2022 (5) TMI 285 - HC - Income Tax

Stay of demand - seeking refund which was recovered in excess of 20% of the total disputed tax demand - stay on recovery of outstanding tax demand subject to fulfilment of appropriate conditions - HELD THAT - Refund has been adjusted against the outstanding tax demand by the Authority without following the due procedure prescribed under the said Section inasmuch as no notice or opportunity of pre-decisional hearing had been provided to the petitioner prior to such adjustment of refund, this Court is of the opinion that the petitioner is entitled to refund of adjustments made in excess of 20% of the disputed tax demands and Rs.30,000/-set off of refunds against tax payable. Consequently, this Court directs the respondents to verify the facts stated in the writ petition and if it finds them to be true and correct then refund the amount adjusted in excess of 20% of the disputed tax demands for the Assessment Year 2012-13 as well as Rs.30,000/-as mentioned in the intimation under Section 245 of the Act to the petitioner within four weeks. The Appellate Authority is also directed to decide the petitioner s appeal challenging the order dated 27th November, 2019 within a year.

Issues:
Seeking refund of excess tax demand recovery for AY 2012-13 against AY 2020-21 and direction for expeditious appeal decision under Section 144.

Analysis:
The petitioner filed a writ petition to claim a refund of Rs.57,65,410, which was collected in excess of 20% of the disputed tax demand for AY 2012-13 against the refund due for AY 2020-21. The petitioner also requested a directive for the respondents to promptly decide the appeal filed against the order dated 27th November, 2019 under Section 144 of the Income Tax Act, 1961. The petitioner argued that under Section 220(6) of the Act, the Assessing Officer has the authority to grant a stay on the recovery of outstanding tax demand upon fulfilling certain conditions. The Central Board of Direct Taxes issued Circulars/Notifications specifying that if an assessee challenges additions/disallowances in the assessment order by appealing to the CIT(A) and deposits 20% of the disputed outstanding tax demand, the Assessing Officer can stay the recovery of the remaining demand. However, the respondents allegedly recovered the disputed outstanding tax demand in excess of 20% by adjusting refunds from subsequent assessment years, contrary to the provisions of the Circulars. The petitioner highlighted that the respondents adjusted Rs.95,43,930, which was 51% of the demand, without deciding on the petitioner's stay application.

The Court observed that the issue raised in the petition had been previously addressed in a similar matter. Referring to the case law, the Court emphasized that the government must adhere to the rules and standards they have established, failing which their actions could be invalidated. The Court noted that the Assessing Officer should typically grant a stay of demand until the first appeal's disposal upon payment of 20% of the disputed demand. If the Assessing Officer deems a lump sum higher than 20% necessary, they must provide reasons justifying it. The Court found that the orders for refund adjustments and stay of demand did not provide any specific reasons for recovering amounts exceeding 20% of the outstanding demand, as required by the Circular. Therefore, the Court ruled that the respondents were only entitled to seek a pre-deposit of 20% of the disputed demand during the appeal's pendency.

Consequently, the Court directed the respondents to refund the amount adjusted in excess of 20% of the disputed demand for AY 2012-13 and Rs.30,000 set off of refunds against tax payable. The Court emphasized that the petitioner should receive the refund for the excess adjustments within four weeks. Additionally, the Appellate Authority was instructed to decide on the petitioner's appeal challenging the order dated 27th November, 2019 within a year. With these directions, the writ petition and applications were disposed of.

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