Adjustment of tax refunds against outstanding dues requires prior intimation and adherence to principles of natural justice as mandated by Section 245 of the Income Tax Act.

JUDGMENT :

MURAHARI SRI RAMAN, J.

1. Aggrieved by adjustment of outstanding demand pertaining to Assessment Year 2018-19 (pertaining to Financial Year 2017-18), during pendency of statutory appeal, against the refund dues flown with respect to Assessment Years 2021-22, 2022-23, 2023-24 and 2024-25, notwithstanding deposits made as directed by the Income Tax Officer, Ward 1(1), Cuttack vide Orders under Section 220(6) of the INCOME TAX ACT , 1961, the writ petition is filed to invoke extraordinary jurisdiction under the provisions of Articles 226 and 227 of the Constitution of India, with the following prayer(s):

“Under the aforesaid circumstances it is prayed therefore that this Hon'ble Court may be graciously pleased to:

(A) Admit the Writ Application;

(B) Issue rule nisi calling upon the opposite party No. 2 to refund Rs.21,43,181/- realized/recovered from the petitioner over and above 20% of the assessed tax demand along with Interest;

(C) If the opposite parties do not show or show insufficient cause to make the rule absolute;

(D) Issue writ in the nature of mandamus or any other appropriate directing the opposite party No.2 to refund Rs.21,43,181/- along with Interest as may be directed by this Hon'ble Court in the end of justice;

(E) To pass such order/orders, writ/writs as may be fit and proper;

(F) To allow this writ petition.

And for this act of kindness the petitioner shall as in duty bound ever pray.”

Pleadings in the writ petition:

2. The Assessing Officer, opposite party No.3, having initiated proceeding by issue of notice under Section 148 of the INCOME TAX ACT , 1961 (“IT Act” for short) upon scrutiny of self-assessment returns filed under Section 139 on 13.10.2018 for the Assessment Year 2018-19 alleging escapement of income framed assessment vide Order dated 28.03.2023 under Section 147 read with Section 144B raising demand to the tune of Rs.1,35,38,224/-.

2.1. Having disputed, the petitioner filed appeal before the Commissioner of Income Tax (Appeals) on 27.04.2023 and moved petition under Section 220(6) of the IT Act before the Assessing Officer for stay the realisation of above demand so as not to treat the petitioner-assessee not in default.

2.2. Referring to the Central Board of Direct Taxes Office Memorandum No.404/72/93-ITCC, dated 31.07.2017, the Income Tax Officer, Ward 1(1), Cuttack (“ITO” for convenience) vide Order dated 19.05.2023 against said demand of Rs.1,35,38,224/- pertaining to Assessment Year 2018-19 issued following directions:

“As per your submission, the demand raised at Rs.1,35,38,226/- had been contested before the CIT(A) in your case on 27.04.2023. Considering the fact, stay of the recovery proceeding against the outstanding demand is granted subject to payment of 20% of the demand raised i.e. Rs.27.07.645/- (20% of Rs.1,35,38,226/-) within 17.06.2023 with an intimation evidencing payment of challan to this office. In case of failure on your part with regard to payment of Rs.27,07,645/- within the due date, the stay granted shall be treated as withdrawn. In case of payment of Rs.27,07,645/- within the time allowed, stay of balance demand of Rs.1,08,30,581/- is granted till disposal of 1st appeal by the Ld. CIT(A) subject to the following conditions:

1. Require an undertaking that you will cooperate in the early disposal of appeal before the CIT(A).

2. The undersigned has reserve the right to review that order passed after expiry of reasonable period (say 6 months) or if the assessee has not cooperated in the early disposal of appeal, or where as subsequent pronouncement by a higher appellate authority or court alters the a