Delhi HC Orders Refund of Tax Recovered Without Assessment Order

Philco Exports Pvt. Ltd. challenged the recovery of Rs. 11.14 lakh adjusted by the Income Tax Department from its refunds for later years towards an alleged demand for AY 2001-02. Despite repeated representations, RTI applications, and even directions from the High Court during the pendency of the writ petition, the Department failed to provide a copy of the assessment order or demand notice under Section 156.

The Department argued that records were old, digitization issues existed, and that non-service was partly due to the assessee’s failure to update its address.

Issue Before HC: Whether tax recovery can be sustained when the Department is unable to produce or serve the assessment order and demand notice forming the basis of such recovery.

HC’s Decision: The Delhi High Court held that recovery of tax without supplying the assessment order amounts to recovery without authority of law. The Court ruled that once recovery was effected and the assessee demanded the assessment order, the Department was duty-bound to provide it.

The Court directed a refund of Rs. 11.14 lakh with interest, unless the Department is able to trace and validly serve the assessment order by that date. Till then, all further recoveries for AY 2001-02 were restrained. Liberty was granted to the assessee to file an appeal without limitation objections if the assessment order is eventually served.

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