Income tax officers as per the Income Tax Act are required to send a valid notice in lieu of the outstanding tax demand to the respective taxpayer. This said IT officials are not authorized to make any adjustments against tax demand without sending prior notice. By a valid notice we mean that a notice to this effect has to be served within a specified timeline as per the provisions of the respective sections.
In this respect, the Bombay High Court has come out with a new ruling that taxpayer's should know
Recent high court ruling that taxpayers must know
In a recent case, in respect of a taxpayer, income tax officials assessed outstanding tax demand for 4 AYs including 1995-96, 2003-2004, 2009-10 and 2012-13. Income tax officials then adjusted the amount outstanding to the department with his tax refund. Nonetheless, taxpayer claimed that he did not receive any notice or order for such outstanding tax demands. And so the adjustments made against his refund remain invalid.
The case then taken to the Bombay High Court granted relief to the taxpayer on the premise that without ensuring that a valid notice of demand has been served on the concerned taxpayer, income tax official adjusted his tax refund for outstanding demand. And income tax department has been asked by the court to give back the due refund to the taxpayer with the applicable interest. Further from the tax official dept. will recover Rs. 1.5 lakh and will also take disciplinary action as suggested by the Bombay high court.