The Karnataka Chartered Accountants (CA) Association filed representation to the Commissioner of Income Tax regarding the representation on adjustments of demand by the Central Processing Unit (CPC) for assessments pending before the appellate authorities.
The representation stated that in recent instances, taxpayers who have preferred an appeal before the CIT(A) against disputed demands raised by the Assessing Officer during assessments have sought a stay of the disputed demand, as provided for under the Income Tax Act. To secure this stay, they have duly complied with the requirements by paying 20% of the disputed demand amount.
Despite having already paid 20% of the disputed demand and having moved an application for stay before the Assessing Officer, it is observed that CPC has been wrongly adjusting the balance amount due against refund of other years. The immediate adjustment of disputed demands against legitimate refunds owed for different assessment years has imposed considerable financial distress upon taxpayers.
Section 220(6) of the Income Tax Act, 1961 (“the Act”) provides that, where an assessee has presented an appeal under Section 246 or Section 246A of the Act, the Assessing Officer may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed off.
The Central Board of Direct Taxes (“CBDT”) through its office memorandum F.No. 404/72 / 93 – ITCC dated 29/02/2016 prescribed that stay of demand can be granted subject to payment of 15% of the disputed demand. However, this limit has been enhanced from 15% to 20% through another office memorandum F.No. 404/72 / 93 – ITCC dated 31/07/2017.
The representation points out that the premature adjustment of demands also undermines the very purpose of filing appeals before the CIT(A) and seeking a stay on the disputed demand and it also has the effect of not giving regard to Board’s Instruction No. 1914 dated 21.03.1996. Also, due to this, the taxpayers are left with fewer financial resources to contest their cases effectively, and the appeal process loses its effectiveness as a means of redressal.
A request was made to direct the concerned authorities of the Central Processing Centre so as to ensure that there is no automatic adjustment performed on the disputed demand against any legitimate refunds which may be due, in cases where appeals have been preferred by the assessing and 20% of the disputed demand has been paid as pre-deposit.
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