Rajendra Kumar v. The Assistant Commissioner Of Income Tax, Income Taxdepartment, Central Circle-I, Jaipur.department, Central Circle-I, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 11980/2021 Rajendra Kumar S/o Lt. Shri Manak Chand, R/o Plot No. 109,Ram Gali No. 6, Raja Park, Jaipur- 302004 Proprietor Of M/sManak Chand Rajendra Kumar Having Its Office At 163-164,Chaura Rasta, Jaipur- 302003. ----Petitioner Versus 1. The Assistant Commissioner Of Income Tax, Income TaxDepartment, Central Circle-I, Jaipur.Department, Central Circle-I, Jaipur. 2. Commissioner Of Income Tax, New Central RevenueBuilding, Status Circle, Jaipur.Building, Status Circle, Jaipur. ----Respondents For Petitioner(s) For Respondent(s) : Mr. Ankit Totuka, Adv.: Mr. Anuroop Singhi, Adv. with Mr. N.S. Bhati, Adv. HON'BLE MR. JUSTICE PRAKASH GUPTA HON'BLE MR. JUSTICE SAMEER JAIN REPORTABLE Judgment / Order Reserved on: 13/05/2022Pronounced on: 25/05/2022 Per: HON'BLE MR. JUSTICE SAMEER JAIN 1.Instant writ petition under Article 226 of the Constitution of India has been filed by the petitioner-assessee with the following prayers:- a.to issue a writ of mandamus or any otherappropriate writ, directing Respondent No. 1 to refundthe amount adjusted in excess of 20% of the disputeddemand for AY 2017-18;appropriate writ, directing Respondent No. 1 to refundthe amount adjusted in excess of 20% of the disputeddemand for AY 2017-18; b. to issue a writ of mandamus restraining theRespondent from initiating any further recovery ofRespondent from initiating any further recovery of outstanding demand for AY 2017-18 until the disposalof appeal challenging the assessment order is pendingadjudication before the Commissioner of Income Tax(Appeals); c.to impose the exemplary costs on RespondentNo. 1 for carrying out a blatantly illegal recovery oftax against the accepted principles of reasonableness,judicial discipline and law. d.by awarding the cost of writ petition in favour ofthe petitioner; e.any other order, relief or direction, which thisHon'ble High Court may deem fit & proper be passedin favour of the Petitioner; 2.Facts of the case as borne out from record of the writ petition are that on 13/12/2019 one Assessment Order waspassed by the respondent no.1-Assessment Officer (hereinafterreferred to as 'AO') under Section 143(3) of the Income Tax Act,1961 (hereinafter referred to as the 'IT Act') for the AssessmentYear 2017-18 and a demand of Rs.2,09,44,100/- was raised underSection 156 of the IT Act as specified vide Annexure-2 & 3 againstwhich the petitioner-assessee filed an appeal (Annexure-5) underSection 246 of the IT Act on 26/12/2019 in the prescribed formsubmitting that he has a prima-facie case and the demand raisedis not maintainable. 2.1On 13/01/2020, Income Tax Return for the Assessment Year2018-2019 processed by the CPC Wing of the respondent-department and a refund of Rs.70,86,950/- due in favour of thepetitioner-assessee was adjusted against the balance demand ofAssessment Year 2017-18 created on 13/12/2019. The petitioner-assessee filed a Stay Application in response to intimation issuedto him on 13/01/2020 under Section 245 of the IT Act in the formof a Note mentioned in the order dated 13/01/2020 (Annexure-6)which is reproduced as under:- Note : As per the records of CPC, the followingdemands are outstanding. An Intimation underSection 245 of the Income Tax Act, 1961 has beenissued separately proposing to adjust the outstandingdemands against the refund determined as per thisorder. Since, the release of the refundable amountwill be considered on the basis of yourresponse/compliance to the intimation U/s 245. youare requested to submit your response expeditiously.For further clarification in this regard, please ReferCBDT Circular number 8/2015 DTD 14-05-2015. Note : As per the records of CPC, the followingdemands are outstanding. An Intimation underSection 245 of the Income Tax Act, 1961 has beenissued separately proposing to adjust the outstandingdemands against the refund determined as per thisorder. Since, the release of the refundable amountwill be considered on the basis of yourresponse/compliance to the intimation U/s 245. youare requested to submit your response expeditiously.For further clarification in this regard, please ReferCBDT Circular number 8/2015 DTD 14-05-2015. 3.Contention of the petitioner is that his letter dated22/01/2020 (Annexure-7) in response to intimation under Section245 of the IT Act dated 13/01/2020 pointed out that 20% of thedemand amounting to Rs.41,88,620/- be adjusted from the saidrefund in terms of the departmental circulars. He furthercontended that he has preferred an appeal against the said orderbut in spite of the same, again on 25/02/2020, while processingIncome Tax Return for the Assessment Year 2019-20, the CPCadjusted a refund of Rs.32,35,662/- against the balance demandof Assessment Year 2017-18 in spite of the appeal and the stayapplication filed in response to intimation under Section 245 of theIT Act. It is further contended that with the belief to be saved, thepetitioner-assessee filed a stay application on 30/06/2020(Annexure-9) which was disposed of on 22/01/2020 whereby stayon recovery of the balance demand was granted. The same wasalso passed vide order dated 23/03/2021. 