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TMI Blog2013 (5) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... 03,09,77,260/- as against the alleged demand outstanding for Assessment Year 2009-10, seeking to quash the same and consequently direct the respondent herein to refund the aforesaid sum of Rs.103,09,77,260/- under Section 240 of the Income Tax Act, 1961 (for short, 'the Act') together with interest thereon as may be payable under Section 244/244-A of the Act. 5. The case of the petitioner is as follows: (a) The petitioner is a Private Limited Company incorporated under the Companies Act, 1956 and engaged in the business of development of computer software and related services and its export and provides various software solutions to variety of industries. The petitioner carries out its business activities through various units set up in Software Technology Parks (STPs) and Special Economic Zones (SEZs) and claims deduction under Section 10-A and 10-AA of the Act. (b) For the assessment year 2008-09, the petitioner filed their Return of income on 29.9.2008, which was processed under Section 143(1) of the Act on 8.3.2010. The petitioner's case was selected for scrutiny by the Assistant Commissioner of Income Tax under Section 143(2) of the Act on 12.8.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner at Rs.716,33,79,150/- as against the returned income of Rs.93,54,87,072/- and consequently, a demand of Rs.181,37,25,560/- was raised, vide demand notice, dated 31.12.2011 under Section 156 of the Act. (e) Pursuant to the said demand notice, the petitioner filed a stay petition before the respondent under Section 220(6) of the Act and the respondent, vide order dated 6.7.2012, stayed the demand to the extent of Rs.71,55,83,993/- pending disposal of the appeal before the Commissioner of Income Tax (Appeals) (i.e. for short, 'CIT(A)') or until 31.12.2012 whichever is earlier. The petitioner remitted Rs.25,22,00,000/- on 24.2.2012 and the respondent adjusted income tax refund of Rs.71,47,53,133/- relating to various assessment years on various dates only with express consent of the petitioner given during the hearing while completing the assessment, and thereafter, on 17.12.2012, the petitioner requested for extension of stay of demand till the disposal of appeal by CIT(A). (f) The petitioner filed an appeal against the said assessment order, dated 30.12.2011, for assessment year 2008-09 on 30.1.2012 and the same was decided in favour of the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mal computation purpose of an amount under Section 40(a)(i) with respect to non-with-holding of taxes for payments made for purchase of software licence), are similar to that of the one made in assessment year 2008-09, which was eventually decided in favour of the petitioner by CIT(A) and many of the issues being similar, were already decided in favour of the petitioner for the assessment year 2005-06 and 2007-08 by the Income Tax Appellate Tribunal, Chennai, by order dated 23.1.2013 in I.T.A.Nos.114 and 2100 (Mds) of 2011 and I.T.A.No.90(Mds) of 2011. Thus, the demand made by the Additional C.I.T. for the assessment year 2009-10, is untenable. (k) Even assuming without admitting that the three new and minor issues as stated above, are decided against the petitioner, the total sum of income tax demand payable will only be approximately to an extent of Rs.6,00,00,000/- as against the untenable demand made at Rs.362,38,85,090/-. (l) Where the demand made is substantially greater than the Returned income, the recovery proceedings are liable to be stayed and where the demand arises out of the issues which have been decided in favour of the assessee in the ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard's letter dated 28.4.2010, wherein, CBDT gave instructions to the Revenue Officers that the provisions of Section 245 of the Act must be followed and written intimation must be sent to the assessee before adjusting refund of the outstanding demand and any lapse in this regard shall be viewed seriously. The petitioner claims balance of convenience in their favour and alleges that prima-facie case is made out and states that grave prejudice and irreparable loss will be caused if the impugned order is allowed to be acted upon. 7. The respondent has filed counter affidavit, inter-alia stating as follows: (a) The respondent objects to the usage of the term "alleged demand" by the petitioner, as the demand for the assessment year 2009-10 was raised under the provisions of the Act and is very much existing on record and the demand for Rs.362,38,85,090/- raised in the assessment year 2009-10 is a legally enforceable demand as on date, as demand notice was issued along with the assessment order, and the said notice was served on the assessee on 11.3.2013. The averment of the petitioner that the income tax refund of Rs.71,47,53,133/- relating to various assessment years we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was sent by post on 30.3.2013. In the month of March, the assessing officer was under tremendous pressure of completing time barring scrutiny assessments and also to give effect to various appellate orders and collection of demands. The delay in dispatching the intimation about the adjustment of refund, is genuinely regretted, which is only a procedural delay and the act of adjustment of refund against the demand payable, is well within the framework of law. (e) The averment of the petitioner that the refund due to the petitioner in assessment year 2008-09 was adjusted against the demand raised in assessment year 2009-10 even before the same becoming due, is not acceptable. The demand raised under the Act becomes payable the moment the demand notice is served on the assessee (petitioner). As per Section 220(1) of the Act, the assessee is required to pay the demand specified in demand notice under Section 156 of the Act within 30 days from the date of service of the demand notice and the period of 30 days can further be reduced by the assessing officer if he has any reason to believe that it will be detrimental to the Revenue, if the full period of 30 days is allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ognizant Inc. USA and there is no agreement with the client or the final site of maintenance. Based on these and after elaborate analysis of the facts, the tax holiday claimed on overseas software maintenance was denied in the assessment order, which resulted in substantial reduction in tax holiday under Section 10-A/10-AA of the Act, i.e. from Rs.2163,35,14,860/- claimed by the assessee-Company to Rs.1004,40,71,894/-. Based on the findings made in the assessment year 