M/s. Height Insurance Services Ltd. vs Dy. Commissioner of Income Tax and Others

Sanjib Banerjee, J.—The writ petitioner-assessee complains of a two-fold violation of the provisions of the Income Tax Act, 1961 in the assessing officer having adjusted the refund due to the assessee in respect of another assessment year for a claim relating to a previous assessment year and in the assessing officer attaching two bank accounts of the assessee without forwarding a copy of the relevant notice u/s 226(3) of the Act to the assessee. Following an assessment order made on October 31, 2011, the assessing officer found that the short-fall in income tax was to the extent of about Rs.20 crore. The assessee has preferred an appeal within the statutory period and the same is pending. It appears that penalty was also sought to be levied on the assessee for the short-fall in the income tax. In respect of such demand on account of penalty, the assessee has applied u/s 220(6) of the Act for stay of the penalty proceedings. No application has been made u/s 220(6) of the Act in respect of the primary claim on account of income tax due for the relevant assessment year.

The present grievance of the assessee is that the refund due to the assessee for the assessment year 2009-10 to the extent of about Rs. 14 crore has been adjusted by a notice dated March 20, 2012 though it appears from the relevant document under Form-26 AS that the adjustment was, in fact, made on December 19, 2011. The assessee says that section 245 of the Act mandates a prior notice to be issued to the assessee to allow the assessee an opportunity of protesting the proposed action to adjust a refund due on account of an assessment year for the claim relating to a different period. The assessee says that in the assessing officer having appropriated the amount on account of refund against the claim prior to issuance of such notice, there has been an infraction of the relevant provision. The other grievance pertains to the notices sent to the two bankers of the assessee for the adjustment of the balance between the enhanced claim for the relevant assessment year and the amount adjusted against the refund due for the assessment year 2009-10. The assessee says that it is evident that no notice was issued to the assessee in terms of clause (iii) of sub-section (3) of section 226 of the Act. The assessee refers to clause (x) of the relevant sub-section to show that it is a statutory precondition for such notice to be issued and for the noticee having an opportunity to contest the notice.

It does not appear, on a reading of clause (x) of the relevant sub-section that an assessee has a right of recourse against a notice issued u/s 226(3) of the Act. Indeed, the operative words in the relevant clause are "the person to whom a notice under this sub-section is sent." Such expression has, necessarily, to imply the creditor of the assessee or any person who holds money to the account of the assessee which the department seeks to attach or obtain. Such expression cannot mean the assessee. The section uses the two expressions, "the person to whom a notice under this sub-section is sent" and "assessee" to indicate the distinction between the two persons and an assessee cannot be heard to complain that upon the notice under Clause (iii) of sub-section (3) not allegedly having been issued to the assessee, a valuable right of the assessee under clause (x) of the relevant sub-section has been lost.

There does not appear to be any valuable right of the assessee which has been taken away in the assessee not having allegedly been given simultaneous notice by the assessing officer u/s 226(3)(iii) of the Act.

As far as the ground urged u/s 245 of the Act is concerned, it appears that prior to the institution of the present proceedings, by a letter dated March 30, 2012, issued by the assessee shortly after coming to know from its bankers that its bank accounts had been attached to the extent of the short-fall, the assessee had represented to the department that the department had already adjusted a sum in excess of Rs. 14 crore on account of the refund due to the assessee for the assessment year 2009-10 and that there was a further substantial amount available with the department on account of the refund due to the assessee for the following assessment year which could be withheld, but the bank accounts should be unfrozen. In making such representation, the assessee accepted the adjustment made by the department in respect of the refund due on account of the assessment, year 2009-10 and is now precluded from urging that such adjustment itself was bad on account of the mandate of section 245 not having been followed.

There does not appear to be any merit in either ground urged by the petitioner-assessee in assailing the measures taken by the assessing officer.

It, however, appears that notwithstanding there being no provision in such regard in the statute, an appeal or a representation has been made by the assessee to the superior officer of the assessing officer to reconsider the steps taken by the assessing officer and that such matter is under consideration. The appropriate superior officer will consider the request in accordance with law and being uninfluenced by the observations in this order. It is also desirable that such request is considered and disposed of within a fortnight from date.

The appellate authority is requested to expedite the hearing of the appeal relating to the income tax claim for Rs. 20 crore. W.P. No. 346 of 2012 is disposed of on the above basis without any order as to costs.

Urgent certified photocopies of this order, if applied for, be given to the parties subject to compliance with all requisite formalities.