2022 (1) TMI 353 - HC - Income Tax

Refund of adjustments made in excess of 20% of the disputed tax demands - HELD THAT - As per mandate of law as well as the fact that refunds have been adjusted against outstanding tax demand by the Authority without invoking Section 245 of the Act and/or without following the due procedure prescribed under the said Section inasmuch as no notice or opportunity of pre-decisional hearing had been provided to the petitioner prior to such adjustment of refund this Court is of the opinion that the petitioner is entitled to refund of adjustments made in excess of 20% of the disputed tax demands.

Summary

Issues:
Refund of excess amount deducted in excess of 20% of the outstanding demand.

Analysis:
The petitioner filed a writ petition seeking a refund of ?1,66,35,954, which was recovered in excess of 20% of the total disputed tax demand for the Assessment Year 2013-14 against refunds due for various Assessment Years. The petitioner also sought directions for the appeal filed against the order dated 28th March, 2016 under Section 143(3) of the Income Tax Act, 1961. The petitioner argued that under Section 220(6) of the Act, the Assessing Officer has the power to grant stay on recovery of outstanding tax demand subject to conditions. Circulars issued by the Central Board of Direct Taxes prescribe that upon depositing 20% of the total disputed outstanding tax demand, the assessing officer must grant stay on recovery of the balance demand. However, the respondents recovered the disputed outstanding tax demand in excess of 20% by adjusting refunds due for subsequent assessment years.

The Respondents argued that there is no provision for refund of excess amount recovered, but it can be refunded through manual refund. The Court referred to a previous judgment where it was held that the Assessing Officer should grant stay of demand till disposal of the first appeal on payment of 20% of the disputed demand unless specific reasons are given for a higher amount. The Court found that the orders for adjustments of refunds did not provide reasons for recovering amounts in excess of 20% of the outstanding demand. Therefore, the Court directed the respondents to refund the amount adjusted in excess of 20% of the disputed demand for the Assessment Year 2013-14 within four weeks.

In conclusion, the Court held that the petitioner is entitled to a refund of adjustments made in excess of 20% of the disputed tax demands. The respondents were directed to verify the facts and refund the excess amount within four weeks, disposing of the writ petition and application.