Case Note & Summary
The petitioner, an individual, filed his return of income for assessment year 2015-2016 on 28 September 2015, declaring income of Rs.56,65,660/-. The return was selected for scrutiny, and an assessment order under Section 143(3) of the Income Tax Act, 1961 was passed on 20 December 2017, assessing income at Rs.1,11,85,520/- and raising a demand of Rs.37,91,550/-. The petitioner voluntarily deposited 20% of the demand, amounting to Rs.7,58,310/-, on 25 January 2018, even before filing a stay application on 29 January 2018. The stay application was not decided for over six years. Meanwhile, on 6 October 2022, while processing the return for assessment year 2022-2023, the revenue adjusted a refund of Rs.6,05,030/- against the demand for 2015-2016. On 17 April 2024, the Assessing Officer passed a stay order, noting that 20% had already been paid and granting stay for the balance of Rs.30,33,240/-. The petitioner objected to the adjustment via letter dated 14 November 2023, but the revenue did not refund the amount. The petitioner then filed a writ petition under Article 226 of the Constitution of India. The court held that the adjustment resulted in recovery exceeding 20% of the demand, contrary to the stay order and Instruction No.1914. The court deprecated the six-year delay in deciding the stay application and directed the revenue to refund Rs.6,05,030/- within four weeks, failing which interest at 6% per annum would accrue.
Headnote
A) Income Tax - Stay of Demand - Instruction No.1914 - Recovery beyond 20% - Petitioner voluntarily deposited 20% of tax demand for AY 2015-2016 before filing stay application. Revenue adjusted refund for AY 2022-2023 against the same demand, resulting in total recovery exceeding 20%. Held that such adjustment is contrary to the stay order and Instruction No.1914, and revenue must refund the excess amount. (Paras 12-16) B) Income Tax - Delay in Disposal of Stay Application - Administrative Lapses - Stay application filed on 29 January 2018 was decided only on 17 April 2024, after more than six years. Court deprecated the practice of inordinate delay, noting that it affects revenue's interest and is not justified. (Paras 12-13) C) Constitutional Law - Article 226 - Writ Jurisdiction - Refund of Excess Recovery - Court exercised writ jurisdiction to direct refund of Rs.6,05,030/- adjusted in excess of 20% demand, as the adjustment was contrary to the stay order and Instruction No.1914. (Paras 15-16)
Issue of Consideration
Whether the revenue can adjust refund of a subsequent assessment year against a demand for which stay has been granted on payment of 20%, resulting in recovery exceeding 20% of the demand.
Final Decision
Writ petition allowed. Respondents directed to refund Rs.6,05,030/- to petitioner within four weeks. If not refunded within four weeks, amount shall carry interest at 6% per annum from the date of this order until payment.
Law Points
- Stay of tax demand
- Instruction No.1914
- adjustment of refund against demand
- recovery beyond 20%
- delay in disposal of stay application
- Article 226 of Constitution of India
