Bombay High Court Declares Prior Intimation Mandatory, Quashes Unlawful Refund Adjustment in Favour of Bharat Petroleum
Bombay High Court Declares Prior Intimation Mandatory, Quashes Unlawful Refund Adjustment in Favour of Bharat Petroleum
Bharat Petroleum Corporation Limited (petitioner) has received a favourable ruling from the Bombay High Court, as it nullified the adjustment of refund made by tax authorities. The Court has directed that a refund of ₹211,42,98,781, or any further determined amount, be paid to the petitioner, along with interest under Section 244A of the Income Tax Act.
In the appeal, the petitioner raised a concern about the improper adjustment of a refund that was rightfully owed to them, without receiving prior intimation as required under Section 254 of the Income Tax Act.
The respondent's counsel argued that the order specified in Section 220 (6) of the Act had been stayed for six months or until the issuance of the Appellate Authority's order, whichever occurred earlier. They asserted that since the stay period expired on June 28, 2022, the demand for adjustment was justified.
Furthermore, the counsel acknowledged a procedural oversight in adjusting the refund without prior intimation under Section 245 of the Act. Nevertheless, they contended that the adjustment was valid based on the existence of an outstanding demand.
Contrary to the arguments put forth by the respondent's counsel, the bench consisting of Justices Dhiraj Singh Thakur and Kamal Khata held that a stay granted under Section 220(6) of the Income Tax Act remains in effect until the appeal is disposed of, without any limitation of six months.
Additionally, the bench underscored that the failure to provide written intimation before offsetting the payable amount against the refund amount was a crucial and fatal error. In support of this stance, the bench referred to the case of Jet Privilege Private Limited v. Deputy Commissioner of Income Tax [LQ/BomHC/2021/950], where it was established that the prior intimation requirement outlined in Section 245 of the Income Tax Act was obligatory.
Consequently, the bench concluded that the non-compliance with this requirement rendered the entire refund adjustment illegal and invalid.
