Rajendra Kumar Vs ACIT Jaipur (Rajasthan High Court)
Date-25th May 2022

Sub-Whether refunds in excess of 20% of demand pending appeal can be withheld/adjusted? High handedness of department -Rs 50000/- cost imposed.

The Division bench of Rajasthan High Court in this case was dealing with a matter where refund for AY 2018-19 was determined and upon notice u/s 245 having been received, the appellant requested adjusted of 20% of the demand for AY 2017-18 for which year appeal was pending and requested refund of the balance amount. However, inspite of the said request, the entire refund was adjusted and the matter was challenged before the Hon’ble Writ Court. The Court after hearing the arguments came down upon heavily on the department by observing that “absolute power corrupts absolutely”. As regards arguments of the department, no stay application was filed, the court observed that Nowhere in the provisions of Section 220(6) of the IT Act, it is specified that the stay application has to be filed. The mandate of Section 220(6) of the IT Act makes it very clear that once an appeal is filed within time in the prescribed format, the assessee will not be deemed as an ‘assessee in default’.

The Court also observed that when an appeal of the assessee is pending and the same is not disposed of for the reasons beyond his control, on account of autocratic, lethargy and administrative constraints on the part of the respondents, the recovery of demand pending appeal will be an act in terrorem. The Revenue for its own default of not considering the appeal in time even after lapse of one and half year.

On these facts not only the writ was allowed but severe strictures were passed against the department and/its officers and cost of Rs 50000 was imposed on the officers personally.

This judgement will be very very helpful in recovery cases.

Ramesh Patodia
26-05-2022