The Delhi High Court held that the Assessing Officer cannot adjust Refund Due to Taxpayer against outstanding Demand in excess to the limit of 20%.
Mr.Bhuwan Dhoopar, the counsel for the petitioner, Eko India Financial Services Private Ltd. contended that as per the binding directions issued by the CBDT, the respondent authority was obliged to grant a stay on recovery of outstanding demand for the Assessment Year 2017-18 to the petitioner upon recovery of 20%, as an appeal challenging the assessment order is pending adjudication before the Commissioner of Income Tax (Appeals).
On the other hand, Mr. Zoheb Hossain, standing counsel for the Revenue stated that he has only instructions to place on record the order dated 02nd July, 2021, reproduced hereinabove. However, a perusal of the order dated 03rd June, 2021 passed by the learned predecessor Division Bench shows that notice had been accepted by the respondent on the said date of hearing and time to file a counter-affidavit had been given. Since no counter-affidavit has been filed, the request for adjournment is declined.
Mr. Hossain referred to paragraph 4(B) of the office memorandum dated 29th February, 2016 which states that pre-deposit of 20% is not a rule of the thumb and the respondent has the discretion to direct a set off of a higher sum under Section 245 of the Act. Paragraph 4(B) of the office memorandum dated 29th February, 2016 as well as the relevant portion of the adjustment of refund order dated 17th March, 2020 under Section 245 of the Act and order dated 21st December, 2020 grants the conditional stay of demand.
The division bench of Justice Navin Chawla and Justice Manmohan noted that the order under Section 245 of the Act for adjustments of refunds as well as the order on stay of demand under Section 220(6) of the Act do not give any special/particular reason as to why any amount in excess of 20% of the outstanding demand should be recovered from the petitioner-assessee at this stage in accordance with paragraph 4(B) of the office memorandum dated 29th February, 2016. Consequently, this Court is of the view that the respondent is entitled to seek pre-deposit of only 20% of the disputed demand during the pendency of the appeal in accordance with paragraph 4(A) of the office memorandum dated 29th February, 2016, as amended by the office memorandum dated 25th August, 2017.
The court directed the respondent authority to refund the amount adjusted in excess of 20% of the disputed demand for the Assessment Year 2017-18, within four weeks.
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