4.In this background, the petitioner-assessee contended thatin terms of the order under Section 245of the IT Act, the appealwas preferred by him immediately and as per provisions of Section220(6) of the IT Act, he cannot be termed as an assessee indefault. As per petitioner, the recovery can only be initiated as per the statutory mechanism that too by learned Tax Recovery Officeras mandatory under Section 223 of the IT Act. He furthersubmitted that giving go-bye to the departmental circulars, settledposition of law, principles of natural justice, statutory mandateand the provisions of Section 245 of the IT Act, set up of refundwas made suo-motu and the act of the department was highhanded and autocratic without authority of law and as such, hehas filed the present writ petition for violation of his fundamentalrights, principles of natural justice and recovery being violative ofArticle 265 of the Constitution of India. 5.Per-contra, Mr. Anuroop Singhi, learned Standing Counsel forthe respondent-Revenue submitted that it is true that against theimpugned order passed under Section 143(3) of the IT Act for theAssessment Year 2017-18, on 13/12/2019 a demand ofRs.2,09,44,100/- was raised under Section 156 of the IT Actagainst the addition of Rs.2,51,98,421/- on 13/12/2019. Thepetitioner-assessee filed an appeal on 26/12/2019 which ispending adjudication with the department. He further submittedthat no application for waiver of recovery and stay of demand wasfiled alongwith appeal. He further submitted that it was only on22/02/2021 that an application under Section 220(6) of the IT Actfor stay of demand was filed by the petitioner-assessee andthereafter, the respondents have passed an order of stay on thebalance amount till disposal of the appeal before theCommissioner of Income Tax (Appeals). Therefore, the recoverymade is within the four-corners of law and till filing of the stayapplication on 22/02/2021, the assessee was deemed to be indefault and hence the recovery was made. 6.After considering the records of the writ petition, hearingarguments advanced by learned counsel for both the sides andalso considering the judgments cited at bar, we observe asunder:- 6.After considering the records of the writ petition, hearingarguments advanced by learned counsel for both the sides andalso considering the judgments cited at bar, we observe asunder:- (a)The Assessment Order under Section 143(3) of the IT Actwas passed and the demand was raised under Section 156 of theIT Act simultaneously qua the Assessment Year 2017-18 fordemand of tax to the tune of Rs.2,09,44,100/-. In the specifiedformat of notice of demand under Section 156 of the IT Act, it wasspecifically submitted that recovery proceedings will be carried outin case of default and non-payment within thirty days underprovisions of Section 222 to 227, 229 and 232 of the IT Act. Itwas also mentioned in the said notice under Section 156 of the ITAct that an appeal can be preferred within a period of thirty days.The same is reflected in the notice of demand dated 13/12/2019(Annexure-3). (b)It is also an admitted fact that an appeal under Section 246Aof the IT Act read with Rule 45 of the IT Rules was filed in theprescribed form no.35 on 26/12/2019. As per provisions ofSection 220(6) of the IT Act, which provide as under, the assesseecannot be termed as an assessee in default:- "220 (6)Where an assessee has presented anappeal under section 246 2[or section 246A] theAssessing Officer may, in his discretion and subject tosuch conditions as he may think fit to impose in thecircumstances of the case, treat the assessee as notbeing in default in respect of the amount in dispute inthe appeal, even though the time for payment hasexpired, as long as such appeal remains undisposedof." appeal under section 246 2[or section 246A] theAssessing Officer may, in his discretion and subject tosuch conditions as he may think fit to impose in thecircumstances of the case, treat the assessee as notbeing in default in respect of the amount in dispute inthe appeal, even though the time for payment hasexpired, as long as such appeal remains undisposedof." (c)The respondents have also issued an intimation deemed tobe under Section 245 of the IT Act only on 13/01/2020. Theprovisions of Section 245 of the IT Act, which are reproducedbelow, categorically specify that as per the principles of naturaljustice, before adjusting the