Wp/19243/2020 Of M/S. Tsi Business Parks (Hyderabad) Pvt., Ltd v. Assistant Director Of Income Tax Cpc

FRIDAY, THE TWENTY SECOND DAY OF JANUARYTWO THOUSAND AND TWENTY ONE PRESENT THE HON'BLE SRI JUSTICE M. S. RAMACHANDRA RAOANDTHE HON'BLE SRI JUSTICE T. AMARNATH GOUD WRIT PETITION NOS: 19243 AND 19259 OF 2020 wP NO.19243 0F 2020: Between: It//s. TSI Business parks (Hyderabad) Pvt., Ltd, Sy.No. 115 (part), waverockBuilding, Nanakaramguda Village,Hyderabad-SOO 008 Telangana, rep. by itsauthorized signatory A/r. Sanjay Bhardwaj ...PETITIONER AND 1. The Assistant Commissioner of Income Tax, Circle -2 (1), sth Floor, SignatureTowers, Opp. Botanical Garden, Kondapur, Hyderabad-SO0 084.Towers, Opp. Botanical Garden, Kondapur, Hyderabad-SO0 084. 2. The Assistant Director of lncome Tax CPC, Centralized processing Centreprestige Alpha No. 4811 , 4812, Beratenagrahara Begur Hobli, Hosur Road,Bengaluru, Karnataka-560 1 00.prestige Alpha No. 4811 , 4812, Beratenagrahara Begur Hobli, Hosur Road,Bengaluru, Karnataka-560 1 00.3. Union of lndia, through Secretary, Ivlinistry of Finance, Department of Revenue,North Block' New Delhi-1 10001 North Block' New Delhi-1 10001 ...REspoNDENrs Petition under Article 226 of the Constitution of lndia praying that in thecircumstances stated in the affidavit filed therewith, the High Court may be pleasedto issue a writ order or direction more particularly one in the nature of writ ofIvlandamus, declaring the action of the respondents in adjusting excessive refundsas arbitrary, illegal, set aside the same and consequently direct the respondents torefund the excessive amount to the tune of INR 1,06,06,740 with interest Counsel for the Petitioner: SRI DEEPK CHOPRA, SENIOR COUNSELFOR SRI G. NARENDRA CHETTY Counsel for Respondent Nos.1&2: Ms. K MAMATA CHOUDARY, SENIOR COUNSEL FOR INCOME TAX Counsel for Respondent No.3: SRI NAMAVARAPU RAJESHWAR RAO,ASSISTANT SOLICITOR GENERAL WP NO: 19259 OF 2020 Between: It//s. TSI Business parks (Hyderabad) Pvt., Ltd., Sy.No. 1 15 (part), waverockBuilding, Nanakaramguda Village, Hyderabad-500 008, Telangana, Rep. by itsauthorized signatory tvl r. Sanjay Bhardwai. Building, Nanakaramguda Village, Hyderabad-500 008, Telangana, Rep. by itsauthorized signatory tvl r. Sanjay Bhardwai. ...pE,,oNERAND 1. Assistant Director of lncome Tax, CPC Centraalized processing Centre prestigeAlpha No. 4811,4812, Beratenagrahara Begur Hobli, Hosur Road, Bengaluru,Karnataka-560100.Alpha No. 4811,4812, Beratenagrahara Begur Hobli, Hosur Road, Bengaluru,Karnataka-560100. 2. Assistant Commissioner of lncome Tax, Circle -2 (1), sth Floor, SignatureTowers, Opp. Botanical Garden, Kondapur, Hyderabad-500 084.Towers, Opp. Botanical Garden, Kondapur, Hyderabad-500 084. 3. Union of lndia, [through ][secretary ][tt/inister of Finance Department of ][Revenue,]North Block New [Delhi-1 ][10001. ] ...RES'.NDENTS Petition under Article [226 ][of ][the ][constitution ][of ][lndia ][praying ][that ][in ][the]circumstances stated [in ][the ][affidavit ][filed ][therewith, ][the ][High Court may ][be ][pleased]to issue a writ order [or ][direction more ][particularly ][one ][in the ][nature ][of ][writ ][of]Mandamus, declaring, [the ][action of ][the ][respondents in adjusting ][the ][refunds due for]AY 2O1g-20 as arbitrary, [illegal, ][set ][aside ][the ][same ][and ][consequently ][direct ][the]respondents to refund [the ][amount to ][the tune ][of ] [6,25,70,390 with ][interest]Counsel