Income Tax Recovery without Supplying a Copy of Assessment Order Lacks Authority of Law: Delhi HC [Read Order]

In a recent ruling, the Delhi High Court held that recovery of tax dues without serving the assessment order and statutory demand notice is legally unsustainable. The high court directed the department to refund the recovered amount, observing that such recovery amounted to collection without authority of law.

The writ petition filed by the petitioner, Philco Exports Private Limited, which had challenged the action of the Assistant Commissioner of Income Tax, New Delhi, for recovering an amount of ₹11.14 lakh by adjusting refunds of subsequent assessment years against an alleged outstanding demand for Assessment Year 2001–02.

The petitioner argued that no statutory tax liability can arise unless an assessment order is passed and duly served, followed by issuance of a demand notice under Section 156 and also submitted that despite various representations and RTI applications, It was submitted that recovery without complying with these mandatory steps was illegal and fundamental right violation.

The respondent Income Tax Department submitted that the demand pertained to an old assessment year, and that the assessment records were not readily traceable due to subsequent digitisation of records. The respondent further contended that the petitioner had failed to update its address, which may have resulted in non-service of the assessment order.

The high court acknowledged the respondent's contention regarding the non-updation of the address. However, recovering the tax without supplying the assessment order amounts to recovery without authority of law. Administrative difficulties or inability to trace old records cannot justify retention of amounts recovered from the assessee.

The bench of Justice Dinesh Mehta and Justice Vinod Kumar directed the income tax department to refund ₹11.14 lakh along with applicable interest on or before 31 March 2026.

The Court clarified that if the Department succeeds in tracing and serving the assessment order by the said date, the refund would not be required, and the petitioner would be entitled to challenge the assessment by filing an appeal under Section 246A, without any objection on limitation.

The high court also restrained the department from making any further recovery in relation to the alleged demand for AY 2001-2002 until the stipulated date.

Accordingly writ petition was disposed