2021 (8) TMI 261 - HC - Income Tax

Stay of demand - pre-deposit of only 20% of the disputed demand - adjustments of refunds against demand - HELD THAT - The order under Section 245 of the Act for adjustments of refunds as well as the order on stay of demand under Section 220(6) of the Act do not give any special/particular reason as to why any amount in excess of 20% of the outstanding demand should be recovered from the petitioner-assessee at this stage in accordance with paragraph 4(B) of the office memorandum dated 29th February, 2016. Consequently, this Court is of the view that the respondent is entitled to seek pre-deposit of only 20% of the disputed demand during the pendency of the appeal in accordance with paragraph 4(A) of the office memorandum dated 29th February, 2016, as amended by the office memorandum dated 25th August, 2017. Accordingly, the respondent no.1 is directed to refund the amount adjusted in excess of 20% of the disputed demand for the Assessment Year 2017-18, within four weeks. This Court clarifies that it is not granting any relief with regard to prayer (c), as the Principal Commissioner, Income Tax vide order dated 02nd July, 2021, as reproduced hereinabove, has already granted the said prayer.

Issues Involved:
1. Quashing of the Impugned Order dated June 11, 2020.
2. Refund of the amount adjusted in excess of 20% of the disputed demand for AY 2017-18.
3. Restraining further recovery of outstanding tax demand for AY 2017-18 until the disposal of the appeal.
4. Quashing of the Impugned Order dated December 21, 2020.
5. Imposition of exemplary costs for illegal recovery of tax.
6. Ad-interim reliefs and costs of the Petition.

Issue-wise Detailed Analysis:

1. Quashing of the Impugned Order dated June 11, 2020:
The petitioner sought the quashing of the Impugned Order dated June 11, 2020, issued by CPC, which adjusted the entire refund for AY 2019-20 against the disputed demand for AY 2017-18. The court considered the guidelines contained in the Office Memorandum dated 29.02.2016, issued by the Central Board of Direct Taxes, which stipulates that the Assessing Officer shall normally grant stay of demand till disposal of the first appeal on payment of 20% of the disputed demand.

2. Refund of the amount adjusted in excess of 20% of the disputed demand for AY 2017-18:
The petitioner argued that the adjustment was in excess of 20%, contrary to the guidelines. The court noted that the respondent did not provide any special/particular reason for recovering an amount in excess of 20% of the outstanding demand. Consequently, the court directed the respondent to refund the amount adjusted in excess of 20% of the disputed demand for AY 2017-18 within four weeks.

3. Restraining further recovery of outstanding tax demand for AY 2017-18 until the disposal of the appeal:
The petitioner requested a stay on further recovery of the outstanding tax demand for AY 2017-18 until the disposal of the appeal. The court observed that the Principal Commissioner, Income Tax, had already granted this relief in the order dated 02nd July, 2021, which stated that the remaining demand would be stayed and no further refunds would be adjusted until the disposal of the first appeal or 31.03.2022, whichever is earlier.

4. Quashing of the Impugned Order dated December 21, 2020:
The petitioner sought the quashing of the Impugned Order dated December 21, 2020, which granted a conditional stay of demand for AY 2017-18. The court found that the order did not provide any reasons for recovering an amount in excess of 20% of the disputed demand, as required by paragraph 4(B) of the office memorandum dated 29th February, 2016.

5. Imposition of exemplary costs for illegal recovery of tax:
The petitioner sought exemplary costs for the illegal recovery of tax. The court did not specifically address this issue in the judgment.

6. Ad-interim reliefs and costs of the Petition:
The court did not grant any specific ad-interim reliefs or costs of the petition, other than the directions already mentioned.

Conclusion:
The court directed the respondent to refund the amount adjusted in excess of 20% of the disputed demand for AY 2017-18 within four weeks. The court did not grant any relief with regard to restraining further recovery of outstanding tax demand, as the Principal Commissioner, Income Tax, had already granted this relief. The writ petition was disposed of with the aforesaid directions.

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