The Delhi High Court recently issued a ruling stating that the collection of tax dues is legally invalid unless the assessment order and statutory demand notice are provided. The court directed the tax department to refund the amounts that were recovered, emphasising that the collection was carried out without the proper legal authority.
Philco Exports Private Limited, the applicant, has submitted the writ petition, which had contested the action of the Assistant Commissioner of Income Tax, New Delhi, for recovering Rs 11.14 lakh by adjusting refunds of forthcoming assessment years against an alleged outstanding demand for AY 2001-02.
The applicant said that no statutory tax obligation can emerge unless an assessment order is passed and duly served, after the issuance of a demand notice u/s 156, and furnished that even after distinct representations and RTI applications, it was specified that recovery without following up with such obligatory measures was not legal and a fundamental right breach.
The respondent, Income Tax Department, said that the demand of an old assessment year, and that the assessment records were not readily traceable because of the forthcoming digitisation of records.
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The respondent also said that the applicant had been unable to update its address, which may have consequences in non-service of the assessment order.
The HC considered the claim of the respondent for the non-updation of the address. But recovering the tax without supplying the assessment order is directed to recovery without authority of law. The administrative issues or inability to trace old records could not explain the retention of amounts recovered from the taxpayer.
The bench of Justice Dinesh Mehta and Justice Vinod Kumar asked the income tax department to refund Rs 11.14 lakh, including applicable interest, on or before 31 March 2026.
The court mentioned that if the department succeeds in tracing and providing the assessment order by the said date, then the refund shall not be needed and the applicant shall be qualified to contest the assessment by filing an appeal u/s 246A, without any objection on limitation.
HC refuses the department from making any additional recovery for the alleged demand for AY 2001-2002 till the mentioned date.
Subsequently writ petition was disposed of.
| Case Title | Philco Exports Private Limited vs. Assistant Commissioner of Income Tax, & ORS |
| Case No. | W.P.(C) 12318/2021, CM APPL. 38748/2021(stay) |
| For the Petitioner | Mr Sunil Agarwal, Ms Priya Sarkar, Mr Anugrah Dwivedi |
| For the Respondents | Mr Sunil Agarwal, Ms Priya Sarkar, Mr Anugrah Dwivedi |
| Delhi High Court | Read Order |
