CPC can not adjust refund in excess of 20% for disputed outstanding demand. Order u/s 245 or order u/s 220(6) do not authorise recovery in excess of 20%.
ABCAUS Case Law Citation
ABCAUS 3542 (2021) (08) HC
Important case law relied referred:
Amrit Singh Ahluwalia vs. State of Punjab & Ors. 1975 (3) SCR 82
Ramana Dayaram Shetty vs. International Airport Authority of India & Ors. 1979 SCR (3) 1014
In the instant case the assessee had filed a Writ Petition before the Hon’ble High Court against the CPC Bengaluru for adjusting the entire refund amount against disputed demand of earlier years.
The case of the assessee was that as per the binding directions issued by the CBDT, the Income Tax Department was obliged to grant a stay on recovery of outstanding demand in dispute upon recovery of 20% as an appeal challenging the assessment order was pending adjudication before the Commissioner of Income Tax (Appeals).
The assessee relied upon the Office Memorandum of CBDT dated 29th February 2016 according to which 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. The said percentage of 20% was later revised to 20% of the disputed demand.
The Revenue submitted that the said office memorandum itself 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.
The Hon’ble High Court opined that the Government is bound to follow the rules and standards they themselves had set on pain of their action being invalidated.
The Court was of the view that the office memorandums, the Assessing Officer shall normally grant stay of demand till disposal of the first appeal on payment of 20% of the disputed demand. In the event, the Assessing Officer is of the view that the payment of a lump sum amount higher than 20% is warranted, then the Assessing Officer will have to give reasons to show that the case falls in other para of the office memorandum.
The Hon’ble High Court stated that the order under Section 245 of the Act for adjustments of refunds as well as the order on stay of demand u/s 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.
The Hon’ble High Court held that the Revenue was 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 said office memorandum as amended.
Accordingly, the Hon’ble High Court directed the Revenue to refund the amount adjusted in excess of 20% of the disputed demand.
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