Recovery capped at 20% of disputed tax demand; excess adjustment against refunds had to be returned pending appeal.

Revenue recovery pending first appeal was limited to 20% of the outstanding tax demand under the CBDT office memorandum. Because more than that ceiling had already been recovered by adjustment of refunds, the excess amount, including the sum adjusted against the disputed demand, was liable to be refunded. The Court also noted that the first appellate proceedings were still pending and directed their expeditious disposal.

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Issues: Whether the revenue could retain recovery in excess of 20% of the outstanding tax demand for the relevant assessment year and whether the excess amount, including the amount adjusted against the disputed demand, was liable to be refunded pending disposal of the first appeal.

Analysis: The order records that the first appellate proceeding was pending and that the Commissioner (Appeals) had already granted stay of the balance demand after noting that more than 20% of the demand had been recovered by adjustment of refunds. The Court applied the CBDT office memorandum governing recovery of outstanding demand and held that the respondents could not recover more than 20% of the outstanding demand. Since the amount already recovered exceeded that ceiling, the excess recovery, including the sum adjusted from earlier refunds, had to be returned. The Court also directed that the appeal be disposed of expeditiously.

Conclusion: The excess recovery was held to be refundable and the assessee's challenge succeeded.

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