AO Can Adjust Refund Without Further Intimation if No Response | HC

Case Details: Reliable Security and Intelligence Services (Orissa) (P.) Ltd. v. National Faceless Appeal Centre (NFAC) - [2025] 177 taxmann.com 505 (Orissa)

Judiciary and Counsel Details

• Harish Tandon, CJ.
•  Murihari Sri Raman, J.
• Jagabandhu Sahoo, Sr Adv., Ms Kajal Sahoo, Ronit Ghosh, Romeet Panigrahi, Ms Deepshikha Mallik, Subhajeet Sahu & Ms Urmila Sahu, Advs. for the Petitioner
• Subash Chandra Mohanty, Sr Standing Counsel & Avinash Kedia, Jr. Standing Counsel for the Respondent

Facts of the Case

Assessee filed its return of income for the assessment year 2018-19, which was selected for scrutiny. An assessment order was passed raising a demand that was confirmed by the Commissioner (Appeals). Meanwhile, the assessee filed an application under section 220(6) for a stay on the realisation of the demand on the condition that the assessee would deposit 20 per cent of the demand.

The Assessing Officer (AO) allowed a stay of the demand and also reserved the right to adjust refunds, if any, arising against the demand to the extent of the amount required for granting the stay, subject to the provisions of Section 245. The assessee deposited 20% of the demand. Subsequently, AO passed an order under section 148 raising a demand for a certain amount.

Meanwhile, AO adjusted the refund due to the assessee for the assessment years 2021-22, 2022-23, 2023-24 and 2024-25 against outstanding demand for the assessment year 2018-19.

Aggrieved-assessee filed a writ petition contending that no intimation was issued to it before adjusting the amount of refund against the outstanding tax liability of the assessee for the relevant assessment years.

High Court Held

The High Court held that the only contention to be addressed is whether the authority is required to adhere to the principles of natural justice before adjusting the refunds against outstanding demanded dues for an assessment year. As is manifest from the words ‘an intimation’ employed in section 245, the word ‘an’ has significance. As is apparent from the bare reading of the provision, it is unequivocal that once it is admitted that an intimation under said section has been received, it is incumbent on the part of the assessee to respond to the same. In the absence of which, the AO is empowered to set off the amount to be refunded or any part of that amount against any sum remaining payable under the Act ‘in lieu of payment of the refund’.

Since the assessee admitted to not having taken steps after receipt of such intimation, the outstanding demand as of that date could be considered for adjustment/set-off against the refund(s) in conformity with the statutory provision contained in Section 245.

List of Cases Reviewed

• Gujarat University v. Krishna Raghunath Mudholkar (1963) Supp 1 SCR 112
• Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd. (2001) 3 SCC 609
• Bhadauria Gram Sewa Sansthan v.. A.C.S.T. 2006 taxmann.com 2068 (All.)
• Essjay Ericson Private Limited v. CIT 2021 SCC OnLine Del 5562 (para 8.1)
• Skyline Engineering Contracts (India) (P.) Ltd. v. Dy. CIT, Circle 22(2)Delhi [2021] 132 taxmann.com 158 (Delhi) (para 8.1)
• Jindal Stainless Ltd. v. Dy. CIT [2023] 154 taxmann.com 649 (Delhi) [Para 9] Followed

List of Cases Referred to

• Gujarat University v. Krishna Raghunath Mudholkar (1963) Supp 1 SCR 112 (para 7.6)
• Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd. (2001) 3 SCC 609 (para 7.7)
• Bhadauria Gram Sewa Sansthan v.. A.C.S.T. 2006 taxmann.com 2068 (All.) (para 7.9)
• Essjay Ericson Private Limited v. CIT 2021 SCC OnLine Del 5562 (para 8.1)
• Skyline Engineering Contracts (India) (P.) Ltd. v. Dy. CIT, Circle 22(2), Delhi [2021] 132 taxmann.com 158 (Delhi) (para 8.1)
• Jindal Stainless Ltd. v. Dy. CIT [2023] 154 taxmann.com 649 (Delhi) (para 8.1)