2024 (12) TMI 651 - HC - Income Tax

Adjustment of outstanding demand against refund payable - as contended on behalf of the petitioner that the petitioner was granted stay of recovery of the demand for the AY 2015-16, subject to the payment of 20% of the outstanding tax demand - HELD THAT - As not disputed that in terms of the instructions issued by the CBDT, in the given cases, the stay is required to be granted to the Assessee in respect of the disputed demands on the condition that the Assessee deposits an amount equal to 20% of the outstanding tax demand. In the given circumstances, the effect of the Revenue adjusting refunds against the stayed demand would essentially place the Assessee that is entitled to a refund in a disadvantageous position vis-a-vis those assesses to whom no refund is due. It is also material to note that there is no allegation that the petitioner is alienating its assets so as to frustrate the recovery of any demand or that it would be unable to pay the disputed demand in the event the same was confirmed in the appellate proceedings. In the given facts, we find merit in the contention that the Revenue s decision to adjust the refund due to the petitioner for the AYs 2008-09 and 2017-18, is arbitrary. See Eko India Financial Services (P.) Ltd. 2021 (8) TMI 261 - DELHI HIGH COURT We consider it apposite to direct the Revenue to refund the amount due to the petitioner with applicable interest, in respect of the AYs 2008-09 and 2017-2018, as expeditiously as possible, and preferably within a period of eight weeks from date.

Summary

Issues:
Adjustment of refunds against outstanding tax demand for AY 2015-16 stayed under specific conditions.

Analysis:

1. Background and Assessment Proceedings:
The petitioner, a company engaged in telecommunication equipment business, filed returns for AY 2015-16 with subsequent modifications leading to an assessed income of Rs. 11,66,69,04,758/- and a demand of Rs. 43,38,30,384/-. An appeal against this assessment order is pending before CIT (A), and a stay application under Section 220 (6) of the Income Tax Act, 1961 was filed, leading to a conditional stay order requiring a 20% deposit of the outstanding tax demand.

2. Adjustment of Refunds and Legal Contention:
The petitioner's grievance arose when refunds for AY 2008-09 and 2017-18 were adjusted against the stayed demand for AY 2015-16, despite the petitioner's compliance with the conditions of the stay order. The petitioner argued that such adjustment was contrary to CBDT's Office Memorandum dated 29.02.2016 and previous court decisions.

3. Legal Arguments and Precedents:
The Revenue contended that the stay granted was not unconditional and reserved the right to adjust refunds against the demand. However, the petitioner argued that adjustments should be limited to the amount required for securing the stay, referencing specific clauses of the Office Memorandum.

4. Court's Decision and Precedent Reference:
The court found merit in the petitioner's contention, deeming the Revenue's decision to adjust refunds as arbitrary. Citing a previous judgment, the court directed the Revenue to refund the excess amount adjusted against the demand for AY 2017-18 and AY 2008-09, emphasizing adherence to the guidelines set by CBDT.

5. Conclusion and Relief Granted:
In line with the precedent and legal principles, the court allowed the petition, directing the Revenue to refund the amount due to the petitioner for AYs 2008-09 and 2017-18 promptly, preferably within eight weeks from the judgment date, with applicable interest.

This detailed analysis encapsulates the core issues, legal contentions, court's reasoning, and the relief granted in the judgment concerning the adjustment of refunds against the outstanding tax demand for the AY 2015-16 stayed under specific conditions.