Adjustments of tax refunds should not exceed 20% of disputed demands, as established in judicial precedents, ensuring taxpayers receive fair treatment.

ORDER :

P.Sam Koshy, J.

Heard Mr.Avinash Desai, learned Senior Counsel along with Mr.Cuddapah Nanda Gopal, learned counsel for the petitioner and Ms.J.Sunitha, learned Standing Counsel for the Income Tax Department appearing for the respondents. Perused the record.

2. The grievance of the petitioner in this writ petition seems to be the so called adjustment made by the respondent department of the refund outstanding payable to the petitioner for the year 2024-25 against the demand raised for assessment order passed for the assessment year 2022-23.

3. Learned Senior Counsel appearing for the petitioner submits that the refund payable to the petitioner in the instant case for the assessment year 2024-25 comes to around Rs.8.96 crores and the demand for the assessment year 2022-23 is Rs.7.25 crores. Meanwhile, the petitioner have preferred an appeal for the demand raised for the assessment year 2022-23 and the matter is pending consideration before the appellate authority. The petitioner has also meanwhile moved an appropriate petition seeking for refund for the year 2024-25. However, it has been informed to the petitioner by the department that the entire amount of outstanding refund stands adjusted against the demand for the previous assessment year 2022-23 which has lead to the filing of the present writ petition.

4. Learned Senior Counsel for the petitioner submits that, even if the petitioner would have sought for an interim direction of the demand for the assessment year 2022-23, the authorities concerned would had normally allowed the stay petition subject to the petitioner paying 20% of the demand amount which in the instant case, comes to around Rs.1.58 crore. Therefore, if the Income Tax Department intended to adjust any amount from the demand for the assessment year 2022-23, the adjustment could had been only to the extent of 20% of the total demand amount and the balance of amount ought to have been refunded back to the petitioner.

5. Learned Senior Counsel also refers to the office memorandum, issued by the Ministry of Finance, Central Board of Direct Taxes (CBDT), dated 29.02.2016, wherein in clause four (4) of the said memorandum as reads as under:

A. In a case where the outstanding demand is disputed before CIT (A), the assessing officer shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand, unless the case falls in the category discussed in para (B) hereunder B. in a situation where, a) the assessing officer is of the view that nature of addition resulting in the disputed demand is such that payment of a lump sum amount higher than 15% is warranted (e.g. in a case where addition on the same issue has been confirmed by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of Revenue or addition is based on credible evidence collected in a search or survey operation etc.) or, b) the assessing officer is of the view that nature of addition resulting in the disputed demand is such that payment of a lump sum amount lower than 15% is warranted (e.g. in a case where addition on the same issue has been deleted by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee, etc.) the assessing officer shall refer the matter to the administrative Pr.CIT/CIT, who after considering all relevant facts shall decide the quantum/proportion of demand to be paid by the assesse as lump sum payment for granting a stay of the balance demand.

6. This memorandum stands subsequently modified vide office m