2021 (9) TMI 203 - HC - Income Tax

Stay of demand - guideline for stay of demand on payment of 20% of the disputed demand (earlier 15%) till the final disposal of the first appeal - Adjustment of future refunds - provisions of Section 254(1) and(2A) of the Act - alternate remedy - whether the action on the part of the Revenue is in accordance with law? - HELD THAT - It is not that the CIT has not granted stay in favour of the writ applicant, but the same is conditional. It is highly doubtful whether such an order can be challenged in an appeal before the ITAT. We are not inclined to reject this writ application only on the ground of alternative remedy. So far as the CBDT instructions are concerned, there is an underlying principle that pending the first appeal, the assessee may be afforded with some protection against coercive recovery on the condition of deposit of some money So far as Section 245 of the Act is concerned, there need not be any debate as regards the power of the Department to adjust the refund, however, such power should be exercised in a reasonable manner. Here is a case wherein the assessee is sought to be deprived of a huge amount towards the refund. A huge amount towards refund is being declined on the ground that a demand is pending for the previous year - One assessee who has to recover significant amount towards the refunds and another who has not to recover the refunds would be put in two different categories because in the first case refund would be adjusted whereas in the second case, no such adjustment is possible. We are also not impressed by the submission canvassed on behalf of the Revenue as regards estoppel. First, there cannot be any estoppel against the statute. We may only observe that the writ applicant has raised issues relating to financial hardships. The writ applicant has pointed out that it has suffered losses in earlier four years - As decided in M/S JINDAL STEEL AND POWER LTD. 2016 (9) TMI 1194 - PUNJAB AND HARYANA HIGH COURT CIT rightly did not grant a complete stay but considered the petitioner's application in the alternative for a stay subject to its paying 15% of the outstanding demand in terms of the Office Memorandum. Writ application succeeds and is hereby allowed. The impugned order dated 12th July, 2019 passed by the respondent No.2, Annexure-A is hereby set aside to the extent it puts a condition of adjustment of future demands arising to the writ applicants. There shall be unconditional stay of demand against the application filed by the writ applicants dated 10th July, 2019 till the final disposal of the appeal pending before the Income Tax Appellate Tribunal. The intimations dated 22nd July, 2019, Annexure-A1 are also hereby quashed and set aside.

Issues Involved:
1. Quashing of the order dated 12.07.2019 regarding refund adjustment.
2. Direction to issue refund for A.Y. 2014-15.
3. Quashing the condition of adjustment of future refunds.
4. Prohibition on recovery or adjustment of amounts for A.Y. 2012-13 and 2010-11.
5. Quashing and staying the operation of intimations dated 22.07.2019.
6. Granting unconditional stay of demand till the disposal of the appeal by ITAT.

Detailed Analysis:

1. Quashing of the Order Dated 12.07.2019 Regarding Refund Adjustment:
The writ applicants challenged the order dated 12.07.2019, which adjusted the refund against the demand for A.Y. 2012-13. The court noted that the respondent had previously granted stay orders with conditions to adjust future refunds. The court found that the Revenue's action to adjust refunds was not in accordance with the principle of reasonableness and fairness, especially when substantial tax payments had already been made by the writ applicants.

2. Direction to Issue Refund for A.Y. 2014-15:
The writ applicants sought a direction for the issuance of a refund arising from the appellate order for A.Y. 2014-15. The court observed that the Revenue had adjusted the refund of ?224 Crore for A.Y. 2014-15 against the demand for A.Y. 2012-13. The court concluded that such adjustment should not have been made unconditionally and directed the Revenue to issue the refund without adjustment.

3. Quashing the Condition of Adjustment of Future Refunds:
The court examined the condition imposed by the respondent to adjust future refunds against the demand for A.Y. 2012-13. The court found that the condition was unreasonable, especially given the substantial tax payments already made by the writ applicants. The court set aside the condition, emphasizing that the power to adjust refunds should be exercised reasonably.

4. Prohibition on Recovery or Adjustment of Amounts for A.Y. 2012-13 and 2010-11:
The writ applicants sought prohibition on the recovery or adjustment of amounts for A.Y. 2012-13 and 2010-11. The court noted that the Revenue had issued intimations proposing to adjust refunds for these years. The court found that further recovery or adjustment would be unjust given the substantial payments already made and directed the Revenue to refrain from such actions until the disposal of the appeal by ITAT.

5. Quashing and Staying the Operation of Intimations Dated 22.07.2019:
The writ applicants challenged the intimations dated 22.07.2019, which proposed to adjust refunds for A.Y. 2012-13 and 2010-11. The court found these intimations to be unreasonable and quashed them. The court also stayed their operation, preventing the Revenue from recovering or adjusting any amounts based on these intimations.

6. Granting Unconditional Stay of Demand Till the Disposal of the Appeal by ITAT:
The court considered the substantial tax payments already made by the writ applicants and the financial hardships claimed. The court granted an unconditional stay of the demand against the application filed by the writ applicants dated 10.07.2019. The court emphasized that the stay would remain in effect until the final disposal of the appeal pending before ITAT.

Conclusion:
The court allowed the writ application, set aside the impugned orders and conditions, and directed the Revenue to issue refunds without adjustments. The court also granted an unconditional stay of the demand till the final disposal of the appeal by ITAT and requested ITAT to expedite the hearing and disposal of the appeal within two months.

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