TATA COMMUNICATIONS LIMITED vs. DEPUTY COMMISSIONER OF INCOME TAX 1(3)(2) AND 3 ORS

The Petitioner has approached this Court by way of this Writ Petition in respect of the refusal of the Respondent-Deputy Commissioner of Income-Tax to refund the excess paid as income tax. During the pendency of the Petition, certain communications have been issued by the Respondent-Deputy Commissioner of Income- tax, which by amending the Petition, have been challenged.

The Petitioner is a Company incorporated under provisions of Companies Act, 1956 and carries on the business of providing telecommunication services. The present Petition concerns Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 03:34:49

The representative of the Petitioner visited the office of the Deputy Commissioner of Income-tax to inquire about the processing the return, the Petitioner was informed that the same would be processed within the time limit given by the Court and as there were some technical issues due to which refunds due to the Petitioner could not be processed in time. The Respondent No.1- Deputy Commissioner on 8 July 2019 served a notice of demand under Section 156 of the Income Tax Act determining the refund at Rs.147,22,04,945/- including interest in respect of Assessment Year 2016-17. Since the Respondents did not issue the refund within four weeks under the earlier order passed by this Court, the Petitioner filed the present Petition on 18 July 2019 seeking a refund of Rs.147,22,04,945/-. Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 03:34:49

This Writ Petition came up on board on 22 July 2019 before the Division Bench. The following order was passed : ‘ Learned Counsel Mr. Suresh Kumar appeared for the Respondents on advance copy. He stated on instructions that pursuant to the order dated 10th June, 2019, the Petitioner’s refund arising out of the return of income for the assessment year 2016-17 shall be paid over within a couple of days. Stand over to 29th July, 2019.’ After that, the Petition appeared on board on 29 July 2019, and it was adjourned by recording as under : ‘ Despite earlier statement, so far, refund has not been credited in the account of the Petitioner. Shri Rahul Singhania, Deputy Commissioner of Income Tax 1(3) (2), who is present before the Court, instructed learned Counsel Mr. Suresh Kumar for the Income Tax Department that the refund shall be credited in the account of the Petitioner latest by 2 nd August, 2019. Stand over to 5/8/2019.' On 5 August 2019 further order was passed as under : ‘1. Learned Counsel for the petitioner placed on record a communication dated 2.8.2019 received by the petitioner from the Deputy Commissioner of Income Tax giving a break-up of the refund of sum of Rs.89,14,46,149/-. The said letter is taken on record.

Learned Counsel for the parties agree that a sum of Rs.89,14,46,149/- has been credited in the account of the petitioner by way of refund. However, the learned Counsel for the petitioner submitted that adjustment of a sum of Rs.58,07,58,796/- for alleged Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 03:34:49

S.O. to 19.8.2019.’

On 5 August 2019, the Petitioner received an intimation dated 31 July 2019 under Section 245 of the Act. The above intimation called upon the Petitioner to respond to the notice of intimation for proposed adjustment within 30 days. It further informed the Petitioner that if no action is taken in the above period, the refund for the subject Assessment Year would be adjusted against the demand for Assessment Year 2013-14. 7. Before the Petitioner could respond to the above communication, on 5 August 2019 itself the Petitioner received another communication dated 2 August 2019 from the Assessing Officer – Deputy Commissioner of Income Tax intimating to the Petitioner that out of the refund of Rs.147,22,06,945/- determined by him, an demand amount of Rs.58,07,58,796/- (outstanding demand of Rs.48,39,96,245/- for A.Y 2013-14 along with interest thereon) is being adjusted. The balance amount of Rs.89.14 crores was the net refund handed over to the Petitioner, subsequent to the filing by this Petition. This fact was pointed out to the Court on 5 August 2019. 8. The Petitioner amended the Petition and sought the Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 03:34:49

We have heard Mr.Mistri, learned Senior Advocate appearing on behalf of the Petitioner and Mr.Suresh Kumar, learned counsel for Respondents.

The Petitioner has raised various contentions in support of its claim. The Petitioner contends that in the interim orders passed in this Petition, commitments of the Respondents regarding refund due to the Petitioner have been recorded, which Respondents must honour. The Petitioner contends that since the statement recorded in the order dated 22 July 2019 was regarding the refund arising out of the return of income, the same being Rs.147,22,04945 ought to have been paid. It is further contended that the adjustment of Rs.58,07,58,796/- is contrary to this statement. The Petitioner Commissioner of Income-tax-1(1)

The Petitioner counters this submission contending: a) The letter dated 19 February 2018 cannot be construed as a permission to adjust the refund in all circumstances; b) an assessee cannot waive mandatory provisions of Section 245 of the Act regarding prior intimation.

Admittedly no intimation was given to the petitioner prior to adjusting of the refund. The first controversy in this Petition thus mainly revolves around the purport of the letter dated 19 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 03:34:49

In the case of Hindustan Unilever Ltd., the Division Bench of this Court observed that Section 245 empower the revenue to adjust refunds due to an assessee against any tax payable, but the exercise of this power, from the use of the word “may" employed therein, as is evident, is discretionary. The Division Bench observed that the notice/intimation enables a party to point out not only factual errors but also point out why such a power should not be exercised in the facts, such as the demand sought to be adjusted is still a subject -matter of appeal and the issue is covered by decisions of higher forums, etc. The observation of the Division Bench is quoted below. ‘Section 245 empowers the revenue to adjust refunds due to an assessee against any tax payable (of the same character as the refund due) by him. The Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 03:34:49

We now turn to examine the letter dated 19 February 2018. This letter was sent almost one and a half years prior to adjustment of the refund. The subject of the letter dated 19 February 2018 is a request for pending refunds. The Petitioner in the letter has listed the details of the refunds, which, according to the Petitioner, are due are aggregating to Rs.860 Crores. The Petitioner explained its claim of the Assessment Years 1990-91, 1994-95, 2001-02, 2002- 03, 2009-10, 2015-16, 2016-17, 2017-18. The Petitioner claims these refunds are due under orders of the Tribunal, Appellate orders, processing of intimation under section 143(1) of the Act. After giving these details, the Petitioner has stated as under. ‘……. It may kindly be noted that all the above-referred refunds will be aggregating to about Rs.860 crs. We have also agreed with the AO as well as Additional Commissioner of adjustment of our outstanding demand of about Rs.82 crs. pertaining Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 03:34:49

Therefore since no prior notice was issued to the Petitioner before adjusting the refund, there was a breach of the requirement under section 245. The letter dated 19 February 2018 cannot be made the basis of deviating from the mandate under section 245. The sequitur is that the impugned communication adjusting the amount of Rs.58,07,58,796 /- must be quashed and set aside. So also the notice dated 31 July 2019 under Section 245 of the Act is set aside with liberty to the Deputy Commissioner of Income Tax to issue a fresh notice under Section 245 of the Act.

Because of this conclusion, it is unnecessary for us to decide the other arguments of the Petitioner referred to earlier. We also keep the right of the Respondents to take further steps as per law, and the Petitioner’s right to defend the same and take steps in law open.

Accordingly, the Petition succeeds.

The Rule is made absolute in terms of above. No costs. (NITIN JAMDAR, J.) (M.S.SANKLECHA, J.) Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 03:34:49 Powered by TCPDF (www.tcpdf.org)