Judgment:
Pendse, J. - The petitioner has filed his return for the asst. yr. 1982-83 and the IAC passed assessment order assessing the income at Rs. 60,60,234 and the petitioner paid an amount of Rs. 4,29,000 by way of tax. The petitioner then preferred an appeal against the assessment order before the CIT (Appeals), and the appeal was allowed. The ITO gave effect to the appellate order and revised the total assessable income of the petitioner for the asst. yr. 1982-83 as per the directions given by the CIT (Appeals). The revised assessment order was passed and the total income of the assessee was computed at Rs. 21,948, on which the tax liability was only Rs. 2,294. Accordingly, the petitioner was entitled to the refund of the amount of Rs. 4,26,706.
2. While forwarding the revised assessment order for the asst. yr. 1982-83, the ITO also simultaneously issued the notice for the finalisation of the proceedings of the assessment for the asst. yr. 1983-84. The petitioner thereupon addressed letter dt. 31-5-1985 to the CIT requesting that the refund should be granted forthwith and the pendency of the assessment for the asst. yr. 1983-84 should not delay handing over the refund certificate. The refund was not given to the petitioner and that gave rise to filing of the present petition under Art. 226 of the Constitution of India in this Court on 8-7-1985. The petition was duly admitted on 15-7-1985 and the hearing was expedited. The petition was admitted by me as the respondents, inspite of adjournment, could not explain why the refund was not given.
3. The respondents have not filed any return in answer to the relief sought by the petitioner, but Shri Joshi, ld. counsel for the petitioner, points out the reason why the respondents did not give refund due for the asst. yr. 1982-83. Shri Joshi invited my attention to the order dt. 28-6-1985 passed by the 16th ITO, completing the assessment of the petitioner for the asst. yr. 1983-84. The order recites that the petitioner is liable to pay the tax amount of Rs. 7,47,732 and out of the above demand Rs. 4,26,090 is adjusted against the refund for the asst. yr. 1982-83. Shri Joshi complains that though this order was passed on 28-61985 it was not disclosed to the Court at the time of admission of the petition. Shri Joshi further submits that in any event it is not permissible for the ITO to adjust the amount of refund due in respect of earlier assessment order without giving prior notice and an opportunity of being heard to the petitioner. Shri Joshi relies upon provisions of s. 245 of the IT Act, 1961, which read as under :
'245. Where under any of the provisions of this Act, a refund is found to be due to any person, the Income Tax Officer, Appellate Assistant Commissioner, Commissioner (Appeals) or Commissioner, 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.'
The mere perusal of this section makes it clear that the ITO may in lieu of payment of refund set off the amount to be refunded against the sum payable by the person, but only after giving intimation in writing to such person of the proposed action. Shri Deodhar, ld. counsel appearing on behalf of the respondents had to concede that the ITO did not give any intimation to the petitioner before making adjustment while passing the assessment order for the asst. yr. 1983-84. In my judgment, the action of the ITO is wholly illegal and the respondents were clearly in error in not refunding the amount of Rs. 4,26,090 to the petitioner forthwith.
4. Accordingly, petition succeeds and the rule is made absolute and the respondents are directed to refund the amount of Rs. 4,26,090 to the petitioner within a period of two weeks from today. The respondents shall ensure that the refund order is actually handed over to the petitioner before expiry of two weeks. The respondents shall pay the costs of petition.