2021 (5) TMI 452 - HC - Income Tax

Stay of demand - refund claim - outstanding demand raised by the respondent against the petitioner for AYs 2017 -2018, 2018-2019 and 2019 -2020 pertains to denial of exemption benefit to the petitioner under sections 11 and 12 of the Act, 1961 treating the petitioner liable to pay the tax on the income assessed on denial of concept of mutuality - AO assess the income of the petitioner without giving the benefit of exemption despite the petitioner succeeding before the Tribunal and raised demand so as to adjust the same against the existing refunds year after year and thereby not issuing refund to the petitioner - HELD THAT - The respondents were required to use their discretion for granting stay, more particularly, when the Tribunal in earlier year has held in favour of the petitioner assessee and therefore, from the narration of the facts and the provisions noticed above, the conditions necessary for exercise of discretion in favour of the assessee under section 220(6) of the Act apparently exists in favour of the assessee in the present case. This Court in case of AIR Conditioning Specialists Pvt. Ltd. v. Union of India 1995 (3) TMI 14 - GUJARAT HIGH COUR has held that it is settled law that unless and until decision is reversed by a superior Court, it holds the field and when a point is concluded by a decision by the higher Courts, all Subordinate Courts and authorities within the territory of the appellate authority are bound by it and must scrupulously follow the said decision in letter and spirit. Respondent no.1Assessing Officer is therefore, bound by the order passed by the Tribunal in the earlier years on the same issue of granting exemption from income tax to the petitioner. It may be true that the Assessing Officer would like to keep the issue live till the highest court concludes and arrive at final decision and therefore, may have taken a contrary view than the decision of the Tribunal but,in such circumstances, when the appeal is preferred by the assessee before CIT(Appeals) under section 246 of the Act, 1961, the assessee is entitled to get complete stay against the demand not by treating the assessee being in default in respect of amount in dispute in appeals. We are of the view that rejection of the stay-application is nothing but harassment to the assessee as there is no distinction between the facts of the pending appeals from the order of the Tribunal and CIT(Appeals) rendered in favour of the assessee for the earlier years and hence, CIT (Appeals) is bound to follow the order of the Tribunal for earlier years. The Principal CIT therefore, ought to have granted complete stay of the outstanding demand in the pending appeals for AYs 2017 -2018, 2018 -2019 and 2019 -2020 as the issue arising for consideration stands concluded by the decision of the higher forum i.e. the Tribunal as the view taken by the Assessing Officer in the appeal against the petitioner is contrary to what has been held in the previous years, without there being any material change in facts or law. Prayer of the petitioner to grant refund for the earlier years - Refund as due to the petitioner assessee, pursuant to the order giving effect passed by the Assessing Officer on account of the appeals preferred by the petitioner being allowed by the Tribunal, issue is no more res integra. This Court in case of Jugal Kishore Mahendra Biyani v. Income Tax Officer 2019 (8) TMI 1338 - GUJARAT HIGH COURT has held that when Revenue accepted that the assessee was entitled to refund as claimed and when the petitioner-assessee has made repeated requests and sent reminders to the respondent authority, if no refund is granted and now the contention is taken before this Court that under section 245 of the Act, refund cannot be granted as same is required to be adjusted against outstanding demand pending against the petitioner, cannot be accepted because, as of now as the demand raised against the petitioner for the assessment years 2017 -2018, 2018 -2019 and 2019 -2020 are already stayed by this order, the respondent authorities are required to process the refund payable to the petitioner and issue refund due at the earliest. We dispose of this petition with a direction to the respondents to grant stay against outstanding demand for A.Y. 2017 -18 to 2019 20 during the pendency of the appeals before the CIT(Appeals) and further direct to release the refund to which the petitioner- assessee is entitled to for the earlier years from assessment year 2002 -2003 onwards in accordance with the provisions of section 244A(1)

Summary

Issues Involved:
1. Issuance of refunds due to the petitioner for various assessment years.
2. Response to stay applications filed by the petitioner.
3. Adjustment or recovery against demands for specific assessment years.
4. Granting of stay of outstanding demands during the pendency of appeals.
5. Release of refunds due to the petitioner.

Issue-wise Detailed Analysis:

1. Issuance of Refunds Due to the Petitioner:
The petitioner, a non-profit mutual concern exempt from taxation, has been regularly filing income returns since 2002-2003. Despite succeeding in appeals before the CIT(Appeals), Tribunal, and High Court, the refunds due have not been paid by the respondents. The petitioner provided a detailed summary of litigation and refund status from 2002-2003 to 2019-2020, indicating the amounts due and the status of departmental appeals. The court observed that the respondents have been adjusting refunds for certain years against demands raised for other years, thereby not issuing refunds to the petitioner.

2. Response to Stay Applications Filed by the Petitioner:
The petitioner filed applications for stay of outstanding demands for the assessment years 2017-2018, 2018-2019, and 2019-2020, which were not decided by the respondents despite repeated reminders. The court noted that the respondents did not comply with the directions to decide the stay applications within a reasonable time. The court emphasized that the rejection of stay applications was contrary to the fact that the appellate authority had decided in favor of the petitioner for earlier years.

3. Adjustment or Recovery Against Demands for Specific Assessment Years:
The respondents continued to assess the petitioner’s income without granting the benefit of exemption and adjusted refunds against demands for other years. The petitioner argued that such adjustments were made without legal basis, especially when the appellate authorities had ruled in favor of the petitioner. The court found that the respondents were required to use their discretion for granting stay, especially when the Tribunal had held in favor of the petitioner in earlier years.

4. Granting of Stay of Outstanding Demands During the Pendency of Appeals:
The court directed the respondents to grant stay against outstanding demands for the assessment years 2017-2018, 2018-2019, and 2019-2020 during the pendency of appeals before the CIT(Appeals). The court cited Section 220(6) of the Income Tax Act, which allows the Assessing Officer to treat the assessee as not being in default in respect of the amount in dispute in the appeal. The court also referred to CBDT instructions which provide guidelines for staying demand, emphasizing that stay should be granted when the issue in dispute has been decided in favor of the assessee by an appellate authority in earlier years.

5. Release of Refunds Due to the Petitioner:
The court observed that the petitioner was entitled to refunds for earlier years as per the orders of the appellate authorities. It directed the respondents to process and issue the refunds due to the petitioner within six weeks from the date of receipt of the court order. The court referenced the decision in Jugal Kishore Mahendra Biyani v. Income Tax Officer, which held that refunds should be granted promptly when the assessee is entitled to them, and any outstanding demands should not be used as a basis to withhold refunds.

Conclusion:
The court disposed of the petition by directing the respondents to grant stay against outstanding demands for the assessment years 2017-2018 to 2019-2020 during the pendency of appeals before the CIT(Appeals). Additionally, the court ordered the release of refunds due to the petitioner for earlier years in accordance with Section 244A(1) of the Income Tax Act within six weeks. The rule was made absolute to the extent of these directions, and no order as to costs was issued.