Hon'ble Dr. Satish Chandra,J.
We heard Sri Rakesh Ranjan, learned Senior Advocate assisted by Sri Suyash Agrawal, learned counsel for the petitioners and Sri Shambhoo Chopra, learned counsel for the department.
From the record, it transpires that a search under Section-132 of the Income Tax Act was conducted at the residential and business premises of the petitioner on 23.12.2002. Pursuant to the materials seized in the course of search and seizure operation, block assessment was completed under Section-158 BC by an order dated 31.12.2004. Based on this assessment proceedings, a demand was raised against the petitioner pursuant to which the petitioner deposited a sum of Rs. 14 lacs odd. The petitioner preferred an appeal which was allowed by the Commissioner, Income Tax, Meerut by its order dated 10.07.2009 and the assessment order passed under Section-158BC was modified. Based on order of the appellate authority, the petitioner applied for refund under Section-245 of the Act. This application remained pending and accordingly, the present writ petition was filed praying for a writ of mandamus commanding the Assistant Commissioner of Income tax, Circle-2, Meerut, respondent no.1 to refund the amount of tax alongwith interest.
A counter affidavit has been filed by the Income-tax department indicating that the tax amount has been adjusted against the dues of one firm known as "Jeet Construction Company" in which the petitioner is one of the partners and consequently the petitioner was not entitled for refund of the amount.
In rejoinder affidavit, the petitioner has filed an order of Income-Tax Tribunal indicating therein that the appeal of Jeet Construction Company has been allowed in part by the Tribunal vide its order dated 31.10.2011 setting-aside the demand raised against the said firm.
The learned counsel for the department submits that an appeal has been filed by the Income-tax department under Section-260A before the High Court praying for quashing the order of the Tribunal by which the appeal of the Jeet Construction Company was allowed and that the department has also filed an appeal before the Tribunal against the appellate order allowing the appeal of the petitioner which is pending consideration.
Section-245 of the Income-tax Act provides as under:-
245. 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 Commi], 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.
A perusal of the aforesaid provision indicates that the authority is entitled to set off the refund against the dues of the same person.
In our opinion, dues of the firm or a company in which the petitioner is a partner could not be recovered/set off. Consequently, the action of the respondents in adjusting the dues of the petitioner against another firm namely M/s. Jeet Construction Company, in which the petitioner happens to be a partner, was wholly illegal and without jurisdiction. In any case, we find that the appeal of M/s. Jeet Construction Company has been allowed and the demand created against the said firm has been set-aside.
In view of the aforesaid, there is no justification for the Income-tax authority to retain this amount any further. The contention of the respondents that they have preferred an appeal which is pending consideration, has no value in as much as there is nothing on record to indicate that the order of the lower authority has been stayed in the appeal. Nothing has been brought on record to indicate that the department has filed an application for stay of the order by which the demand has been set-aside. Further, we of the view that once an order of demand has been set-aside by a superior authority, the department is duty bound to refund the amount under Section-245 and there is no justification to retain the same.
In M/S Usha Polytex Ltd. Vs. Chief Commissioner of Income Tax and others in Writ (Tax) No. 433 of 2007 decided on 04.03.2013, it was held that there is no provision which authorises the Income Tax authorities to set off the refund of a person against the dues of another person.
In Writ Petition No. 296 of 2010, the ornaments of the wife of the petitioner in Writ Petition No. 295 of 2010 was seized. In appeal, C.I.T. (A) has already set-aside the assessment order in part. The jewellry was retained on the ground that the tax is due agasint M/s. Jeet Construction Company where her husband is a partner. In these circumstances, we are of the view that the stand taken by the department in retaining the jewelry and not refunding the amount is patently illegal.
Consequently, for the reasons aforesaid, both the writ petitions are allowed. A writ of mandamus is issued directing the respondent no.1 to refund the amount as per law within a period of two weeks from the date of production of certified copy of the order. We further direct the same respondent to return the jewelry of the petitioner in Writ Petition No. 296 of 2010 within the same period from the date of production of certified copy of this order.
In the circumstances of the case, since the amount has been retained illegally, without any jurisdiction, we impose a cost of Rs. 50,000/- which shall be paid by the Income-Tax Department to the petitioners within the same period. It would be open to the department to recover the cost from the erring officials.
Order Date :- 23.7.2014 pp (Dr. Satish Chandra,J.) (Tarun Agarwala,J.)