Opinion Of Eminent Legal Luminaries On Controversial Issues

Can Assessee Claim Set Off Refunds Of Later Years Against The Demand Of Earlier Years?

QUERY: P had offered capital gains to tax in the years in which the flats were sold and the moneys received by him and paid the tax. Subsequently, the Assessing officer re-opened the earlier year in which agreement was made and possession handed over, and brought the entire gains to tax in that year. The stand of the department has been upheld in appeal upto the High Court. P wishes to know whether the department will automatically adjust the taxes paid for the subsequent years or whether he has to claim refund for those years. How will interest be calculated, since the taxes have already been paid for other years?
ANSWER: The provisions of section 245 of the Act, are for the benefit of both department and the taxpayer. Therefore, it would be duty of the AO to set-off under this section if the assessee claims it and proves that he is entitled for refund as per N. C. Mukerjee and Co., vs. UOI [68 ITR 500 (SC)] and other judgments.

So P has to request the A.O. to adjust the refund of latter years against the demand of earlier years, if any.

After adjusting the refund, the A.O. has to calculate interest on the net demand.
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Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
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