Andhra Pradesh HC directs Adjustment of Income Tax Refund to assessee towards Tax Arrears instead of Penalty [Read Order]

The Andhra Pradesh High Court directed the adjustment of Income Tax refundable to the assessee towards tax arrears instead of a penalty.

The petitioner, M/s Best India Tobacco Suppliers is a company engaged in the business of exporting tobacco. The petitioner was assessed income tax under the Income Tax Act and has been filing its returns before the Assistant Commissioner, Circle-I, Guntur, who is the Assessing Officer. While so, for the assessment year 1986-87 the petitioner had filed returns disclosing a net income of Rs.1,87,540/-. The Assessing Officer issued a notice under Section 143(2) of the Income Tax Act and passed an assessment order under Section 143(3) computing the total income of the assessee for the Assessment Year 1986-87 and accordingly, levied tax, interest, and penalty.

Aggrieved, the petitioner preferred an appeal before C.I.T (Appeals). The first appellate authority allowed the appeal and set aside the additions, which were made by the assessing officer.

Advocate Challa Gunaranjan on behalf of the petitioner contended that the petitioner was under the bonafide impression that the refund amount of Rs.4,86,970/- was adjusted towards tax arrears. However, the same was adjusted towards penalty contrary to the information provided to the petitioner under the Right to Information Act by the CBDT. If the refund amount is adjusted towards regular tax, the petitioner is liable to pay only Rs.74,790/- but not Rs.3,70,103/- as determined by the respondents.

The division bench of Justice U.Durga Prasad Rao and Justice J.Uma Devi directed the respondent authorities to adjust the tax refundable to the petitioner for the year 1996-97 of Rs.4,86,970/- to the tax arrears instead of a penalty and accordingly, re-determine the amount payable by the petitioner under Section 90(1) of the Finance (No.2) Act, 1998 and grant certificate expeditiously, but not later than four weeks.

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