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2022 (1) TMI 1163 - HC - Income TaxAdjustment of refund against the outstanding tax demand - HELD THAT - As refunds have been adjusted against outstanding tax demand by the Authority without mentioning that the case of the assessee falls in the category mentioned in paragraph 4(B) of the Office Memorandum dated 29 th February, 2016 and/or without passing any order under Section 245 of the Act, 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. This Court is also of the view that the restrictive stay order dated 11 th February, 2019 issued by the Respondents granting stay to the Petitioner only till 31 st December, 2019 is in violation of the directions of the CBDT as well as previous orders of this Court wherein it has been held that the assessing officer must grant stay till the disposal of the first appeal. This Court directs the respondents to verify the facts stated in the writ petition and if it finds them to be true and correct, then refund the amount adjusted in excess of 20% of the disputed tax demands for the Assessment Year 2016-17 to the petitioner within four weeks.
Issues:
1. Refund of excess tax demand recovery for Assessment Year 2016-17. 2. Directions restraining further tax demand recovery. 3. Violation of Circulars/Notifications in recovery process. 4. Restrictive stay order validity. Analysis: Issue 1: Refund of Excess Tax Demand Recovery for Assessment Year 2016-17 The petitioner filed a writ petition seeking a refund of excess tax demand recovery for Assessment Year 2016-17, which was beyond the 20% limit of the total disputed tax demand. The petitioner argued that the assessing officer should grant a stay on the recovery of the balance disputed tax demand upon payment of 20% of the disputed amount, as per Circulars/Notifications issued by the Central Board of Direct Taxes. The court held that the respondents had recovered the disputed outstanding tax demand in excess of 20% by adjusting refunds due for subsequent assessment years. The court directed the respondent to refund the amount adjusted in excess of 20% of the disputed demand for the Assessment Year 2016-17. Issue 2: Directions Restraining Further Tax Demand Recovery The petitioner also sought directions restraining the respondents from recovering any further tax demand for Assessment Year 2016-17 until the disposal of the appeal filed before the Commissioner (Appeals) under the Faceless Appeal Scheme, 2020. The court noted that the assessing officer must grant a stay of demand till the disposal of the first appeal on payment of 20% of the disputed demand. The court directed the respondents to verify the facts and refund the amount adjusted in excess of 20% of the disputed tax demands for Assessment Year 2016-17 to the petitioner within four weeks. Issue 3: Violation of Circulars/Notifications in Recovery Process The petitioner argued that the respondents violated Circulars/Notifications by recovering the disputed outstanding tax demand in excess of 20% through the adjustment of refunds. The court held that the respondents must follow the rules and standards set by themselves, and the assessing officer should provide reasons if a lump sum amount higher than 20% is warranted. The court emphasized that the respondents are entitled to seek a pre-deposit of only 20% of the disputed demand during the pendency of appeals. Issue 4: Restrictive Stay Order Validity The court found that a restrictive stay order issued by the respondents, granting stay only till a specified date, was in violation of the directions of the CBDT and previous court orders. The court held that the assessing officer must grant a stay till the disposal of the first appeal. Consequently, the court directed the respondents to refund the amount adjusted in excess of 20% of the disputed tax demands for Assessment Year 2016-17 to the petitioner within four weeks.
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