TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 366
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....ion 220(2) of the Act demanding interest on the delayed payment of the adjusted demands for the Assessment years 2004-05, 2007-08 and 2008-09. Facts:- 3. For the Assessment Year 2006-07, the petitioner filed its return of income declaring Rs. 366.94 crores as income and computing the tax payable thereon Rs. 123.51 crores. The Assessing Officer consequent to the directions of the Dispute Resolution Panel passed an order dated 7 October 2010 under Section 143(3) r/w Section 144C of the Act enhancing the taxable income from Rs. 366.94 crores to Rs. 937.86 crores. A part of the enhancement was attributable to transfer pricing adjustment of Rs. 369 crores. This further addition on account of transfer pricing led to a tax demand of Rs. 124 crores. 4. Being aggrieved, the petitioner carried the above order in appeal to the Income Tax Appellate Tribunal (Tribunal). By an order dated 10 December 2012 the Tribunal partly accepted plea of the petitioner including on account of transfer pricing adjustment. The Tribunal by the above order dated 10 December 2012 restored some of the issues to the Assessing officer who by order dated 29 May 2013 while giving effect to the order of Tribunal red....
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....al to adjust out of the refund of Rs. 129 crores due to the petitioner for the Assessment Year 2006-07 with the pending demands which were as under: A.Y. Amount of demand (exclusive of interest) 2004-05 Rs.3,76,985/- 2007-08 Rs.17,98,92,047/- 2008-09 Rs.24,98,64,327/- 9. The petitioner by letter dated 5 August 2013, objected to to the proposed adjustment pointing out that the demand for the Assessment Year 2004-05 has already been adjusted on 10 January 2011 out of the refund due to the petitioner for the Assessment Year 2004-05 itself. So far as Assessment Years 2007-08 and 2008-09 were concerned, the petitioner pointed out that demand for Rs. 18 crores for the Assessment Year 2007-08 and the demand for Rs. 25 crores for Assessment year 2008-09 had been stayed by the order of Commissioner dated 22 March 2011 and the order of the Assessing officer dated 9 March 2012 respectively till the disposal of its appeals by CIT (Appeals). It was pointed out that the appeals for Assessment years 2008-08 and 2008-09 are still awaiting disposal at the hands of the CIT(Appeals). Thus it was submitted that adjustment as proposed was not justified/warranted. 10. The Assessing Officer app....
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....and (c) So far as the three orders dated 22 August 2013 demanding interest are concerned the same is consequential to unsustainable adjustment. Therefore need to be quashed. 12. Per contra, Mr. Arvind Pinto, the learned Counsel for the Revenue submits as under: (a) It is accepted that there is no demand payable by the petitioner for Assessment year 2004-05. Thus there is no occasion to adjust the same from the refund due to the petitioner for A.Y.2006-07. Consequently, no occasion to demand interest for the amount adjusted for A.Y. 2004-05 as done by the order dated 22 August 2013 can arise; (b) So far as demands for the Assessment Year 2007-08 and 2008-09 are concerned the same is payable under the Act by the petitioner. The stay obtained only keeps recovery in abeyance. Therefore, the action of Assessing officer is completely justified in adjusting the same out of the refund for the Assessment Year 2006-07; (c) The stay that has been granted under Section 220(6) of the Act. The grant of such a stay is in absolute discretion of the Assessing Officer, thus a party has no right to it. So far as the Assessment Year 2007-08 is concerned, the stay has been granted by the Commissio....
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....use of the word "may" therein. Besides the requirement of giving notice/intimation of the proposed action of adjustment out of the refund due is also an indication of discretionary nature of power not mandatory. This notice/intimation is required to be given so as to enable a party to point out not only factual errors but also point out why such a power should not be exercised in the facts of the case, such as the demand sought to be adjusted is still a subject matter of appeal and the issue is covered by decisions of higher forums etc. On consideration of the same, it is open to the officer of the revenue concerned to exercise its discretion, to adjust or not. This giving of prior intimation has been held by this Court in A.H. Shaikh and Ors v. Suresh B Jain 165 ITR 86 to be mandatory before any adjustment can be made. The exercise of powers under Section 245 of the Act being discretionary has also been so held by the Delhi High Court in Glaxo Smith Kline Asia (P) Ltd. Vs. CIT 290 ITR 35. We respectfully concur with the above view of the Delhi high Court that the power under Section 245 of the Act is discretionary. Thus the exercise of a power of adjusting demands out of refunds d....
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....the petitioner for Assessment year 2005-06 to meet a non existing demand for A.Y. 2004-05 can arise. Consequent demanding of interest under Section 220(2) of the Act as demanded by order dated 22 August 2013 for A.Y.2004-05 would not arise. Therefore in view of above agreed position the Revenue is directed to hand over the sum of Rs. 3.76 lakhs retained/adjusted out of the refund due for the alleged dues of A.Y.2004-05 to the petitioner along with interest in accordance with the Act. So also we set aside the impugned order dated 22 August 2013 being Exhibit P to the the petition demanding interest of Rs. 1.05 lakhs. 18. So far as the Assessment Year 2007-08 is concerned, the demand of Rs. 18 crores had been stayed by the order of Commissioner dated 22 March 2011 under Section 220(6) till the disposal of the petitioner's appeal before the CIT (Appeals). The appeals are still pending. Further, stay was granted in respect of the demands attributable to transfer pricing adjustment which was an issue of dispute even for the Assessment Year 2006-07 and was finally resolved in favour of the petitioner. The contention of Mr.Pinto is that as the order of stay was granted by Commissione....
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.... payable under the Act by the person concerned. Therefore in the present facts, we would have to examine whether any demands/sums were remaining payable under the Act. Normally under the Act after orders of Assessment is passed, a notice of demand is issued to the party concerned under Section 156 of the Act. This notice under Section 156 of the Act specifies the period(normally 30 days) within which the payment is to be made failing which the person concerned is treated as an Assessee in default. It is only after the expiry of time limit to make the payment is the recovery provision triggered under Section 220 onwards of the Act. However where a stay is granted under Section 220(6) of the Act, in view of pending appeal before the CIT(Appeals) then such an assessee would not be treated in default even after the expiring of the period of 30 days. It therefore follows that the time to make the payment stands extended and the person is not to be deemed to be an Assesee in default for the recovery provisions to be set in motion. The words "remaining payable under the Act" would mean where the assessee has not paid within the time available and has becomes an Asseessee in default. In th....
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....sed, it would be improper and inappropriate on the part of the Revenue to recover the demand by way of adjustment. In case of doubt or ambiguity, an application for clarification or vacation/modification of stay to allow adjustment can be, and should be filed. But no attempt should be made and it should not appear that the Revenue has tried to overreach and circumvent the stay order. Obedience and compliance with the stay order in letter and spirit is mandatory. A stay order passed by an appellate/higher authority must be respected. No deviance or breach should be made." (Emphasis supplied) We are in respectful agreement with this view. 25. Therefore the Revenue should have approached the appellate authority before whom the appeals were pending to expedite the hearing or alternatively seek to vary the order of stay after giving a hearing to the party concerned before the adjustment under Section 245 of the Act is carried out. This has admittedly not been done. 26. The power under Section 245 is discretionary. The orders of stay have to be honoured before adjustment of the demand out of refund is done by the Revenue. If the Assessing Officer did not accept the assessee's con....