P.S. Srijan Height Developers vs Assistant Commissioner of Income Tax, Calcutta High Court

The Calcutta High Court[1] held that while mere filing of an appeal does not automatically stay recovery proceedings or prevent an assessee from being treated as in default, any adjustment of refund under Section 245 of the Income-tax Act must strictly comply with the statutory requirement of prior intimation and meaningful opportunity to object.

The Court ruled that if the Revenue adjusts a refund before expiry of the time granted in the Section 245 intimation, such adjustment is contrary to law. Section 245 expressly requires prior written intimation so that the assessee may raise objections before adjustment of refund. Such intimation is not a mere formality but a safeguard grounded in principles of natural justice.

In the present case, although the intimation granted the petitioner 21 days to respond, the Revenue adjusted the refund on the very next day, which the Court termed a clear violation of Section 245.

The Court further held that while exercising powers affecting recovery during pendency of appeal, the Assessing Officer must act fairly and reasonably in line with Section 220(6), CBDT Instruction No. 1914, and subsequent Office Memoranda. Recovery exceeding 20% of the disputed demand during pendency of appeal requires special reasons. Ultimately, the Court directed the Revenue to refund the amounts adjusted in excess of 20% of the disputed demand pursuant to the adjustment.

[1] WPO 780 OF 2025, decided on 4^th May, 2026