refund against the assessee indefault, an intimation in writing to such person of the actionproposed, is to be served:- 245. Where under any of the provisions of this Act, arefund is found to be due to any person, the AssessingOfficer,DeputyCommissioner(Appeals),Commissioner(Appeals)orPrincipalChiefCommissioner or Chief Commissioner or PrincipalCommissioner or Commissioner, as the case may be,may, in lieu of payment of the refund, set off theamount to be refunded or any part of that amount,against the sum, if any, remaining payable under thisAct by the person to whom the refund is due, aftergiving an intimation in writing to such person of theaction proposed to be taken under this section. (d)In response to the said intimation under Section 245 of theIT Act, the petitioner-assessee filed an application for stay ofdemand which is reflected in letter dt. 22/01/2020 (Annexure-7).It is also reflected that the petitioner-assessee, in terms ofdepartmental circulars, has voluntarily requested the departmentfor adjustment of 20% of the demand to the tune ofRs.41,88,620/- from the refund and the balance amount to berefunded but it is analyzed that de-hors the provisions of Sections245, 220(6) of the IT Act the respondents have suo-motuadjusted the entire amount of refund to the tune ofRs.70,86,950/- qua the Assessment Year 2018-19 on 13/12/2020 making the provisionsof Sections 220(6) and 245 of the IT Act,referred to above, as an empty formality. (d)In response to the said intimation under Section 245 of theIT Act, the petitioner-assessee filed an application for stay ofdemand which is reflected in letter dt. 22/01/2020 (Annexure-7).It is also reflected that the petitioner-assessee, in terms ofdepartmental circulars, has voluntarily requested the departmentfor adjustment of 20% of the demand to the tune ofRs.41,88,620/- from the refund and the balance amount to berefunded but it is analyzed that de-hors the provisions of Sections245, 220(6) of the IT Act the respondents have suo-motuadjusted the entire amount of refund to the tune ofRs.70,86,950/- qua the Assessment Year 2018-19 on 13/12/2020 making the provisionsof Sections 220(6) and 245 of the IT Act,referred to above, as an empty formality. (e)Further, the prejudice against the petitioner has been takenin violation of the principles of natural justice. The high handedaction of the respondents is also reflected in bye-passing the saidapplication for the Assessment Year 2019-20 as refund ofRs.32,32,662/- was again suo-motu adjusted on 25/02/2020 bye-passing the fact of filing of appeal as well as the provisions ofSection 245 of the IT Act. The petitioner, in support of hiserstwhile application for stay dated 22/01/2020, again filed a stayapplication which also was not considered. Finally, the petitionerfiled an application on 22/02/2021 being afraid of further recoveryby specifically mentioning the provisions of Section 220 of the ITAct and on 23/03/2021, the respondents granted stay on recoveryof balance demand till disposal of the appeal. (f)The case in hand is a classic example of 'absolute powercorrupts absolutely'. The petitioner-assessee was quite prompt infiling appeal under Section 246-A of the IT Act against the orderdated 13/12/2019 without waiting for thirty days of statutorytime. He filed the appeal on merits in the prescribed format on26/12/2019. It is a fact on record which is admitted by therespondents themselves that till date, the CIT(A), for the reasonsbest known to him, has not considered the said appeal which isbeyond control of the petitioner. In spite of the specific statutoryprovisions under Section 220(6) of the IT Act that on filing appealin the prescribed format, the petitioner-assessee will not beconsidered as an 'assessee in default', giving go-bye to thestatutory provisions contained under Sections 220(6), 222, 223and 245 of the IT Act, giving intimation under Section 245 of the IT Act for staying of refund against the outstanding demand, therespondents have failed to consider the response rather havegiven a technical argument that the said application was not madeas per specific provision of Section 220(6) of the IT Act. Nowherein the provisions of Section 220(6) of the IT Act, it is specified thatthe stay application has to be filed. The mandate of Section220(6) of the IT Act makes it very clear that once an appeal isfiled within time in the prescribed format, the assessee will not bedeemed as an 'assessee in default'. Further, the notice underSection 156 of the IT Act categorically specifies that the demandcan only be initiated in the case of default under the provisions ofSections 222, 223 of the IT Act which in the given case is notmade out. IT Act for staying of refund against the outstanding demand, therespondents have failed to consider the response rather havegiven a technical argument