Delhi High Court Limits Adjustment Of Tax Refunds Against Disputed Demands At 20%

The Delhi High Court has limited the adjustment of tax refunds against disputed demands to 20%.

The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that the 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 principal grievance of the petitioner is that the respondents/department have adjusted the refund payable for Assessment Year (AY) 2022–23 against demands outstanding with respect to AYs 2011–12, 2012–13, and 2013–14.

The department contended that the petitioner ought to have filed an application under Section 220 of the Income Tax Act, 1961, so that an appropriate order could have been passed by the Assessing Officer (AO) with regard to the outstanding deposit against the disputed demand.

The assessee has submitted that this is a case where the intimation was given on March 2, 2023, under Section 245 and the adjustment was made on the very same date, despite the assessee submitting its response on the designated portal.

The assessee submitted that the AO did not provide any time to respond to the intimation dated March 2, 2023, proposing an adjustment of the outstanding demand against the refund due to the petitioner/assessee. According to the assessee, the AO was required to apply his mind and pass an appropriate order.

The court noted that under the Office Memorandum ("OM") dated February 29, 2016, as amended by the OM dated July 31, 2017, the AO should have, ordinarily, in terms of Paragraph 4A, adjusted not more than 20% of the disputed demand, considering the fact that an appeal concerning the disputed demand was, admittedly, pending before the CIT (A).

The court directed the department to release the amount, along with applicable interest, which is in excess of 20% of the disputed demand, concerning the aforementioned AYs.

Case Title: Jindal Stainless Ltd Versus DCIT

Citation: 2023 LiveLaw (Del) 796

Date: 07.08.2023

Counsel For Petitioner: Neeraj Jain

Counsel For Respondent: Shailendera Singh

Click Here To Read The Order