Delhi HC directs the Income Tax Department for re-assessment in the petition

Issue

Writ petitions have been filed before Delhi HC for seeking refund of the Income Tax (including interest) adjusted in excess of 20% of the disputed tax demand arising in the case of the Petitioner for the assessment years 2016-17 and 2017-18 against the refunds due for the Assessments Years 2018-19 and 2019-20 along with the applicable interest. Petitioner also seeks direction to the respondent to dispose of the application dated 10th July, 2020 filed by the Petitioner under Section 154 of the Income Tax Act, 1961 [for short ‘the Act’] seeking rectification of the assessment order dated 17th June, 2020 for the assessment year 2016-2017.

Facts

• The petitioner states that under Section 220(6) of the Act, the Assessing Officer has been conferred with the power to grant stay on recovery of outstanding tax demand subject to fulfillment of appropriate conditions.
• The Central Board of Direct Taxes has issued various Circulars/ Notification from time to time including Office Memorandums dated 29th February, 2016 and 31st July, 2017, prescribing that in cases where an assessee challenges the additions/ disallowances made in the assessment order by way of an appeal before the first appellate authority, i.e., CIT(A), and during pendency thereof deposits 20% of the total disputed outstanding tax demand, the assessing officer is empowered to grant stay of recovery of the balance outstanding demand.
• Upon payment/ recovery of the standard rate of 20% of the disputed outstanding tax demand, the assessing officer is mandated to grant stay on recovery of the balance disputed outstanding tax demand till disposal of first appeal of the assessee, unless the case of the assessee falls in the category discussed in paragraph (B) of the Office Memorandum dated 29th February, 2016.
• Petitioner states that while 20% of the disputed amount for the Assessment Year 2016-17 was Rs. 10,50,36,036/- the respondent adjusted the entire tax demand of Rs. 54,20,04,981/- excluding the interest under Section 220(2) of the Act. He also states that while 20% of the disputed amount for the Assessment Year 2017-18 was Rs. 48,54,63,006/- the respondent recovered Rs. 54,99,73,789/-.

Findings

The Court finds that the issue raised in the present writ petitions is no longer res integra. As well as the fact that refunds have been adjusted against outstanding tax demand by the Authority without following the procedure prescribed under Section 245 of the Act inasmuch as no notice or opportunity of predecisional hearing had been provided to the petitioner prior to such adjustment of refund, this Court is of the opinion that the petitioner is entitled to refund of adjustments made in excess of 20% of the disputed tax demands.

Judgement

Delhi HC directs the respondent to verify the facts stated in the two writ petitions and if it finds them to be true and correct then to refund the amount adjusted in excess of 20% of the disputed tax demands for the Assessment Years 2016-17 and 2017-18 to the Petitioner within eight weeks. The respondent is also directed to dispose of petitioner’s rectification application dated 10th July, 2020 seeking rectification of the assessment order dated 17th June, 2020 for Assessment Year 2016-17 within eight weeks.

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