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IN THE HIGH COURT OF DELHI AT NEW DELHI
Manmohan, Navin Chawla, JJ.
M/s Afflatus International - Appellant
Versus
Assistant Commissioner Of Income Tax Circle 28(1) & Ors. - Respondents
Civil Writ Petition No. 13453 of 2021, Civil Miscellaneous Application No. 42385-42386 of 2021
Decided On : 29-11-2021
Refund - Excess Tax Recovery - The court directed the respondents to refund the excess tax collected by adjusting the high-pitched disputed tax demand against refunds for subsequent years, contrary to the CBDT office memorandum.
Fact of the Case:
The petitioner sought a direction to the respondents to refund the excess tax collected by adjusting the high-pitched disputed tax demand against refunds for subsequent years.
Finding of the Court:
The court found that the recovery of the entire additional demand against refunds of subsequent years was contrary to the CBDT office memorandum, and directed the respondents to refund the excess amount.
Issues: Arbitrary recovery of tax, non-adherence to mandatory requirements, and violation of CBDT office memorandum.
Ratio Decidendi: The court held that the adjustment of refunds in excess of the outstanding demand without adhering to the CBDT office memorandum was impermissible.
Final Decision: The court directed the respondents to refund the excess tax collected by adjusting the high-pitched disputed tax demand against refunds for subsequent years.
JUDGMENT
Manmohan, J. - Present writ petition has been filed by the Petitioner seeking a direction to the Respondents to refund the excess tax collected amounting to Rs.1,43,23,653/- for the Assessment Year 2020-21 and Rs. 53,85,886/- for the Assessment Year 2018-19 forthwith.
2. Learned counsel for the Petitioner states that the Respondents have arbitrarily recovered 100% of the high-pitched disputed tax demand raised against the Petitioner for Assessment Year 2017-18 in an assessment framed under Section 143(3) of the Act from the Refund(s) under Section 143(1) in subsequent years i.e. Rs.1,43,23,653/- for Assessment Year 2020-21 and Rs.53,85,886/- for Assessment Year 2018-19. He states that this was done despite an application seeking stay of recovery of demand being made by the Petitioner in the pending appeal before the CIT(A). He also states that the adjustment was initiated without adhering to the mandatory requirement of issuance of notice to the Petitioner before an adjustment of refund under Section 245 of the Income Tax Act, 1961.
3. Learned counsel for the Petitioner points out that the recovery of the entire additional demand for Assessment Year 2017-18 against refunds of years 2020-2021 and 2018-19 is contrary to CBDT office memorandum dated 31st July 2017 which directs stay on recovery of demand upon deposit of 20% of the outstanding demand where an appeal is pending before the CIT(A).
4. Issue notice. Mr.SC Praty, learned counsel for respondents accepts notice. He, on instructions, states that the amount adjusted in excess of 20% demand in accordance with the CBDT Office Memorandum dated 31st July, 2017 shall be refunded to the petitioner within eight weeks.
5. The statement/undertaking given by learned counsel for respondents is accepted by this Court and the respondents are held bound by the same. In view thereof, the present writ petition along with pending applications stands disposed of as satisfied.
Adjustment of refunds in excess of outstanding demand without adhering to CBDT office memorandum is impermissible.
Tax refunds must not be adjusted without mandatory notice and adherence to procedural safeguards as stipulated in the Income Tax Act and CBDT guidelines.
Refund adjustments under tax laws require mandatory notice and adherence to stay orders; failure to comply results in violation of natural justice.
Tax authorities must adhere to established guidelines regarding tax recovery, including limiting recovery to 20% of disputed demands during appeal, failing which excess recovery is invalid.
The main legal point established in the judgment is that the assessing officer is mandated to grant stay on recovery of the balance disputed outstanding tax demand upon payment/recovery of the standa....
Tax authorities must adhere to their own prescribed procedures regarding refund adjustments, enforcing taxpayers' rights against undue excess recoveries.
The main legal point established in the judgment is that the assessing Officer must adhere to the provisions of the Office Memorandums and grant stay of demand till disposal of the first appeal on pa....
The main legal point established in the judgment is that the assessing officer is mandated to grant stay on recovery of the balance disputed outstanding tax demand till disposal of the first appeal o....
Tax authorities must follow established procedures when collecting disputed amounts, ensuring fairness and adherence to guidelines for stay of demands pending appeal decisions.
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