ORDER :

SAMEER JAIN, J.

1. Instant writ petition under Article 226 of the Constitution of India has been filed by the petitioner-assessee with the following prayers:-

a. to issue a writ of mandamus or any other appropriate writ, directing Respondent No. 1 to refund the amount adjusted in excess of 20% of the disputed demand for AY 2017-18;

b. to issue a writ of mandamus restraining the Respondent from initiating any further recovery of outstanding demand for AY 2017-18 until the disposal of appeal challenging the assessment order is pending adjudication before the Commissioner of Income Tax (Appeals);

c. to impose the 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.

d. by awarding the cost of writ petition in favour of the petitioner;

e. any other order, relief or direction, which this Hon'ble High Court may deem fit & proper be passed in favour of the Petitioner;

2. Facts of the case as borne out from record of the writ petition are that on 13/12/2019 one Assessment Order was passed by the respondent no.1-Assessment Officer (hereinafter referred to as 'AO') under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the 'IT Act') for the Assessment Year 2017-18 and a demand of Rs.2,09,44,100/-was raised under Section 156 of the IT Act as specified vide Annexure-2 & 3 against which the petitioner-assessee filed an appeal (Annexure-5) under Section 246 of the IT Act on 26/12/2019 in the prescribed form submitting that he has a prima-facie case and the demand raised is not maintainable.

2.1 On 13/01/2020, Income Tax Return for the Assessment Year 2018-2019 processed by the CPC Wing of the respondent-department and a refund of Rs.70,86,950/-due in favour of the petitioner-assessee was adjusted against the balance demand of Assessment Year 2017-18 created on 13/12/2019. The petitioner-assessee filed a Stay Application in response to intimation issued to him on 13/01/2020 under Section 245 of the IT Act in the form of a Note mentioned in the order dated 13/01/2020 (Annexure-6) which is reproduced as under:-

Note : As per the records of CPC, the following demands are outstanding. An Intimation under Section 245 of the Income Tax Act, 1961 has been issued separately proposing to adjust the outstanding demands against the refund determined as per this order. Since, the release of the refundable amount will be considered on the basis of your response/compliance to the intimation U/s 245. you are requested to submit your response expeditiously. For further clarification in this regard, please Refer CBDT Circular number 8/2015 DTD 14-05-2015.

3. Contention of the petitioner is that his letter dated 22/01/2020 (Annexure-7) in response to intimation under Section 245 of the IT Act dated 13/01/2020 pointed out that 20% of the demand amounting to Rs.41,88,620/-be adjusted from the said refund in terms of the departmental circulars. He further contended that he has preferred an appeal against the said order but in spite of the same, again on 25/02/2020, while processing Income Tax Return for the Assessment Year 2019-20, the CPC adjusted a refund of Rs.32,35,662/-against the balance demand of Assessment Year 2017-18 in spite of the appeal and the stay application filed in response to intimation under Section 245 of the IT Act. It is further contended that with the belief to be saved, the petitioner-assessee filed a stay application on 30/06/2020 (Annexure-9) which was disposed of on 22/01/2020 whereby stay on recovery of the balance demand was granted. The same was also passed vide order dated 23/03/2021.

4. In this background, the petitioner-assessee contended that in terms of the order under Section 245 of the IT Act, the appeal was preferred by him immediately and as per provisions of Section 220(6) of the IT Act, he cannot be termed as an assessee in default. As per petitioner, the recovery can only be initiated as