#Direct Tax Law

The Calcutta High Court has ruled that adjusting a tax refund beyond 20% of a disputed demand without giving the assessee a prior opportunity to be heard violates the principles of natural justice. This sets a critical precedent for all taxpayers facing refund adjustments under Section 245, mandating procedural fairness even in recovery actions by the Income Tax Department.

ITAT Mumbai quashed an assessment order, ruling that an Income Tax Officer lacks jurisdiction to issue a notice under Section 143(2) of the Income Tax Act if the assessee's declared income exceeds ₹20 lakhs, as per CBDT Instruction No.1/2011. The tribunal held that such notices must be issued by a Deputy/Assistant Commissioner, making the assessment proceedings void ab initio.