2022 (5) TMI 1162 - HC - Income Tax

Seeking refund which was recovered in excess of 10% of the total disputed tax demand against the refunds due - HELD THAT - This Court is of the view that the restrictive stay order dated 11 th March, 2020 issued by the Respondents granting stay to the petitioner only till 30th September, 2020 is in violation of the directions of the CBDT as well as previous orders of this Court wherein it has been held that the Assessing Officer must grant stay till the disposal of the first appeal. Also, keeping in view the fact that the adjustments have been made on 7th September, 2021 i.e. prior to issuance of a set off of refund order dated 28th January, 2022 under Section 245, this Court is of the opinion that the Petitioner is entitled to refund of adjustment made in excess of 10% of the total disputed tax demand. Consequently, this Court directs the respondents to refund to the petitioner the amount adjusted in excess of 10% of the disputed tax demands for the Assessment Year 2017-18 within four weeks along with statutory interest.

Summary

Issues:
Seeking refund of excess recovery of tax demand, violation of natural justice in adjusting refund without notice under Section 245 of the Income Tax Act.

Analysis:
The petitioner filed a writ petition to seek a refund of Rs.1,52,240, which was recovered in excess of 10% of the total disputed tax demand for the Assessment Year 2017-18 against refunds due for the Assessment Year 2020-21. The petitioner had obtained a stay order on the demand till the disposal of the first appeal or 30th September 2020, whichever was earlier. Despite this, the respondents adjusted the refund without issuing a notice under Section 245 of the Act, which is a mandatory requirement before such adjustments. The petitioner's application for extension of the stay of demand was pending, and no opportunity of being heard was provided before the adjustment was made.

The respondents argued that an adjustment order under Section 245 of the Act was passed, and as the stay order was limited in time, they were within their rights to adjust the refund. However, the Court found that the restrictive stay order issued by the respondents was in violation of the directions of the CBDT and previous orders of the Court, which required the Assessing Officer to grant stay till the disposal of the first appeal. The Court noted that the adjustments were made before the issuance of the set-off of refund order under Section 245, and thus, the petitioner was entitled to a refund of the excess adjustment made in violation of the 10% limit of the disputed tax demand.

Consequently, the Court directed the respondents to refund the amount adjusted in excess of 10% of the disputed tax demands for the Assessment Year 2017-18 within four weeks, along with statutory interest. The writ petition and applications were disposed of with this direction.