TMI Blog2015 (7) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1.05 lakhs. For Assessment Year 2007-08 is concerned, the demand of ₹ 18 crores had been stayed by the order of Commissioner dated 22 March 2011 under Section 220(6) till the disposal of the petitioner's appeal before the CIT (Appeals). The appeals are still pending. Further, stay was granted in respect of the demands attributable to transfer pricing adjustment which was an issue of dispute even for the Assessment Year 2006-07 and was finally resolved in favour of the petitioner. It must be pointed out that the petitioner had made an application for stay to the Assessing Officer. In response to the petitioner's application for stay under Section 220(6) of the Act, to the Assessing officer, his superior viz. the Commissioner of Income Tax granted partial stay to the extent of the demand relating to transfer pricing adjustment. We are unable to understand how an order passed by an officer superior to the Assessing Officer granting stay would not be binding upon the Assessing Officer. In fact the Commissioner of Income Tax is the administrative head and does exercise jurisdiction over the entire Commissionerate. Thus, even today, the order Commissioner of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr Arvind Pinto, Adv JUDGMENT (Per M. S. Sanklecha,J. ) On 11 June 2015, at the joint request of the counsel, petition was kept at the bottom of the admission board for final disposal today. Accordingly Rule. Rule made returnable forthwith. Respondent waives services. Taken up for final disposal. 2. The challenge in this petition under Article 226 of the Constitution of India is to the manner in which the Assessing Officer has under Section 245 of the Income Tax Act, 1961 (the 'Act') adjusted the demands aggregating to ₹ 43 crores for the Assessment Years 2004-05, 2007-08 and 2008-09 out of the refund of ₹ 129 crores admittedly due to the petitioner for the Assessment Year 2006-07. Besides the challenge is also to the consequential three orders dated 22 August ,2013 passed under Section 220(2) of the Act demanding interest on the delayed payment of the adjusted demands for the Assessment years 2004-05, 2007-08 and 2008-09. Facts:- 3. For the Assessment Year 2006-07, the petitioner filed its return of income declaring ₹ 366.94 crores as income and computing the tax payable thereon ₹ 123.51 crores. The Assessing Officer consequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... butable to transfer pricing adjustment identical/ similar to the issues now decided in favour of the petitioner by the Tribunal for the Assessment year 2006-07. It is pertinent to note that neither of the two orders of stay dated 22 March 2011 and 9 March 2012 make any reference to any adjustment out of refunds due for Assessment year 2006-07. 7. Consequent to the orders of stay under Section 220(6) of the Act for the Assessment Years 2007-08 and 2008-09, the balance demand of ₹ 65.25 crores for the Assessment Year 2007-08 and ₹ 110 crores for the assessment year 2008-09 was admittedly paid by the petitioner to the revenue. The appeals before the CIT(Appeals) for Assessment year 2007-08 and 2008-09 are still awaiting disposal. 8. On 31 July 2013( received by petitioner on 2 August 2013), the Assessing Officer in terms of Section 245 of the Act informed the petitioner of his proposal to adjust out of the refund of ₹ 129 crores due to the petitioner for the Assessment Year 2006-07 with the pending demands which were as under: A.Y. Amount of demand (exclusive of interest) 2004-05 Rs.3,76,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as under: (a) The action of the Assessing officer in adjusting the demand for Assessment years 2004-05,2007-08 and 2008-09 out of refund due for Assessment year 2006-07 under Section 245 of the Act is without jurisdiction. This is factually so as there is no demand outstanding for Assessment year 2004-05 and the demands for Assessment years 2007-08 and 2008-09 have been stayed. Thus on the date of the intimation i.e. 31 July 2013 as well as on 22 August 2013 no amounts were payable for the three assessment years. The issue it is submitted is concluded in favour of the petitioner by the decision of Delhi High Court in Maruti Suzuki India Ltd. Vs. DCIT, 347 ITR 43; (b) The procedure provided under Section 245 of the Act for adjustment of demands payable out of refunds to an assessee has to be preceded by an intimation of the proposed action. This intimation enables the party concerned to correct any errors in the basis, for the proposed action. The giving of intimation before taking any action implies that the Assessing Officer would consider the objections before carrying out the proposed adjustment.; and (c) So far as the three orders dated 22 August 2013 demanding inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of. Sec. 245. Set off refunds against tax remaining payable. Where under any of the provisions of this Act, a refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section. Consideration: 14. Section 245 of the Act, empowers the revenue to adjust refunds due to an assessee against any tax payable(of the same character as the refund due) by him. The exercise of this power is discretionary as is evident from the use of the word may therein. Besides the requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prejudice to the party entitled to the refund. 16. In the present facts, intimation dated 31 July 2013 under Section 245 of the Act was received by the petitioner on 2 August 2013. The Petitioner filed its objections on 5 August 2013 inter alia pointing out that no demand is outstanding for A.Y. 2004-05 and stay of the demand granted under Section 220(6) of the Act in appeals pending before the Commissioner of Income tax(Appeals) for A.Y. 2007-08 and 2008-09. Theses objections of the petitioner were not considered as is apparent from the fact that even though no demand was due for the A.Y.2004-05 yet adjustment took place from the refund due and a demand for interest was also made by order dated 22 August 2013. The entire object of giving prior intimation as provided under the Act has been rendered superfluous. Thus the decision making process was flawed and the adjustment of the refund against the demands due as well as the consequent demand for interest are unsustainable. 17. It is an admitted position that there is no demand outstanding/payable for Assessment year 2004-05. Thus no occasion to adjust any part of the refund due to the petitioner for Assessment year 2005-06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner's appeal by the CIT(Appeals). These transfer pricing dispute are identical to the issue in A.Y. 2006-07 and the same are now resolved in favour of the petitioner by the order of the Tribunal. The appeals are still pending before the CIT (Appeals) and consequently the stay for the Assessment Year 2008-09 is in force even today. 20. However it is the contention of the Revenue, that grant of stay by the authorities under the Act is immaterial as it would not obliterate the demand which is payable under the Act. It is submitted that the Revenue has jurisdiction to adjust the demands which are payable under the Act and as of today the demands for A.Y. 2007-08 and 2008-09 are payable. The grant of stay under Section 220(6) of the Act only prevent the Revenue from recovering the amounts which have been confirmed by the Assessing Officer. However the amount continues to be payable under the Act by the petitioners to the Revenue. Thus it is submitted that no interference is warranted. 21. Section 245 of the Act provides that when refund is due to any person then in lieu of payment, the revenue can set off/adjust the amount to be refunded against any sum remaining payable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pen to the Revenue to adjust the recovery of amount which has been stayed by orders of stay. 24. The Delhi High Court in the case of Maruti Suzuki India Ltd. (supra) had an occasion to deal with a similar contention as is being raised by the Revenue in the present case namely the recovery of tax cannot and would not include adjustment under Section 245 of the Act and the stay of recovery under Section 220(6) of the Act would not fetter the rights of the Revenue to adjust the demands out of refund due to the assessee. This submission was negatived by the Delhi High Court holding that recovery could be made by various modes including adjustment under Section 245 of the Act. The Delhi High Court held that where an authority grants a stay of recovery under Section 220(6) of the Act, it could provide in that order granting stay of the recovery that the same would not be extended to adjustment of refund. In cases where the stay order is in absolute terms, it would be inappropriate on the part of the Revenue to adjust the demand by way of adjustment. The Delhi High Court observed as under: .... However, when an order of stay of recovery in simplistic and absolute terms is passed, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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