that the said application was not madeas per specific provision of Section 220(6) of the IT Act. Nowherein the provisions of Section 220(6) of the IT Act, it is specified thatthe stay application has to be filed. The mandate of Section220(6) of the IT Act makes it very clear that once an appeal isfiled within time in the prescribed format, the assessee will not bedeemed as an 'assessee in default'. Further, the notice underSection 156 of the IT Act categorically specifies that the demandcan only be initiated in the case of default under the provisions ofSections 222, 223 of the IT Act which in the given case is notmade out. (g)It is also analyzed by this Court that time and again incatena of judgments of Apex Court as well as various High Courtsreported in Commissioner of Cus.& C. Ex. Ahmedabad Vs.Kumar Cotton Mills Pvt. Ltd.: 2005(180) E.L.T. 434 (SC);Larsen & Toubro Limited Vs. The Union of India & Ors.:2013(288) E.L.T. 481 (Bom.); Manglam Cement Limited Vs.The Superintendent, Central Excise, Range-III, Kota & Ors.(DB Civil Writ Petition No.1891/2013) & connected mattersdecided by Rajasthan High Court at Jaipur Bench, Jaipur on01/03/2013; Skyline Engineering Contracts (India) P. Ltd.Vs. Deputy Commissioner of Income-tax: (2021) 132taxmann.com 158 (Delhi) and Jet Privilege (P.) Ltd. Vs.Deputy Commissioner of Income-tax: (2021) 131taxmann.com 119 (Bombay), it is held that under Section 245of the IT Act, the recovery can only be initiated after giving anintimation in writing to the assessee of the action that he proposes to take under this Section. Not following the mandatoryrequirement of intimation under Section 245 of the IT Act and alsonot following the principles of natural justice, is illegal, withoutauthority and unjustified. (h)Further, the series of judgments, referred above, havecategorically held that when an appeal of the assessee is pendingand the same is not disposed of for the reasons beyond hiscontrol, on account of autocratic, lethargy and administrativeconstraints on the part of the respondents, the recovery ofdemand pending appeal will be an act interrorem. (i)Learned counsel for the respondent-Revenue was not able toreflect that why the appeal was not disposed of when the samewas filed promptly nor was he able to refute the fact that underSection 220(6) of the IT Act, once on filing the appeal, thepetitioner was not to be treated as an 'assessee in default' andthat the recovery taken place is de-hors the provisions of Section245 of the IT Act. Learned counsel for the respondent-Revenueonly cited and contended that the application for stay underSection 220(6) of the IT Act was only made on 22/02/2021 andthereafter, the stay on demand was made. In this context, it isimportant to note that unlike the provisions of Section 129(e) ofthe Customs Act, 1962 and the provisions of Section 235(f) of theCentral Excise Act, there is no mandatory requirement of pre-deposit for entertaining the appeal. It is only by administrative fiatunder the Income-tax Act that a provision of stay is granted if ademand of 20% is pre-deposited, vide office memorandum dated29/02/2016 meaning thereby that without a statutory fiat, powerand authority of law, office memorandums are issued. Therespondents have failed to consider the provisions of Section 220(6) of the IT Act whereby on filing of appeal, the assessee willnot be deemed in default. The recovery action as per Sections222, 223 of the IT Act can only be initiated by the Tax RecoveryOfficer, the adjustment from due refund can only be carried outafter serving intimation and giving opportunity of hearing as perprovisions of Section 245 of the IT Act as held in the catena ofjudgments (supra). 220(6) of the IT Act whereby on filing of appeal, the assessee willnot be deemed in default. The recovery action as per Sections222, 223 of the IT Act can only be initiated by the Tax RecoveryOfficer, the adjustment from due refund can only be carried outafter serving intimation and giving opportunity of hearing as perprovisions of Section 245 of the IT Act as held in the catena ofjudgments (supra). (j)The Revenue for its own default of not considering the appealin time even after lapse of one and half year has initiated recoveryfrom the assessee that too merely at the verge of expiry of 30days dehors not only the statutory provisions and the judgmentsof the higher forums but even contrary to its own officememorandum which permits recovery only to the extent of 20%. 