Court orders refund of excess tax adjustments exceeding 20% for AY 2017-18, restrains further actions.

The court granted the petitioner's refund request for adjustments made in excess of 20% of the disputed tax demands for Assessment Year 2017-18 against refunds due for subsequent years. The court directed the respondents to refund the excess amount adjusted from the petitioner and restrained further adjustments or recoveries until the appeal's disposal. The respondents were instructed to verify the facts and refund the excess amount within four weeks. The court emphasized adherence to legal provisions and Circulars/Notifications governing the stay of demand process.

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Issues Involved:
1. Refund of excess tax demand recovery exceeding 20% for Assessment Year 2017-18 against refunds due for Assessment Years 2020-21 and 2021-22.

Detailed Analysis:
1. The petitioner filed a writ petition seeking a refund of Rs. 2,87,520/-, which was recovered in excess of 20% of the total disputed tax demand for Assessment Year 2017-18 against refunds due for Assessment Years 2020-21 and 2021-22.

2. The petitioner's counsel referred to Section 220(6) of the Income Tax Act, 1961, stating that the Assessing Officer can grant stay on recovery of tax demand upon fulfillment of conditions. The Central Board of Direct Taxes issued Circulars/Notifications guiding the stay of demand process. The petitioner argued that recovery exceeding 20% of the disputed tax demand through refund adjustments violated these guidelines.

3. The petitioner had paid 20% of the disputed amount for Assessment Year 2017-18 as per a stay order but the respondents adjusted 25% from refunds for subsequent years. The respondents' actions were contested as being in contravention of the Circulars/Notifications.

4. The respondent's counsel accepted notice and acknowledged a previous judgment where it was held that recovery exceeding 20% without specific reasons was not permissible during the pendency of an appeal. The court emphasized that the Assessing Officer can seek pre-deposit of only 20% of the disputed demand unless specific reasons are provided justifying a higher amount.

5. The court directed the respondents to refund the excess amount adjusted from the petitioner and restrained further adjustments or recoveries until the appeal's disposal. The respondents were instructed to verify the facts and refund the excess amount within four weeks.

6. In conclusion, the court granted the petitioner's refund request for adjustments made in excess of 20% of the disputed tax demands, emphasizing adherence to the legal provisions and Circulars/Notifications governing the stay of demand process.

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