My appeal is pending. Can the department take my whole refund against the disputed demand, or only twenty per cent of it?
Ordinarily only twenty per cent. Where an appeal against the demand is pending before the Commissioner (Appeals), the Board's Office Memorandum of 29 February 2016 as amended on 31 July 2017 permits adjustment of not more than twenty per cent of the disputed demand. Anything above that can be retained only if the case falls within the narrow exception in para 4B(a), and the department has to show that it does.
Decided by the High Court (Rajiv Shakdher J and Girish Kathpalia J) on 2023-08-07, reported as W.P.(C) 9292/2023 (Delhi)(HC); 2023 LiveLaw (Del) 796. It bears on section 245, section 220(6), section 244A, section 271(1)(c), section 221 of the Income Tax Act 1961, in Refunds, Interest & Condonation matters.
The twenty per cent figure is usually discussed as a condition for a stay of recovery. This judgment applies it to adjustment of a refund under s.245, which is how the demand is actually collected in most cases, and orders the excess back with interest.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The refund claimed for AY 2022-23 was Rs 52,78,60,069. An intimation under s.245 was issued on 2 March 2023 and an adjustment of Rs 40,09,91,031 was made against outstanding demands for AYs 2011-12, 2012-13 and 2014-15 on the very same day, although the company had put its response on the designated portal. Those demands were penalty demands under s.271(1)(c) against which appeals were pending before the Commissioner (Appeals), and the company had already told the department, in a response of 3 October 2022 to a notice under s.221 and again by a communication of 1 May 2023, that appeals were pending, that it sought a stay and asked not to be treated as an assessee in default, and that the Centralised Processing Centre had adjusted the full disputed demand instead of twenty per cent, causing working capital and cash flow difficulty. The company sought the balance of Rs 32,07,13,625 with applicable interest, being the amount adjusted in excess of twenty per cent of the disputed demand. No counter affidavit was filed and the Revenue did not dispute the facts, contending only that an application under s.220 should have been made.
The writ petition was disposed of with a direction to release the amount in excess of twenty per cent of the disputed demand along with applicable interest. The adjustment of the AY 2022-23 refund against the disputed demands was not only hasty but contrary to law. Under the Office Memorandum dated 29 February 2016 as amended on 31 July 2017 the Assessing Officer should ordinarily have adjusted not more than twenty per cent of the disputed demand where an appeal was pending before the Commissioner (Appeals); a higher amount can be retained only if the case falls within para 4B(a), and no material suggesting that had been furnished. The Revenue was directed to release the amount in excess of twenty per cent with applicable interest within four weeks (paras 9, 10, 10.1, 11 and 13).
The Court had recorded at the earlier hearing that, prima facie, to make an adjustment over and above twenty per cent of the disputed demand the officer would have to furnish reasons and satisfy himself why the disputed tax could not be collected by other means if it ultimately fell due (para 1, extracting para 7 of the order of 14 July 2023). At the final hearing the facts stood undisputed, no counter affidavit had been filed, and the only answer offered was that the assessee should have applied under s.220. The Court found that the assessee had in fact repeatedly told the department that appeals were pending and had responded to the s.245 intimation, that the adjustment was made on the same date as the intimation, and that the Revenue had produced nothing to bring the case within para 4B(a) of the Office Memorandum (paras 4.1 to 10.1). The direction was accordingly to release the excess over twenty per cent with interest, the Revenue being left to make its own computation of the excess (paras 11 and 13).
Having heard the counsels for the parties, we are of the view that the impugned action of the AO in adjusting the refund due to the petitioner/assessee for AY 2022-23, against the disputed demands for AYs 2011-12, 2012-13, and 2014-15 was not only hasty, but was also contrary to law.
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Handle my notice → Ask a CA on WhatsAppOrdinarily only twenty per cent. Where an appeal against the demand is pending before the Commissioner (Appeals), the Board's Office Memorandum of 29 February 2016 as amended on 31 July 2017 permits adjustment of not more than twenty per cent of the disputed demand. Anything above that can be retained only if the case falls within the narrow exception in para 4B(a), and the department has to show that it does. This was decided by the High Court (Rajiv Shakdher J and Girish Kathpalia J) and bears on section 245, section 220(6), section 244A, section 271(1)(c), section 221 of the Income Tax Act 1961. It is reported as W.P.(C) 9292/2023 (Delhi)(HC); 2023 LiveLaw (Del) 796. The twenty per cent figure is usually discussed as a condition for a stay of recovery. This judgment applies it to adjustment of a refund under s.245, which is how the demand is actually collected in most cases, and orders the excess back with interest. If it applies to you, the first step is this: Work out twenty per cent of the disputed demand for each year in which your appeal is pending, and compare it with what has been adjusted.
The refund claimed for AY 2022-23 was Rs 52,78,60,069. An intimation under s.245 was issued on 2 March 2023 and an adjustment of Rs 40,09,91,031 was made against outstanding demands for AYs 2011-12, 2012-13 and 2014-15 on the very same day, although the company had put its response on the designated portal. Those demands were penalty demands under s.271(1)(c) against which appeals were pending before the Commissioner (Appeals), and the company had already told the department, in a response of 3 October 2022 to a notice under s.221 and again by a communication of 1 May 2023, that appeals were pending, that it sought a stay and asked not to be treated as an assessee in default, and that the Centralised Processing Centre had adjusted the full disputed demand instead of twenty per cent, causing working capital and cash flow difficulty. The company sought the balance of Rs 32,07,13,625 with applicable interest, being the amount adjusted in excess of twenty per cent of the disputed demand. No counter affidavit was filed and the Revenue did not dispute the facts, contending only that an application under s.220 should have been made. The matter was decided on 2023-08-07 by the High Court (Rajiv Shakdher J and Girish Kathpalia J). On those facts the High Court held as follows. The writ petition was disposed of with a direction to release the amount in excess of twenty per cent of the disputed demand along with applicable interest. The adjustment of the AY 2022-23 refund against the disputed demands was not only hasty but contrary to law. Under the Office Memorandum dated 29 February 2016 as amended on 31 July 2017 the Assessing Officer should ordinarily have adjusted not more than twenty per cent of the disputed demand where an appeal was pending before the Commissioner (Appeals); a higher amount can be retained only if the case falls within para 4B(a), and no material suggesting that had been furnished. The Revenue was directed to release the amount in excess of twenty per cent with applicable interest within four weeks (paras 9, 10, 10.1, 11 and 13).
