Adjustment of Refund/Recovery of taxes


Collection of taxes due is the most important part of the Revenue departments.Every department is governed by the parent act under which it operates as regard recovery of taxes.In this post we will cover the recovery of taxes by the Income tax department .

Taxes may arise due to any of the following:

(The list is not exhaustive)

a)An assessee has filed its return but the taxes claimed are not being deposited or are deposited in any other PAN or in any other Assessment Year

b)After filing of the return demand arises at the time of processing by way of some adjustment u/s 143(1)(a)

c)The case has been assessed under sec 143(3) and taxes became due

d)There may be penalties imposed for any non compliance

There may be many more cases when taxes become due but one thing is common .Unless the demand is by way of any enabling provision it is always bad in eyes of law.A demand to be legitimate it must pass following tests:

a)It must arise out of any order and further that the order also must be passed after due provisions have been followed.

b)the notice of demand must be serviced as per the requirements of service as laid down under sec

c)If any demand has been stayed (by way of any enabling provision) or by way of any speaking order then it cannot be recovered unless the stay is vacated


CBDT notification no 89/2015 dtd 02/12/2015 and Income tax rule 27 are worth mentioning which says that

Where communication is delivered or transmitted by post, courier or for the purpose of service of summons, the communication address shall be –
As per the Permanent Account Number (PAN) database of the taxpayer; or
As per the income tax return furnished by the taxpayer; or
The address provided in the last income tax return furnished by the taxpayer; or
In the case of a company, its registered office address available on the website of the Ministry of Corporate Affairs (MCA).
The communication shall not be delivered or transmitted as mentioned above, where the taxpayer furnishes any other address in writing to the income tax authority or any person authorised by such an authority issuing communication.
Where communication is delivered or transmitted electronically, the e-mail address shall be –
As per the income tax return furnished by the taxpayer to which the communication relates; or

The e-mail address available in the last income tax return furnished by the taxpayer; or
In the case of a company, its registered office address available on the website of the MCA.
Any other e-mail address provided by the taxpayer to the income tax authority or any person authorised by such income-tax authority.

When Demand becomes Due:

Generally a demand becomes due on the expiry of 30 days of the notice of demand (sec 220 of Income tax act) however the Assessing officer may with prior approval of Joint commissioner may allow a time less than 30 days if the case deems to be fit for such shorter period.


The recovery process starts once the time given as above expires.Now the department has following options/methods at its disposal.

a) Recovery by notice

b)Issuance of Recovery certificate to TRO (Tax recovery officer)

Now it is the tax recovery officer who will proceed further.The procedure being as follows as provided in Second Schedule to Income tax Act.First the TRO will serve a notice to defaulter and wait for 15 days .After 15 days have elapsed and the payment is still unpaid the TRO will proceed to recover by any of following methods:

a) by attachment and sale of the defaulter’s movable property;

(b) by attachment and sale of the defaulter’s immovable property;

(c) by arrest of the defaulter and his detention in prison;

(d) by appointing a receiver for the management of the defaulter’s movable and immovable properties.

Current Scenario:

First option above provides the recovery by attachment and sale of the defaulter’s moveable property as per following caveats:

(1) In the case of—

(a) a debt not secured by a negotiable instrument,

(b) a share in a corporation, or

(c) other movable property not in the possession of the defaulter except property deposited in, or in the custody of, any court,

the attachment shall be made by a written order prohibiting,—

(i) in the case of the debt—the creditor from recovering the debt and the debtor from making payment thereof until the further order of the Tax Recovery Officer;

(ii) in the case of the share—the person in whose name the share may be standing from transferring the same or receiving any dividend thereon;

(iii) in the case of the other movable property (except as aforesaid)—the person in possession of the same from giving it over to the defaulter.

This aspect applies to the amount lying with the defaulter in any of its bank account whether by way of deposit or by way of loan and amount in form of investment as shares ,FDs etc.In this mode the TRO issues notice to the person having such money on behalf of the defaulter to with held the amount till it is allowed to do so.

this is the most common method employed by the department these days as this is the simplest of all methods and with the advent of Aadhar linking now the department has access to all your bank accounts in single place.So what is happening that the TRO sends a notice to the banker and ask for the amount and the banker also without thinking twice just extracts the amount and pays to the department when he was supposed to inform the assessee about such notice and also to verify the authenticity of the notice.

What to do when such an attachment of demand occurs:

  • First of all if the demand is genuine one is bound to pay so nothing can be done
  • But if the department has attached the amount without following the set protocols explained above then  only option available is filing a writ petition u/s 226 with the jurisdictional High Court
  • Before filing the writ it should be ensured that there has been a fault in the procedure adopted else the writ will not be admissible

since demand recovery is a very broad field so it is not possible to cover each and every aspect so we have tried to cover the topic in such manner which is contextual in current scenario as in recent times there have been many cases where some over zealous officer has attached the bank account and recovered the demand without following proper procedure

Also since the department has tried to bring the process online on system so what has happened is that old demands have been also uploaded in system where it is possible that the demands have been already paid /recovered from assessee in manual mode therefore also this topic becomes timely because an all those cases the assessee must immediately take action as suggested in this post.

For any clarification please drop a mail at






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