India: Bombay HC directs IT Officers to pay for improper refunds

October 28, 2018


The mechanism of taxation, being largest source of income, enables the Government for the socio-economic development of the nation in terms of infrastructure, education, healthcare and medical facilities, industrial advancement, agricultural growth, employment generation, etc. Although the tax regime facilitates the Government for carrying on the development of the country, it remains an indispensable requirement of the concerned authorities to ensure that the taxes are properly levied and collected.

Systematic approach for taxation

The tax system makes necessary to ascertain that the taxpayers of the nation pay the requisite tax. The legal framework in this regard imposes liability on the defaulting parties and those engaged in evasion of tax. Laying down the guidelines tax exemptions and non-payment penalties, the regulations issued by the Government in respect to specific taxation regimes set forth the structure and composition of the tax authorities engaged in determination and collection of taxes. Those vested with this duty of vital importance are under the obligation to adequately understand the transactions carried out by the taxpayers, computation of tax attributable to their activities and the process of recovering the same.

Income tax

The taxes are levied on individuals and entities in respect to the income or profits made by them. The provisions of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) help in the determination and collection of income tax along with the Finance Act.

Judicial viewpoint for duties of tax collectors

The Bombay High Court has instructed the Income Tax department to recover INR 150,000 from tax officers for adjusting refund of the amount due to a taxpayer against outstanding demands issuing a prior valid notice of demand in this regard. [1]

The court stated that the income tax officers under the duty to confirm that the procedural requirements for imposition are duly complied with. Focussing on the role of the income tax officers, the Court reiterated the fact that before adjusting the refund due to the taxpayer a notice for the said purpose must be issued to the taxpayer which shall serve as a proof of service of demand.

The tax department have been further directed to grant refund due to the taxpayer with applicable interest as penal consequence for flouting the legal procedures enumerated by the legislation.

Considering the necessity of following due process of law for systematic tax recovery, the judicial authority intimated its intention not to ignore any lapses or serious errors committed by the officers appointed for the fulfilment of the said objective.

By the new wave approach the judicial system seems to strike a balance between the obligations of the taxpayers as well as the authorities thus creating a just and fair taxation framework with proper means for collection of due taxes.


For more information please contact us at :