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2023 (12) TMI 550 - HC - Income TaxStay of demand - Recovery of outstanding demand - pre-condition for stay of demand - outstanding demand, as determined by the assessment order was disputed before the CIT(A) by taking recourse to appeal - HELD THAT - AO ought to have granted a stay in the matter, as the outstanding demand, as determined by the assessment order dated 30.12.2019, was disputed before the CIT(A) by taking recourse to appeal Instruction No. 1914 dated 21-3-1996 contains guidelines issued by the Board regarding procedure to be followed for recovery of outstanding demand, including procedure for grant of stay of demand. Thus when the outstanding amount is disputed before the first appellate authority, i.e., the CIT(A), the AO shall grant a stay on demand till disposal of the first appeal on deposit of a certain percentage of the disputed demand with the respondents/revenue. The change that was brought about by the OM dated 31.07.2017 was that the percentage of the disputed demand required to be deposited for a grant of stay was increased from 15% to 20%. In the instant case, the assessment order dated 30.12.2019 has created an outstanding demand amounting to Rs 36,69,10,379/-. This amount has been disputed before the CIT(A) via appeal dated 27.01.2020. The respondents/revenue already hold refunds due to the petitioner/assessee that exceed 20% of the disputed amount. Therefore, in our opinion, the AO is obligated to stay the demand created by the assessment order dated 30.12.2019. Thus, the AO is directed to stay the demand captured in the order dated 30.12.2019, while retaining 20% of the disputed demand. A necessary consequence of such direction would be that the petitioner/assessee would be entitled to a refund of the remaining amount.
Issues:
The issues involved in the judgment are the early hearing of a matter concerning the release of a refund under Section 143(1) of the Income-tax Act, 1961, and the adjustment of a demand raised in an assessment order for Assessment Year (AY) 2017-18. Early Hearing of Refund Matter: The petitioner sought early hearing for the release of a refund amounting to Rs. 62,14,31,834 under Section 143(1) of the Income-tax Act, 1961. The petitioner's grievance was the failure of the respondents to release the refund along with applicable interest. The respondents had not filed a counter-affidavit in the matter, and the matter was listed for further hearing. Adjustment of Demand in Assessment Order: The assessment order for AY 2017-18 raised a demand of Rs. 36,69,10,379, which was adjusted against pre-paid taxes deposited by the petitioner. The remaining amount after adjustment was remitted to the petitioner, which included interest. The petitioner contended that the entire demand could not have been adjusted based on Office Memorandums issued by the Central Board of Direct Taxes (CBDT). The petitioner also challenged various additions made by the Assessing Officer, citing relevant judgments to support their contentions. Legal Analysis and Directions: The Court noted that the AO should have granted a stay in the matter as the demand was disputed before the CIT(A), in accordance with the OMs issued by the CBDT. The OMs prescribed that a certain percentage of the disputed demand should be deposited for a grant of stay, which was increased from 15% to 20% in a revised guideline. Since the refunds due to the petitioner exceeded 20% of the disputed amount, the AO was directed to stay the demand created by the assessment order and release the excess amount to the petitioner. Consequently, the writ petition was disposed of with specific directions for the AO to comply with. Conclusion: The judgment addressed the early hearing of a refund matter and the adjustment of a demand in an assessment order for AY 2017-18. It emphasized the legal obligations of the Assessing Officer in granting a stay on demand when disputed before the CIT(A), based on the guidelines set forth by the CBDT. The Court provided clear directions for the AO to stay the demand and release the excess amount to the petitioner, in line with the legal provisions and judgments cited during the proceedings.
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