The Court had recorded at the earlier hearing that, prima facie, to make an adjustment over and above twenty per cent of the disputed demand the officer would have to furnish reasons and satisfy himself why the disputed tax could not be collected by other means if it ultimately fell due (para 1, extracting para 7 of the order of 14 July 2023). At the final hearing the facts stood undisputed, no counter affidavit had been filed, and the only answer offered was that the assessee should have applied under s.220. The Court found that the assessee had in fact repeatedly told the department that appeals were pending and had responded to the s.245 intimation, that the adjustment was made on the same date as the intimation, and that the Revenue had produced nothing to bring the case within para 4B(a) of the Office Memorandum (paras 4.1 to 10.1). The direction was accordingly to release the excess over twenty per cent with interest, the Revenue being left to make its own computation of the excess (paras 11 and 13). In the words reproduced by the source cited on this page: "Having heard the counsels for the parties, we are of the view that the impugned action of the AO in adjusting the refund due to the petitioner/assessee for AY 2022-23, against the disputed demands for AYs 2011-12, 2012-13, and 2014-15 was not only hasty, but was also contrary to law." The decision followed or applied Glaxo Smith Kline Asia (P) Ltd. v. CIT (2007) 290 ITR 35 (Delhi) — relied on by the assessee for the need to pass an order under s.245; recorded as affirmed in CIT v. Glaxo SmithKline Asia (P) Ltd. (2010) 236 CTR 113 (SC); Jindal Steel and Power Ltd. v. PCIT (2017) 391 ITR 42 (P&H) — relied on for refund of the amount adjusted in excess of twenty per cent; Hindustan Unilever v. DCIT (2015) 377 ITR 281 (Bombay) — relied on by the assessee.
It was decided by the High Court on 2023-08-07 and is reported as W.P.(C) 9292/2023 (Delhi)(HC); 2023 LiveLaw (Del) 796. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 245, section 220(6), section 244A, section 271(1)(c), section 221, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The writ petition was disposed of with a direction to release the amount in excess of twenty per cent of the disputed demand along with applicable interest. The adjustment of the AY 2022-23 refund against the disputed demands was not only hasty but contrary to law. Under the Office Memorandum dated 29 February 2016 as amended on 31 July 2017 the Assessing Officer should ordinarily have adjusted not more than twenty per cent of the disputed demand where an appeal was pending before the Commissioner (Appeals); a higher amount can be retained only if the case falls within para 4B(a), and no material suggesting that had been furnished. The Revenue was directed to release the amount in excess of twenty per cent with applicable interest within four weeks (paras 9, 10, 10.1, 11 and 13). It arises in Refunds, Interest & Condonation matters, on section 245, section 220(6), section 244A, section 271(1)(c), section 221 of the Income Tax Act 1961, and was decided by Rajiv Shakdher J and Girish Kathpalia J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Write to the Assessing Officer asking on what material your case is said to fall within para 4B(a) of the Office Memorandum; the Court put that burden on the Revenue and the absence of any such material decided the case. Keep and produce your response to the s.245 intimation. Here the adjustment was made on the same day as the intimation, despite a response on the portal, and the Court called the action hasty. Ask for the excess with applicable interest, not merely for the excess.
Still good law. No decision overruling or doubting it was located. The judgment rests on the Board's Office Memorandum of 29 February 2016 as amended on 31 July 2017, so anyone relying on it should check that the memorandum, and in particular paras 4A and 4B(a), still stands in the form applied here. It does not decide the separate question of the effect of the amendment of s.245 by the Finance Act 2023. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The Court records at para 2 that a typographical error in its earlier order of 14 July 2023 required AY 2013-14 to be read as AY 2014-15; the years in issue are AYs 2011-12, 2012-13 and 2014-15. The demands adjusted were penalty demands under s.271(1)(c), which is why the appeals were pending before the Commissioner (Appeals). This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petition was disposed of with a direction to release the amount in excess of twenty per cent of the disputed demand along with applicable interest. The adjustment of the AY 2022-23 refund against the disputed demands was not only hasty but contrary to law. Under the Office Memorandum dated 29 February 2016 as amended on 31 July 2017 the Assessing Officer should ordinarily have adjusted not more than twenty per cent of the disputed demand where an appeal was pending before the Commissioner (Appeals); a higher amount can be retained only if the case falls within para 4B(a), and no material suggesting that had been furnished. The Revenue was directed to release the amount in excess of twenty per cent with applicable interest within four weeks (paras 9, 10, 10.1, 11 and 13).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
Valuables were found at my premises and I say they are not mine. Who has to prove ownership?
Is penalty under s.271(1)(c) criminal, quasi-criminal or civil?
The officer disallowed your claim. Does a disallowance automatically bring penalty with it?
The penalty notice does not say whether I concealed income or filed inaccurate particulars. Does that matter?