2023 (2) TMI 529 - HC - Income Tax

Stay of demand - grant of stay of demand till the disposal of the First Appeal on payment of 15% of the disputed demand - respondent refused to refund the excess amount adjusted beyond 20% of the demand raised by the respondent - petitioner specific grievance that adjustment, which has been made against the refund to be granted as high as 65% of the demand raised, which is more than 20% prescribed by the said instructions dated 31.07.2017, HELD THAT - This is a classic case where even before this Court at the time of filing of affidavit-in-reply, the instructions given to the counsel is to the effect that there was a complete absence of any application when in fact at the time of filing of the appeal, the application has been made and assuming the application was prior in point of time, the gap is only of two days and that kind of a hyper technicality would hardly be expected when otherwise the assessee has fulfilled all other requirements for him to be entitled to the benefit of these circulars. In fact, even the date of 28.04.2015 he is not to be amplified in as much as the endorsement of the authority concerned is indicative of the same being of 30.04.2015. There has been an application for rectification of the Assessment Order on 31.03.2015 that may not be treated as an application for the purpose of exercise of the powers given under the circular. The petitioner s express request to the respondent to keep the demand in abeyance till the time the appeal of the assessment year 2012-13 is disposed of ought to have been considered. As noticed that the adjustments which have taken place over the period of time by disregarding such a request has adjusted the refund to the tune of nearly 65%. When, in fact, 20% of the amount would come to Rs.4,10,67,754/- rounding the same that of to Rs.4.11 Crore, the remaining amount could not have been continued to be adjusted against the demand which is yet to be adjudicated by the CIT (Appeals). Accordingly, this petition preferred by the petitioner deserves to be allowed quashing and setting aside the order whereby the respondent refused to refund the excess amount adjusted beyond 20% of the demand raised by the respondent for the assessment year 2012-13. The only reason one could notice in the communication dated 11.01.2022 for denying and not acceding to the request of the petitioner is that the adjustment of the refund against the demand is done by the CPC system in accordance with the total outstanding demand. This has no reference whatsoever of both the CBDT Office Memorandums referred to hereinabove. This highhanded approach on the part of the respondent is neither palatable nor endorsable. Therefore, it deserves interference at the ends of the Court. Resultantly, this petition is allowed. The respondent authority is directed to refund the excess amount of Rs.4.11 Crore (rounded of) adjusted beyond 20% demand raised by the respondent for the assessment year 2012-13. We also direct further the assessee to cooperate in the early disposal of the appeal. If the assessee fails to cooperate in the disposal of the appeal, the respondent shall be at liberty to approach this Court for review its order.

Issues Involved:
1. Adjustment of refunds against outstanding tax demand.
2. Applicability of CBDT guidelines for stay of demand.
3. Petitioner's application for stay of demand.
4. Respondent's refusal to refund excess adjusted amount.
5. Compliance with CBDT Office Memorandums and procedural guidelines.
6. Court's directive for refund and expedited appeal disposal.

Issue-wise Detailed Analysis:

1. Adjustment of Refunds Against Outstanding Tax Demand:
The petitioner, a registered company, filed a return of income for the assessment year 2012-2013, declaring a total income of Rs.43,01,51,910/-. The case was selected for scrutiny, resulting in an assessment order determining the total income at Rs.87,35,93,335/- and raising a demand of Rs.20,53,38,770/-. The petitioner appealed against this order, and during the pendency of the appeal, the respondent adjusted refunds amounting to Rs.30,43,48,695/- from subsequent years against this demand, constituting 65.43% of the total demand.

2. Applicability of CBDT Guidelines for Stay of Demand:
The petitioner cited CBDT guidelines, specifically Instruction No.1914 and Office Memorandums dated 29.02.2016 and 31.07.2017, which prescribe the payment of 15% and later 20% of the disputed demand for granting a stay of recovery during the appeal process. The guidelines mandate that the Assessing Officer should grant a stay of demand till the disposal of the first appeal on payment of the specified percentage unless a higher or lower amount is warranted based on specific circumstances.

3. Petitioner's Application for Stay of Demand:
The petitioner claimed to have filed an application for stay of demand on 28.04.2015, requesting the demand be kept in abeyance till the appeal's disposal. The respondent, however, contended that no such application was filed, thus justifying the adjustment of refunds. The court found that the application was indeed filed on 30.04.2015, the same day the appeal was preferred, and thus, the petitioner's request for limiting the amount to 20% should have been considered.

4. Respondent's Refusal to Refund Excess Adjusted Amount:
The respondent summarily rejected the petitioner's application for refund of the excess amount adjusted beyond 20% of the demand. The court noted that the respondent's action lacked reference to the CBDT guidelines and was deemed highhanded and not in accordance with the prescribed procedures.

5. Compliance with CBDT Office Memorandums and Procedural Guidelines:
The court emphasized the importance of adhering to the CBDT guidelines, which are binding on the Assessing Officers. It was noted that the guidelines require the Assessing Officer to act upon the stay application and, if necessary, refer the matter to higher authorities for deciding the quantum of demand to be paid. The court found that the respondent failed to follow these procedures, leading to an unjustified adjustment of 65% of the demand.

6. Court's Directive for Refund and Expedited Appeal Disposal:
The court allowed the petition, quashing the order dated 11.01.2022, and directed the respondent to refund the excess amount of Rs.4.11 Crore adjusted beyond 20% of the demand. The court also directed the petitioner to cooperate in the early disposal of the appeal and mandated the Appellate Authority to dispose of the appeal within eight weeks. The refund was to be processed within four weeks, and the court permitted direct service through e-mode.

Conclusion:
The court's judgment underscored the necessity for tax authorities to comply with CBDT guidelines and procedural fairness in adjusting refunds against outstanding demands. The decision mandated a refund of the excess amount adjusted and expedited the appeal process, ensuring adherence to legal standards and protecting the petitioner's rights.

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