2021 (4) TMI 866 - HC - Income Tax

Stay of demand - deposit 20% of the disputed amount - HELD THAT - Without any application of mind, the impugned order at Annexure-A, Page16 came to be passed. It appears that if an assessee wants stay against the recovery of demand, then, he is expected to deposit 20% of the total amount. In this case, the argument of Mr. Soparkar is that he has been asked to deposit ₹ 100 crore being 20% of the total demand. This according to Mr. Soparkar could not have been done. According to Mr. Soparkar, his client is expected to deposit 20% of the disputed amount and not the entire amount of demand. The second limb of his submission is that assuming for the moment that he is obliged to deposit ₹ 100 crore being 20% of the total demand, the department has adjusted an amount of ₹ 133 crore towards the refund for the purpose of recovery of 20%. Therefore, according to Mr. Soparkar, in all, an amount of ₹ 183 crore has been recovered by the department, which they could not have even otherwise recovered in law. As on date, he prays for two reliefs; first there should not be any further adjustment or recovery of any amount from the eligible refund claim and secondly, the respondents should be asked to refund the amount of ₹ 83 crore alleged to have been recovered in excess.

Summary

Issues Involved:
Notice of demand under Section-156 of the Income Tax Act, 1961 for Assessment Year 2016-17; Application for stay of recovery of demand; Validity of order demanding 20% of total amount; Adjustment of refund for recovery; Recovery of excess amount; Relief sought from the court.

Analysis:
The judgment delivered by the Gujarat High Court pertains to a notice of demand issued under Section-156 of the Income Tax Act, 1961 for the Assessment Year 2016-17. The petitioner had filed an appeal against the assessment order, and a subsequent application seeking a stay on the recovery of demand. The court observed that the impugned order demanding the petitioner to deposit 20% of the total amount lacked proper reasoning and application of mind. The petitioner contended that they should only be required to deposit 20% of the disputed amount, not the entire demand. The court noted the petitioner's argument and directed that there should be no further recovery towards the demand by way of adjustment from the eligible refund amount for the said assessment year.

The petitioner further raised concerns regarding the department's adjustment of an amount exceeding the 20% demand from the refund, resulting in the recovery of an excess amount of ?83 crore. The court acknowledged this issue and granted an ad-interim order restraining any additional recovery from the eligible refund amount for the specified assessment year. The court also directed the respondents to be served notice, returnable on a specified date, and permitted direct service through email along with regular direct service.

In conclusion, the judgment addresses the validity of the order demanding 20% of the total amount, the adjustment of refund for recovery purposes, and the recovery of an excess amount by the department. The relief sought by the petitioner includes refraining from further recovery through adjustment and refunding the alleged excess amount recovered. The court's interim directive provides temporary relief to the petitioner pending further proceedings in the case.