Delhi HC ruled regarding adjustment of Income Tax refund against Demands
What is Section 156 of the Income Tax Act?
Section 156 of the Income Tax act deals with demand of income tax. When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the assessing officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable.
Fact and Issue of the case
Present writ petition has been filed with the following prayers:-
a) issuance of a writ of certiorari quashing the Impugned Order No.1 dated June 11, 2020 issued by CPC adjusting the entire refund for AY 2019-20 against the disputed demand for AY 2017-18; and
b) issuance of a writ of mandamus directing the Respondent No. 1 to refund the amount adjusted in excess of 20% of the disputed demand for AY 2017-18; and
c) issuance a writ of mandamus restraining the Respondents No. 1and 2 from further recovery of outstanding tax demand for AY 2017-18 until the disposal of appeal filed by the Petitioner before the Commissioner (Appeals) which is pending adjudication under the Faceless Appeal Scheme, 2020;and
d) issuance of a writ of certiorari quashing the Impugned Order No.2 dated December 21, 2020; and
e) imposition of exemplary costs on Respondent No.1 for carrying out a blatantly illegal recovery of tax against the accepted principles of reasonableness, judicial discipline and law
f) For ad-interim reliefs as the Court may deem fit; and
g) For the costs of this Petition;
h) Pass any other further order (s) / direction (s) as this Hon’ble Court may deem fit and proper in the fact and circumstances of the case.
Observation of the Court
Having heard learned counsel for the parties, this Court is of the view that the Government is bound to follow the rules and standards they themselves had set on pain of their action being invalidated. [See: Amrit Singh Ahluwalia vs. State of Punjab & Ors. 1975 (3) SCR 82 and Ramana Dayaram Shetty vs. International Airport Authority of India & Ors. 1979 SCR (3) 1014].
This Court is also of the view that the office memorandum dated 29th February, 2016 read with office memorandum dated 25th August, 2017 stipulate that the Assessing Officer shall normally grant stay of demand till disposal of the first appeal on payment of 20% of the disputed demand. In the event, the Assessing Officer is of the view that the payment of a lump sum amount higher than 20% is warranted, then the Assessing Officer will have to give reasons to show that the case falls in para 4(B) of the office memorandum dated 29th February, 2016.
This Court finds 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 29 th 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.
With the aforesaid directions, the present writ petition stands disposed of.
The Court ruled the decision in favour of the assessee and disposed off the petition
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