Recovery of tax demand: TDS/TCS must be factored and 20% stay deposit calculated on crystallised tax liability, excess refundable. The HC held that the assessment order frames the crystallised tax liability (Rs. 44,10,05,569) and the 20% deposit for stay pending appeal must be ...
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Recovery of tax demand: TDS/TCS must be factored and 20% stay deposit calculated on crystallised tax liability, excess refundable.
The HC held that the assessment order frames the crystallised tax liability (Rs. 44,10,05,569) and the 20% deposit for stay pending appeal must be calculated on that crystallised amount, not on a reduced figure after credit for third party tax receipts. Consequently, amounts collected in excess of 20% of the crystallised liability must be refunded after verification. TDS and TCS already collected are to be adjusted against the 20% computed on the assessment figure, and any net payable balance is to be remitted to the assessee within the directed time frame.
Issues Involved: The interpretation of Central Board of Direct Taxes (CBDT) Office Memorandum dated 29.02.2016, with an amendment made on 25.08.2017.
Comprehensive Details: The petitioner filed a Return of Income for Assessment Year (AY) 2021-22, declaring taxable income as Rs. 1,04,06,610. The Assessing Officer (AO) added Rs. 146,72,96,789, resulting in a total tax liability of Rs. 44,10,05,569. Adjustments for tax deducted at source (TDS) and tax collected at source (TCS) were made, reducing the liability to Rs. 33,05,82,936. A notice of demand was issued for this amount. A refund for AY 2022-23, Rs. 14,11,32,594, was adjusted against the AY 2021-22 demand. The petitioner claimed that the revenue recovered an amount exceeding 20% of the demand while the appeal was pending before the Commissioner of Income Tax (Appeals) (CIT(A)).
The respondents argued that recovery should be 20% of the balance demand of Rs. 33,05,82,936, in addition to TDS and TCS amounts. They referred to the CBDT OM, stating that demand includes various payable sums under the Income Tax Act. The court noted that 57.04% of the tax liability was recovered, exceeding the 20% limit. The court found that the conditions in the OM for exceeding 20% recovery were not met. The respondents' argument that demand refers to the notice amount was deemed untenable. The court directed the revenue to refund the excess amount over 20% of the crystallized tax liability, adjusting TDS and TCS amounts. The refund was ordered to be made within four weeks, including applicable interest.
The court disposed of the writ petition accordingly, with parties to act based on the digitally signed copy of the order.
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