act without the petitioner raising any demand. Again on August 30, 1993, the petitioner made a demand on the respondent, vide Annexure "VI-A" to refund the total amount including Rs.5,000 plus interest thereon, but without any result. Therefore, the petitioner is forced to file this petition.

A reply has been filed by the respondent and therein, the respondent has taken the position that the assessment was revise under section 155 for adopting the correct share income from the firm, Shivnarain Ashok Kumar & Co. and the total income of the assessee was determined at Rs.1,48,270 as per I.T.N.S. No.150 dated May 7, 1992, which was subsequently revised under section 154 on August 6, 1992, for allowing interest under section 244(1-A) of the act as the same was not allowed in the revision order dated May 7, 1992. A refund of Rs.51,015 was granted to the assessee on June 9, 1992; and adjusted against the outstanding demand of penalty under section 271(1)(c) for the year 1975-76 and refund of Rs.9,562 was adjusted in two parts, namely, Rs.8,725 for the year 1988-89 and Rs.837 for the year 1975-76. The petitioner then filed a rejoinder and submitted that the averments made in paragraph 4 of the return filed by the respondent are absolutely incorrect. It is submitted that no refund was granted to the petitioner on June 9, 1992. It was submitted that no adjustment of refund against outstanding interest could be made without service of a proper notice under the provisions of section 245 of the Act and without giving proper opportunity of hearing to the petitioner. The petitioner in his additional rejoinder has also pointed out that no notice under subsection (3) of section 154 to show cause against its intention of revising the assessment was given to the petitioner. He submitted that notice under section 154(3) was a condition precedent, but no such notice was given to the petitioner by the Assessing Officer.

Shri Jain, learned counsel for the Revenue, has not been able to point out how the assessment which had already become final after the appellate authority had passed the order Annexure "P/3" on April 11, 1991, could have been revised. He has not been able to point out whether any notice under section 154(3) read with section 245 was ever served to the petitioner or not. Likewise, section 45 also states that set-off could not be made unless the party is given any notice. From the return tiled, it appears that no notice whatsoever was given to the petitioner. Therefore, the so-called order passed on June 9, 1992, appears to be without jurisdiction as no notice was given to the petitioner-assessee nor Shri Jain could point out that any notice was given before proceedings were taken up. This is in breach of principles of natural justice as no notice as required under section 154(3) as well as under section 245 of the act were served on the petitioner. Hence, the respondents are directed to refund the amount due forthwith. If they want to make recourse of set-off, it is open to them to proceed in accordance with law. The petitioner shall also be entitled to interest for the illegally withheld amount, according to law. The petition is allowed.

M.B.A./1575/FC Petition allowed.