for the Petitioner: [SRI DEEPK CHOPRA, SENIOR COUNSEL]FOR SRI G. NARENDRA CHETTY Counsel for Respondent [Nos. 1&2: Ms. ] [CHOUDARY,]SENIOR COUNSEL Counsel for Respondent [No.3: ] [RAO']ASSISTANT SOLICITOR The Court made the following: HONOURABLE SRI JUSTICE M.S. RAMACHANDRA RAOAND HONOURABLE SRI JUSTICE T. AMARNATH GOUD WRIT PE,TITION Nos.I9 243 and 19259 of 2020 COMMON ORDER: (Per Hon'ble Sri Justic:e lt,l.S. Ramachanclra Rao) Counsel for Respondent [Nos. 1&2: Ms. ] [CHOUDARY,]SENIOR COUNSEL Counsel for Respondent [No.3: ] [RAO']ASSISTANT SOLICITOR The Court made the following: HONOURABLE SRI JUSTICE M.S. RAMACHANDRA RAOAND HONOURABLE SRI JUSTICE T. AMARNATH GOUD WRIT PE,TITION Nos.I9 243 and 19259 of 2020 COMMON ORDER: (Per Hon'ble Sri Justic:e lt,l.S. Ramachanclra Rao) Since common issues of law and fact arise for considerationand since both cases are filed by the same petitioner against theIncome Tax Department of the Union of lndia, theyare beingdisposed of by this Common Order. 2. Heard Sri Deepak Chopra, Senior Counsel appearing forG. Narendra Chetty, counsel for petitioner, and Ms. MamtaChoudhary, Senior Standing Counsel for the Income Tax Department,for respondent nos.1 and 2 in both the Writ petitions. 3. The petitioner is a limited Company and is engaged in thebusiness of developing LT. Parks in Hyderabad. It is an assesseeunder the Income Tax Act, 196 I , (for short, [othe ]Act,), Writ Petition No. 19243 af 2020 4. The petitioner had filed its Return of Income for theAssessment Year 2017-18 on 31.10.2017 by declar.ing an income ofI{s.2,75,64,380/- under normal provisions and Rs. 16,00,17,5I 4/-under MAT provision and had paid a tax on MAT of Rs.3,41,50,298/-. 5. An Assessment Order dt.23.12.2019 was passed by theAssistant Commissioner of Income Tax, Circle - 2(2), t.Iyderabad./2nd respondent) making a total addition of Rs.36,34 ,89,721- to the income retumed by the petitioner under the MAT provisions andraising a demand for tax of Rs.8,01,57,967 under Section 156 of theAct. 6. Petitioner preferredanAppeal against it before theCommissioner of Income Tax (Appeals) and also filed an applicationseeking stay ofthe demand before the 2nd respondent. 7. On 29.01.2020, the 2nd respondent disposed of the stayapplication following CBDT Instruction No.1914 dt.02.02.1993directing the petitioner to pay 20o/o of the disputed demand for grantof stay. The 2'd respondent stated that stay will be granted onsubmission of challan for 20Yo of the demand raised for theAssessment Year 20 17- I 8. 8. According to petitioner, oral discussions took place with the 2ndrespondent wherein the latter directed petitioner to deposit a sumequivalent to 10% ofthe outstanding demand and the remainder l0%was agreed to be adjusted against the determined refunds due to thepetitioner for Assessment Year 2018-19; and in compliance thereof,petitioner deposited Rs.80,00,000/- on 31.01.2020. Copy of the saidchallan is enclosed as Amexure A.4. g, Thereafter, through a letter Annexure A.5 dt.lO.O2.2O2O,petitioner apprised the 2nd respondent regarding the deposit of themoney as directed and further requested 2nd respondent to adjust thebalance of Rs.80,31,5931 [Rs.1,60,31,5931- (being 20% of the MSR,J & IA.Jwp_19243 2020 &wp_19259 2020 outstanding demand) less Rs.80,00,000/-l against the determinedrefund of Assessment Year 20 I 8- I 9. 