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Bharat Petroleum Corporation Limited v/s Assistant Director of Income-tax, CPC, Bangalore & Others

    Writ Petition No. 2494 of 2021

    Decided On, 16 November 2021

    At, High Court of Judicature at Bombay

    By, THE HONOURABLE MR. JUSTICE K.R. SHRIRAM & THE HONOURABLE MR. JUSTICE AMIT B. BORKAR

    For the Appellant: J.D. Mistri, Senior Advocate i/b Atul K. Jasani, Advocate. For the Respondents: Suresh Kumar, Advocate.



Judgment Text

P. C.:-

1. Petitioner Bharat Petroleum Corporation Limited (hereinafter referred to as 'BPCL') has raised a grievance that, admittedly, it is entitled to a refund of Rs.306,70,93,992/- from the Income Tax department. The fact that Petitioner is entitled to this refund of Rs.306,70,93,992/- is an admitted position. Respondents has not refunded this amount. According to Respondent, it is entitled to adjust this refund amount against the demand that it has against Petitioner. According to Petitioner, the only demand that was outstanding in their case was for AY 2015-16, AY 2016- 17 and AY 2017-18 where a total demand of Rs.620,17,00,418/- has been made. Petitioner denies that any amount is payable by Petitioner to Respondent. Mr. Mistry states that in any event, Respondent was not entitled to adjust the admitted refund amount of Rs.306,70,93,992/- because Respondent has not given the mandatory intimation required under Section 245 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') before making any such adjustment.

2. The issues which can be narrowed down are (i) whether Respondent gave any such intimation required under Section 245 of the Act, (ii) if such intimation has not been given, the effect thereof and (iii) the consequence of the demand outstanding on the refund to be made to Petitioner.

As to Issue No.(i), Petitioner has made an averment in the Petition that no intimation under Section 245 of the Act was given before making any adjustment. In its Affidavit-in-Reply, Respondent No.1 states that the said averment of Petitioner relates to Respondent No.2 and it is for Respondent No.2 to respond. Respondent No.1 therefore does not deny the averment of Petitioner that no such notice was issued. Respondent No.2, in its Affidavit-in-Reply, states that notices under Section 245 of the Act have to be issued by Central Processing Centre ('CPC') to Petitioner proposing the adjustment of demand, the notices under Section 245 are automated and computer generated notices and in Petitioner's case, notices under Section 245 of the Act were issued on 01/01/2021 with reminder on 17/01/2021 for compliance but Petitioner did not comply on the ITBA portal and in the mode decided by CPC. Accordingly, CPC proceeded to adjust the outstanding demand.

3. If one considers this notice dated 01/01/2021 and reminder dated 17/01/2021, it does not relate to any of the 15 refunds totalling to Rs.306,70,93,992/- mentioned by Petitioner in the Petition. These notices issued by Respondent pertain to Kochi Refineries Limited before Kochi Refineries Limited was merged with Petitioner. Even the outstanding demand table annexed to the said notice dated 01/01/2021 does not pertain to any of the 15 refunds totalling to Rs.306,70,93,992/- to be given to Petitioner as stated in the Petition. Therefore, our answer to Issue No.(i) is in negative, the notice as required under Section 245 of the Act has not been given.

4. As regards the Issue No.(ii) the effect of failure to give such notice, it is settled law that non-giving of intimation in writing prior to setting off of the amount payable against the amount to be refunded is fatal. This Court, in Jet Privilege Private Limited Vs. Deputy Commissioner of Income Tax-5(2)(1), Mumbai & Ors. [Oral Judgment dated 09/08/2021 in Writ Petition No.40 of 2021], has held that the requirement of prior intimation under Section 245 of the Act was a mandatory requirement and failure to comply with this mandatory requirement of prior intimation would make the entire adjustment as wholly illegal and therefore Respondents could not have made the adjustment as they wanted to. Paragraphs 7, 8 and 9 of Jet Privilege Private Limited (supra) read as under:

"7. For ease of reference, we shall quote Section 245 of the Act, which read as under;

245. Set off of refunds against tax remaining payable 2 Where under any of the provisions of this Act, a refund is found to be due to any person, the [Assessing] Officer, Deputy Commissioner (Appeals)], Commissioner (Appeals)] or Chief Commissioner or Commissioner], as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section.

8. Mere perusal of the section makes it clear that the officers mentioned in the section, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under the Act by the assessee to whom the refund is due. The officer may set off the amount to be refunded or any part of that amount only after giving an intimation in writing to the assessee of the action that he proposed to take under this section. Therefore, it clearly requires the intimation to be given prior to the officer sets off the amount payable against the amount to be refunded. It can be neither simultaneous nor subsequent.

We find support for this view in Suresh B. Jain Vs. A.N. Shaikh, Sixteenth Income-tax Officer [[1987] 165 ITR 151 (Bom.)], confirmed by the Division Bench of this court in A.N. Shaikh, Sixteenth Incometax Officer Vs. Suresh B. Jain [[1987] 165 ITR 86 (Bom.)] and in Hindustan Unilever Limited Vs. Deputy Commissioner of Income-tax-1 (1) [[2015] 377 ITR 281 (Bom.)] relied upon by Mr. Pardiwalla.

9. The fact that respondent has not followed the mandatory prior requirement of intimation under Section 245 of the Act would make the adjustment wholly illegal and therefore, respondent was clearly in error in not refunding the amount."

5. In the circumstances, as a consequence, answering Issue No. (iii), Petitioner will be entitled to the refund of the entire amount of Rs.306,70,93,992/- together with accumulated interest, if any, in accordance with law. This refund shall be given within 6 weeks from today.

6. In any event, on the demand of Respondent in the cases outstanding against Petitioner, according to Petitioner, only cases for 3 years, i.e., AY 2015-16, AY 2016-17 and AY 2017-18 are pending where a demand of Rs.620,17,00,418/- is pending. Petitioner has stated that it has paid 20% of the demand for grant of stay and that application is pending in this Court.

7. As per the Office Memorandum (F No.404/72/93 - ITCC) dated 29/02/2015, amended by another Office Memorandum dated 25/08/2017, the AO shall grant stay of demand where the outstanding demand is disputed on Assessee paying 20% of the disputed demand. Therefore, there is a stay of demand in force. As held by this Court in Hindustan Unilever Limited Vs. Deputy Commissioner of Income-tax- 1(1)5, the effect of this deposit would mean that the time to make the payment stands extended and Petitioner is not deemed to be an Assessee in default for the reco

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very provisions to be set in motion. 8. As regards the other issue in the Petition, viz., refund of Rs.6,50,10,650/- pertaining to Kochi Refineries Limited, Respondent No.2 is directed to give a personal hearing to Petitioner and after hearing Petitioner and considering the communications etc. / written submissions to be filed by Petitioner, may pass such orders in accordance with law. If Respondent No.2 is not the competent authority to grant personal hearing and pass order on the refund application of Petitioner pertaining to Kochi Refineries Limited, Respondent No.2 shall forward the file to the appropriate authority under advise to Petitioner and such appropriate authority will comply with the directions as mentioned hereinabove. 9. Petition disposed.
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