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2021 (3) TMI 1014 - HC - Income TaxUnjust adjustment of excess refunds - intimation ought to be given to the assessee before making an adjustment of refund towards pending tax dues under Section 245 - Petitioner filed Annexure with the 1st respondent online contesting the said adjustment and informing the latter that the demand for Assessment Year 2017-18 had already been stayed post the deposit of the requisite 20% as required by the 2nd respondent - HELD THAT:- We are of the opinion that the adjustment made on 15.04.2020 by the 1st respondent of the entire refund due to the petitioner for the assessment year 2018-19 towards the outstanding tax demands for the Assessment Years 2017-18 and 2008-09 is per se illegal, as it was done without issuing a prior intimation under Sec.245 of the Act; more so, when the demand for tax for the Assessment Year 2017-18 vide the Assessment Order dt.23.12.2019 is under challenge before the C.I.T. (Appeals) and the 1st respondent through an order dt.29.01.2020 granted stay subject to deposit of 20% of the outstanding demand, and the petitioner deposited on 31.01.2020 ₹ 80,00,000/- and requested the 1st respondent to adjust the remainder of ₹ 80,31,593/- against the determined refund for Assessment Year 2018-19 vide letter dt.10.02.2020 (Annexure A.5). As per Office memorandum F.No.404/72/93-ITCC dt.29.2.2016 issued by the CBDT clarifying it's Instruction No.1914 dt.21.3.1996, the Assessing Officer can, while granting stay of the demand, reserve the right to adjust refunds arising, if any, against the demand, to the extent of amount required for granting stay subject to provisions of Sec.245. There is no dispute that the Office Memorandum is binding on both the respondents. We reject the plea of the respondents that demands for Assessment Year 2017-18 were collectible on 23.01.2020 and for Assessment Year 2008-09 was collectible on 29.01.2020, that the stay of collection of the demand for Assessment Year 2017 - 18 was granted only on 23.07.2020, and therefore, the adjustment made against the demands for Assessment Year 2008-09 and Assessment Year 2017-18 on 18.03.2020 and 22.07.2020 was prior to the order of grant of stay and so the adjustment was valid. The dates of adjustments mentioned above i.e. 18.03.2020 and 22.07.2020 are factually incorrect and no documentary evidence in support thereof has been filed by the respondents. Admittedly, the respondents have adjusted an amount of ₹ 55.92 lakhs towards demand for Assessment Year 2008-09 out of the refund determined for Assessment Year 2018-19 without issuing any Section 245 Intimation. They also admit that they have realized the error and have issued a refund of only ₹ 54.78 lakhs which is short by ₹ 1.13 lakhs of the actual adjustment amount of ₹ 55.92 lakhs. The respondents have to therefore release the balance refund of ₹ 1.13 lakhs also because there is no valid reason why a short refund was granted. The respondents defence for not issuing Section 245 Intimation before making adjustment was that subsequently on 13.05.2020 such intimation was issued under Section 143(1) of the Act, but the said Intimation is not valid in law as held in Japson Estates Private Limited (1 supra). Letter dt.29.01.2020 issued by the 1st respondent stated that in respect of Assessment Year 2017-18 petitioner was required to deposit 20% of the disputed demand in terms of CBDT instructions. In para-6 of the counter, the respondents state that this is only a communication and the actual stay was granted on 23.07.2020. We do not agree with the said plea because the said communication specifically states that the stay will be granted on payment of 20%, and on 30.01.2020 itself part payment was made of ₹ 80.00 lakhs with a request letter dt.10.2.2020 to adjust the balance of ₹ 80.31 lakhs from the determined refunds of Assessment Year 2018-19. 1st respondent ought to have held that the petitioner complied with the 20% deposit as directed in the order dt.29.01.2020 on 10.02.2020 itself and ought to have refrained from proceeding with the adjustment on 22.07.2020 for the demand for Assessment Year 2017-18. Also admittedly, there was no tax payable for Assessment Year 2008-09. No occasion for making any such adjustment of the refund determined for Assessment Year 2018-19 and consequently we are of the opinion that out of the sum of ₹ 1,86,38,333/- which is the refund determined for that Assessment Year, after deducting ₹ 80,31,593/- (the 20% of ₹ 8,01,57,967 = ₹ 1,60,31,593/- less ₹ 80,00,000/-), a sum of ₹ 1,06,06,740/- is refundable to the petitioner with interest at 15% per annum from the date on which it was determined, i.e., 02.10.2019 till the date of payment of the same to the petitioner.
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