2009-10, the order of CIT (Appeals) granting relief to the assessee on the issue of tax holiday on overseas software maintenance was not accepted and it is proposed to file further appeal by the Department before the I.T.A.T. (h) With regard to the decisions of the appellate authorities in the earlier assessment years, the assessing officer has not accepted these decisions and proposals had already been submitted to the Commissioner for further contesting these appellate decisions in the earlier assessment years to the next higher appellate forum. The order of CIT (A) in assessment year 2008-09 is proposed to be contested before the ITAT and orders of ITAT for assessment years 2005-06 and 2007-08 are pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner to the Additional Commissioner of Income Tax, Large Taxpayer Unit, Chennai. In the said Notification, it is clearly stated that after completion of assessment proceedings under Section 143(3) of the Act for assessment year 2009-10, the Additional Commissioner of Income Tax (LTU) shall return the files to the Deputy Commissioner of Income Tax, Large Taxpayer Unit, Chennai, i.e. the respondent. Thus, after completing the assessment proceedings under Section 143(3) of the Act in assessment year 2009-10, vide order dated 7.3.2013, the Additional CIT, LTU has returned the relevant records to the assessing officer, viz., Deputy CIT, LTU and thereafter, refund determined in assessment year 2008-09 was adjusted against the demand raised in assessment year 2009-10. (k) It is for the assessee to file a stay petition under Section 220(6) of the Act as and when a demand notice is served on them. The Department need not anticipate for any stay petition to be filed by the petitioner. At the time of determination of refund in assessment year 2008-09, no stay petition has been filed by the petitioner against notice of demand in assessment year 2009-10. Hence, the refund de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending in assessment year 2009-10. (p) Since act of adjustment of refund of assessment year 2008-09 against the demand of assessment year 2009-10, has already been completed on 26.3.2013 and no further action is pending, the question of granting stay of the impugned order does not arise. (q) The order dated 22.3.2013 was passed to give effect to the order of CIT (Appeals) for assessment year 2008-09, whereby, refund of Rs.103,09,77,260/- was determined. If this order is quashed, no refund can be issued. Even if the order dated 22.3.2013 is quashed, then a fresh order of refund is to be passed in assessment year 2008-09. In such circumstances, as per provisions of Section 245 of the Act, the demand pending in assessment year 2009-10 needs to be adjusted against the refund, which will be a repetition of what was already done by the Department, which does not serve any purpose. According to the respondent, the Writ Petition is not maintainable and is devoid of merits and hence, the respondent prayed to dismiss the Writ Petition. 8. The respondent has also filed an affidavit, dated 18.4.2013, stating as follows: (i) A demand of Rs.362,38,85, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Board of Direct Taxes (for short, 'the CBDT'), issued in Instruction Nos.1952, dated 14.8.1998 and Instruction No.1969, dated 20.8.1999, stating that written intimation must invariably be sent to assessee before adjusting his refund with outstanding demand in compliance to provisions of Section 245 of the Act. As there were certain lapses on the part of the Department in some cases, the CBDT reiterated the position in the subsequent circulars also. Therefore, the learned Senior Counsel appearing for the petitioner submitted that there is non-compliance of the provisions of Section 245 of the Act, as there was no intimation sent to the petitioner-assessee before the impugned adjustment of refund is made by the respondent. 11. On the other hand, the learned Senior Standing Counsel appearing for the respondent-Revenue submitted that it is only to give effect to the order of the Commissioner of Income Tax (Appeals), LTU, Chennai in I.T.A.No.108/11-12/LTU(A), dated 25.2.2013 and the assessment order under Section 143(3) of the Act, dated 30.12.2011 read with rectification order, dated 23.1.2013, the impugned order dated 22.3.2013 has been passed and therefore, the amount due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- was raised by demand notice, dated 31.12.2011 issued under Section 156 of the Act. The petitioner filed a stay petition before the respondent under Section 220(6) of the Act and the respondent, vide order dated 6.7.2012, stayed the demand to the extent of Rs.87,55,83,993/- (Rs.16,00,00,000/- + Rs.71,55,83,993/-) pending disposal of the appeal before the Commissioner of Income Tax (Appeals) or until 31.12.2012, whichever is earlier. The petitioner remitted an amount of Rs.25,22,00,000/- on 24.2.2012 and the respondent adjusted income tax refund of RS.71,47,53,133/- relating to various assessment years on various dates only with express consent of the petitioner given during the hearing while completing the assessments. Thereafter, the petitioner on 17.12.2012, requested for extension of stay of demand till the disposal of the appeal by CIT(A). 16. The petitioner filed an appeal against the said assessment order dated 30.12.2011 for the assessment year 2008-09 on 30.1.2012 and the same was decided in favour of the petitioner on 25.2.2013. The CIT(A) allowed the appeal except on one issue pertaining to disallowance under Section 14-A of the Act. The assessment for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion." 20. From a reading of the above Section, it is crystal clear that the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set-off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under the Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under that Section. 21. On a perusal of the entire material documents including the impugned order, it is clearly evident that there is no intimation in writing to the petitioner-assessee before making such an adjustment of refund. No doubt, the respondent is empowered to make the adjustment of refund, but the same can be done only in the manner as contemplated under the provisions of the Act. It is conspicuous from the records that there is no intimation in writing to the petitioner before making such adjustment of refund. As the respondent has not followed the procedures prescribed under the provisions of the Act while adjusting the refund amount with the outstanding amount, the impugned ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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