10. But, on 15.04.2020, without any prior intimation under Sec.245of the Act, the Assistant Director of Income Tax, CentralizedProcessing Center, Bangalore (1't ['respondent) ]adjusted the entirerefund due to the petitioner for Assessment Year 2018-19, i.e.,Rs.1,86,38,333i- i,e Rs. I,30,45,8131- against the outstanding demandfor Assessment Year 2017-18 (as opposed to the agreed sum ofRs.80,3 1,593/-) and Rs.55,92,520 against an alleged outsrandingdemand for Assessment Year 2008-09. Petitioner has annexed asAnnexure ,4'.6, copy of the refund status for Assessment Year 201 8- I 9evidencing adjustment of refund on 15.04.2020. ll. Thereafter, on 09.05.2020, the l't respondent issued a noticeunder Section 245 of the Act proposing to adjust the determinedrefund of Assessment Year 2019-20 against the outstanding demandfor Assessment Year 201 7- I 8 and Assessment Year 2008-09. 12. This notice is subject matter of Writ Petition No.19259 of 2020. ll. Thereafter, on 09.05.2020, the l't respondent issued a noticeunder Section 245 of the Act proposing to adjust the determinedrefund of Assessment Year 2019-20 against the outstanding demandfor Assessment Year 201 7- I 8 and Assessment Year 2008-09. 12. This notice is subject matter of Writ Petition No.19259 of 2020. 13. Petitioner contends that in the notice d1.09.05.2020, the l'1respondent acknowledged that the outstanding demand fbrAssessment Year 2017-18 as on 09.05.2020 was Rs.5,91,12,1571-[being [Rs.8,01,57,967 ][minus ][(Rs.80,00,000/- ]+ Rs.1,30,45,813/-)]indicating that the adjustment of excessive refund for AssessmentYear 201 8-1 t had occurred on | 5.04.2020. { 14. Thereafter, [on ][13.05.2020, another ][notice under ][Section ][245 ][of]the Act was [issued ][by ][the ][1't ][respondent ][proposing ][to ][adjust the ][refund](which had in fact [already been adjusted) ][due ][to ][the ][petitioner for]Assessment Year [2018-19 ][against ][the ][outstanding ][demands ][of]Assessment [Year ][2008-09 ][and ][Assessment ][Yeat' ][201 ][7- ][1 ][8](Annexure A.8). 15. Petitioner hled [a ][letter Ex.A.9 ][dt'15'06'2020 ][with ][the ][1"]respondent [apprising ][the ][1't respondent ][of ][these ][facts ][alld ][protesting]the [adjustment ][of ][the excessive ][refund ][against ][the ][outstanding]against demand for Assessment [Year ][2017-18 ][mentioning that ][there was ][no]demand outstanding [for ][Assessment ][Year 2008-09 ][and seeking ][that]the excess amount [adjusted ][to ][the ][tune ][of ][Rs'1,06,06,7401- ][be]refunded to it. [The ][Assessment ][Order ][passed ][for ][Assessment Year]2008-0gandthechallanevidencingpaymentofdemandwerealsofiled as Annexures [A.10 ][and ][A'11.] 16. Thereafter, [the ][l't ][respondent ][passed ][the order ][dt'23'07'2020](Annexure A.12) acknowledging [that ][petitioner ][had ][deposited ][a ][sum]than [200/o ][of ][the ][outstanding ][demand ][and ][granted ][stay ][of]higher demand till the [disposal ][of ][the Appeal by the ] [(Appeals)'] 17. Petitioner [filed ][Annexure ][A.13 ][letter ][dt'07'08'2020 ][with ][the ][1"]respondent [protesting ][against the entire actions ][of ][the respondents ][and]that [the adjustment ][of ][refunds was ][unjust ][and contrary ][to]complaining law 18. Petitioner therefore filed Writ petition No.19243 of 2020challenging the action of respondents in making such alleged unjustadjustment of excess refunds to the tune of Rs.1,06,06,7401- andseeking refund of the saine with interest. Writ Petition No.l 9259 of 2020 19. For the Assessment Year 2019-20, petitioner had filed itsReturn oflncome on 30. 