2021 (2) TMI 189 - HC - Income Tax

Ex-parte action taken by the Respondents for adjusting the refund for the AY 2019-20 against the disputed income tax demand for the AY 2017-18 - HELD THAT - As we have enquired from Mr. Vohra, whether the Petitioner would be satisfied incase time-bound directions are issued for disposal of the appeal pending before CIT (A), and that, if the outcome of the decision results in any refund due to the Petitioner, the same can follow. Mr. Vohra, on instructions, states that Petitioner is agreeable to the same. He, however, submits that once the appeal is decided and in case any tax refund becomes due to the Petitioner, the same should be expeditiously dealt with. We have also heard Mr. Zoheb Hossain, Senior Standing Counsel for the Revenue. Accordingly, having considered the entire conspectus of the case, we feel that instead of issuing the directions as sought for, it would be in fitness of things that, the pending appeal of the Petitioner before CIT (A) is disposed of in a time-bound manner. We accordingly direct the concerned CIT (A), Delhi to decide the pending Appeal No.-1/10701/2019-20, within a period of two months from today. It is further directed that, in case the CIT (A) requires a report from the Assessing Officer, the same shall also be furnished within the timeline as specified by CIT (A).

Summary

Issues:
Quashing of ex-parte action under Section 245 of the Income Tax Act for adjusting the refund against outstanding income tax demand for a different assessment year, violation of jurisdiction, application for stay of balance income tax demand, adjustment of refund against income tax demand, compliance with CBDT Instructions, time-bound disposal of pending appeal before CIT (A), expeditious processing of tax refund if due.

Analysis:
The petition sought to quash the ex-parte action by the Respondents on 29th October, 2020, under Section 245 of the Income Tax Act, adjusting the refund of assessment year 2019-20 against outstanding income tax demand for assessment year 2017-18. The Petitioner argued that the action was unjustified and lacked jurisdiction as no hearing was provided. The Petitioner had appealed the assessment order for AY 2017-18, with a stay granted by Respondent No. 1 until a specified date or appeal disposal, subject to deposit conditions.

The Petitioner contended that they had made deposits towards the income tax demand, with 15% already paid, and a refund with interest was determined for AY 2019-20. However, the Respondents adjusted this refund against the outstanding income tax demand for AY 2017-18, resulting in 70.53% recovery of the total demand for that year. The Petitioner argued for the release of the refund, citing violations of CBDT Instructions in the adjustment process.

The Court, after hearing arguments, proposed time-bound disposal of the pending appeal before CIT (A) as a resolution. The Petitioner agreed to this proposal, emphasizing the need for expeditious handling of any tax refunds due post-appeal decision. The Court directed CIT (A) to decide the pending appeal within two months, with necessary reports from the Assessing Officer to be submitted promptly. Following the appeal decision, any refund due to the Petitioner was to be processed within two weeks.

The judgment clarified that it did not assess the case's merits, leaving all rights and contentions open. With these directions, the petition was disposed of, focusing on the importance of resolving the pending appeal within a specified timeline and ensuring prompt processing of any potential tax refunds.