7.In Union of India (UOI) & Ors. Vs. Kamlakshi FinanceCorporation Ltd.: AIR 1992 SC 711, the Apex Court held as under:- "8.We have dealt with this aspect at some length,because it has been suggested by the learnedAdditional Solicitor General that the observationsmade by the High Court, have been harsh on theofficers. It is clear that the observations of the HighCourt, seemingly vehement, and apparentlyunpalatable to the Revenue, are only intended to curba tendency in revenue matters which, if allowed tobecome widespread, could result in considerableharassment to the assesses-public without any benefitto the Revenue. We would like to say that thedepartment should take these observations in theproper spirit. The observations of the High Courtshould be kept in mind in future and the utmostregard should be paid by the adjudicating authoritiesand the appellate authorities to the requirements ofjudicial discipline and the need for giving effect to theorders of the higher appellate authorities which arebinding on them." 8.In these facts and circumstances, placing reliance upon thejudgment rendered by the Apex Court in Kamlakshi FinanceCorporation Ltd. (supra), the ratio of which is reproduced hereinabove, this Court deems it appropriate to allow the present writpetition on account of aforesaid discussion and findings anddirects the respondent-Assessing Officer and other respondents toissue a refund to the petitioner-assessee alongwith interest asspecified in law adjusted by them in excess of 20% of the disputeddemand for Assessment Year 2017-18 within a period of thirtydays from the date of passing of this order. 9.This Court also holds that the action of recovery on the partof the respondents was de-hors the statutory provisions specifiedunder Section 220(6), 245 of the IT Act and was withoutjurisdiction in terms of Sections 222 and 223 of the IT Act. Therespondents have also failed to honour the series of judgments,referred to above which for them are merely pieces of papers.They have completely given go-bye to the principles of judicialdiscipline, majesty of law and even their action is contrary to theirown circulars. This high-handed action of the respondents isagainst Article 14, 19 and 265 of the Constitution of India. In spiteof categorical directions of the Apex Court in Kamlakshi Finance Corporation Ltd. (supra)s. 10.This Court considers that in the present case, therespondents have totally ignored the provisions of law, the judicialpronouncements of higher forum and the action of therespondents in not considering the appeal in time and even tilldate, is against the principles of natural justice, the requirementof law, fair play and therefore, the action of the respondents and the Revenue Authorities is violative of Article 265 of theConstitution of India. Corporation Ltd. (supra)s. 10.This Court considers that in the present case, therespondents have totally ignored the provisions of law, the judicialpronouncements of higher forum and the action of therespondents in not considering the appeal in time and even tilldate, is against the principles of natural justice, the requirementof law, fair play and therefore, the action of the respondents and the Revenue Authorities is violative of Article 265 of theConstitution of India. 11.Accordingly, on perusal of the case in hand, apart fromallowing the writ petition, this court further deems it appropriateto issue strictures to the effect that appropriate departmentalaction be initiated against the officers and authority concerned ofthe respodnent-Revenue who are involved in non-consideration ofappeal of the petitioner in time as well as for not obeying andconsidering the judgments of the Apex Court, referred to above aswell as the provisions of Section 220(6), 245 of the IT Act and thecirculars of the department. The Chief Commissioner of IncomeTax, Rajasthan, Jaipur, Udaipur, etc. is directed to apprise aboutpendency situation and statistics to the Rajasthan State LegalServices Authority, Jaipur so that in the interest of justice, thesame can be considered and appropriate correspondences can bemade with the higher/appropriate authorities in the larger publicinterest as illegal recoveries, levy of interest is imposed for thereasons beyond their control. 12.In the case in hand, this Court further deems it appropriateto impose a cost upon the respondents which is quantified toRs.50,000/- which the respondent-department shall pay itself or ifit so chooses, the same may be recovered equally fromrespondents No.1 & 2 and be deposited with the Rajasthan StateLegal Services Authority, Jaipur and assessee in half and halfwithin two months of passing of this order. 13.A copy of this order be sent by the Registry of this Court tothe Chairman, Central Board of Direct Taxes (CBDT), Departmentof Revenue, Ministry of Finance, Government of India, NorthBlock, New Delhi-110001 and Revenue Secretary, Ministry of Finance, Government of India, North Block, New Delhi-110001 forappropriate compliance and to issue necessary instructions in theinterests of citizens and the assessees. 14.The writ petition is accordingly allowed. All pendingapplications stand disposed of in above terms. (SAMEER JAIN),J(PRAKASH GUPTA),J Raghu/