2024 (12) TMI 1547 - HC - Income Tax

Stay of demand - refund amount due to the petitioner was adjusted against an outstanding demand - HELD THAT -Concededly the issue is covered by the earlier decision of this court in Lease Plan India Another 2012 (12) TMI 904 - DELHI HIGH COURT held that in this case that the actions of the Revenue were violative of the stay order of this Court; they were also contrary to the provisions of Section 245. The term recovery includes adjustment of the refund due to the assessee. Thus the High Court order which directed that the assessment proceedings would not be given effect to without the leave of the court translated to a bar on adjustments as well. Section 245 is clear in its mandate regarding the requirement of prior intimation in writing to the assessee whose refunds are being adjusted against amounts payable to the Revenue; the assessee has to be given notice and heard. Revenue clearly did not follow the provision and give any notice or hearing before making adjustments impugned in this case. The present petition is allowed and the Revenue is directed to refund the amount along with applicable interest which has been adjusted contrary to the stay granted by the ITAT.

Summary

The Delhi High Court, comprising Hon'ble Mr. Justice Vibhu Bakhru and Hon'ble Ms. Justice Swarana Kanta Sharma, addressed a petition challenging an order dated 23.01.2024 under Section 245 of the Income Tax Act, 1961. The order adjusted a refund of Rs.3,08,19,973/- due to the petitioner for AY 2022-23 against an outstanding demand for AY 2018-19. The petitioner argued that the demand for AY 2018-19 had been stayed by the Income Tax Appellate Tribunal (ITAT), rendering the adjustment impermissible.The ITAT had issued a stay order on 23.09.2022, requiring the petitioner to pay Rs.10,00,00,000 as a condition for the stay, with specific amounts to be paid upfront and the balance subject to the disposal of a rectification application. The stay would remain effective for 180 days or until the corresponding appeal was disposed of.The court referenced a precedent from Lease Plan India & Another v. Deputy Commissioner of Income Tax, where it was held that adjustments against a stayed demand violated the stay order and Section 245, which mandates prior written intimation and a hearing for the assessee.Consequently, the court allowed the petition, directing the Revenue to refund the adjusted amount with applicable interest, as the adjustment was contrary to the ITAT's stay order. The petition was disposed of accordingly.