The Income Tax Department cannot withhold a refund under Section 245 of the Income Tax Act, 1961, unless it establishes tax liability, the Calcutta High Court cited.
The Bench of Justice Raja Basu Chowdhury said that it is correct that section 245 of the said Act allows the income tax department to set off a refund against left tax subject to be paid. Unfortunately, in the same case, the respondent has not been able to exhibit that any amount is subject to being paid or is due from the taxpayer. The law does not sanction tax recovery in the absence of any charging statutory provision.
The taxpayers and the Income Tax Department, under section 154 of the Income Tax Act, 1961, permit to correction of any mistake that emerges from the record in an order or intimation.
The Income Tax Department, under section 245 of the Income Tax Act 1961, is allowed to set off a refund against the remaining tax payable.
The taxpayer, a practising Chartered Accountant, submitted his ITR for the assessment year 2018-19. The taxpayer declared a net income of Rs. 37,09,520, with a tax payable of Rs. 9,53,117. But a total TDS of Rs 39,51,350 had been deducted earlier, which makes the taxpayer qualified for a refund of Rs 29,98,230.
Even after repeated rectification proceedings u/s 154, the revised refund calculations and various representations, the department under Section 245, withheld Rs. 22,73,833, adjusted Rs. 14,65,365 without explanation.
As the amount was not refunded even after a partial payment, the taxpayer submitted a petition, which was thereafter withdrawn based on the assurance of the department that the dispute would be solved. The department then does not take any steps. The dissatisfied taxpayer submitted a petition before the Calcutta High Court.
The department said that on withdrawing the petition, the taxpayer had abandoned his claim. Also, no independent proceeding was initiated against the taxpayer for the withholding amount.
As per the bench, the department is not able to establish that any amount is subject to be paid or is due from the taxpayer as per Section 245 of the Income Tax Act, 1961.
The bench stated that the taxpayer is qualified for the refund as determined by the Income Tax Department. The petition was permitted by the bench concerning the above view.
| Case Title | Rajneesh Agarwal vs. Income Tax Officer |
| Case No. | WPO/398/2025 |
| For Petitioner | Mr Vinay Shraff, Mr Dev Kr. Agarwal, Ms Swarnwarshi Poddar |
| For Respondent | Mr Soumen Bhattacharjee, Mr Ankan Das, Ms Shradhya Ghosh |
| Calcutta High Court | Read Order |
