The court ruled that the adjustment of a tax refund against a demand was unjustified due to the delay in adjudicating the stay application, emphasizing timely resolution in tax matters.

JUDGMENT :

Jitendra Jain, J.

1. Heard learned counsel for the parties.

2. Rule. The Rule is made returnable immediately at the request of and with the consent of the learned counsel for the parties.

3. This petition is filed challenging the recovery of more than 20% of the tax demand for assessment year 2015-2016 from the Petitioner.

4. The Petitioner is an individual and has filed his return of income on 28 September 2015 returning income of Rs.56,65,660/-. The said return of income was selected for scrutiny assessment and on 20 December 2017 an assessment order came to be passed under Section 143(3) of the Income Tax Act, 1961 (“the Act”) assessing income at Rs.1,11,85,520/- and a demand of Rs.37,91,550/- was made.

5. The Petitioner filed stay application for assessment year 2015-2016 before the Assessing Officer requesting for stay of the demand raised vide order dated 20 December 2017. It is important to note thatprior to making this application for stay, the Petitioner voluntarily had already deposited 20% of the demand which worked out to Rs.7,58,310/-.

6. On 6 October 2022, an intimation under Section 143(1) of the Act was issued processing return for assessment year 2022-2023 and the refund of assessment year 2022-2023 amounting to Rs.6,05,030/-was adjusted against the demand for assessment year 2015-2016.

7. The assessee’s stay application for assessment year 2015-2016 dated 29 January 2018 was not decided for a period of almost for more than six years and on 17 April 2024 an order on the stay application came to be passed. In the said order, the Assessing Officer admitted that 20% of the total demand has already been paid by the assessee and, therefore, relying upon Instruction No.1914, the stay was granted for the balance amount of Rs.30,33,240/-. The stay was granted subject to the conditions that the Petitioner shall co-operate in the early disposal of the appeal and further the Assessing Officer reserved his right to review this order after expiry of six months.

8. It is on the above backdrop that the Petitioner has approached this Court under Article 226 of the Constitution of India, after addressing letter dated 14 November 2023, whereby the Petitioner has objected to the adjustment of refund for assessment year 2022-2023 against the demand of assessment year 2015-2016 on the ground that he has already paid 20% of the demand for assessment year 2015-2016 and, therefore, the refund adjustment was not in accordance with law.

9. Mr. Gurjar, learned counsel for the Petitioner, submitted that the revenue has recovered more than 20% of the demand for which the stay has been granted by the Assessing Officer. He submits that the Petitioner voluntarily made payment of 20% amounting to Rs.7,58,310/- on 25 January 2018 even before the stay application was filed on 29 January 2018. Inspite of such a payment, the revenue adjusted the refund of assessment year 2022-2023 on 6 October 2022 amounting Rs.6,05,030/-. Therefore, the department has recovered excess of Rs.6,05,030/- and therefore, the revenue should be directed to refund the said amount being contrary to their own stay order dated 17 April 2024.

10. Mr. Sharma, learned counsel for the Respondents, defended the action of the Respondents and submitted that the refund for assessment year 2022-2023 was adjusted prior to the stay order being passed for assessment year 2015-2016 and there is no provision in the system to give a credit of Rs.6,05,030/-. He has relied upon the affidavit-in-reply filed by one Mr. Sanjay Kamble dated 24 February2025.

11. We have heard learned counsel for the Petitioner and Respondents.

12. At the outset, we wish to deprecate the practice of the Respondents in not adjudicating the stay application for more than six years. The stay application was filed on 29 January 2018 for assessment year 2015-2016 and the stay order was passed on 17 April 2024. It is almost after a period of more than six years. If the revenue is keen on recovery of the 20% of the deman