10.2019 and had declared a Book profit ofRs.41,95,09,463l- and claimed a refund of Rs.5,79,35,600/-. 20. On 09.05.2020, rhe l " respondent issued the first noticeAnnexure A.8 under Section 245 of the Act proposing to adjust thedetermined refund of Assessment year 2}lg-20 against theoutstanding demand for Assessment years 2008-09 and 20 I 7- 1 g. 21. Petitioner filed Annexure A.9 response dt.07.06,2020 with theI't respondent online contesting the said adjustment and informing thelatter that the demand for Assessment Year 2017-18 had already beenstayed post the deposit of the requisite 2Oyo as required by the 2"dlespondent. 22. Petitioner also filed Annexure A.l0 letter dt. 15.06.2020 with2nd respondent questioning how the demand for Assessment year2008-09 (which was non-exisrent as it was already paid fully by thepetitioner) could have been again recovered by adjustment of therefund for Assessment Year 2019-20: and reiterating its objection tothe adjustrnent of demand for Assessment y ear 2017-18 against the refund for the Assessment [Year ][2019-20 ][as ][already ][stated ][in ][the]07 .0 6.2020 on-line reply. 21. Petitioner filed Annexure A.9 response dt.07.06,2020 with theI't respondent online contesting the said adjustment and informing thelatter that the demand for Assessment Year 2017-18 had already beenstayed post the deposit of the requisite 2Oyo as required by the 2"dlespondent. 22. Petitioner also filed Annexure A.l0 letter dt. 15.06.2020 with2nd respondent questioning how the demand for Assessment year2008-09 (which was non-exisrent as it was already paid fully by thepetitioner) could have been again recovered by adjustment of therefund for Assessment Year 2019-20: and reiterating its objection tothe adjustrnent of demand for Assessment y ear 2017-18 against the refund for the Assessment [Year ][2019-20 ][as ][already ][stated ][in ][the]07 .0 6.2020 on-line reply. 23. On 08.07.2020, an order Annexure [A.11 ][under Section ][143(1)]of the Act was passed by the [1'1 ]respondent [for ][the ][Assessment ][Year]20119-20 determining the refund [due ][to ][the petitioner ][to ][the tune ][of]Rs.6,25,70,3901-; and simultaneously [1]strespondent issued theimpugned notice dt.08.07.2020 [(Annexure ]A. [1) ][under ][Section ][245 ][of]the Act proposing to again adjust the above [mentioned ][detennined]refund against the outstanding demands for [Assessment ][Years]2008-09 and 2017-18 and asked the [petitioner ]to file a [response]thereto in (30) days. 24. Even before the said [period ]of [30 days granted ][to the petitioner]to respond to the said notice expired, the l't respondent [on ][24.07 ][.2020]itself adjusted the entire refund for Assessment [Year ][2019-20 ][against]the remainder outstanding demand for Assessment Year [2017-18]including the principal amount of Rs.5,91,12,1571- [and interest ][of]Rs.34,58,233l- which is evidenced by [the ][sueen-sftof ][(Annexure]A.13) and extracts of Form 264.3 of [Assessment ][Year ][2017-18](Annexure A.14). 25. As a last resort, petitioner filed its [grievance before ][the ][I't]respondent's on-line portal as well as by [physical ][letters ][apprising ][the]l't respondent regarding the facts of the case [and ][questioning how]refunds have been adjusted against the demand which [had ][already]been stayed by 2nd respondent. The copy of online [grievance ][filed]with the e-Nivaran pofial and the letter filed with the 1't respondent MSR.J & 14.J!vp_r9243_2020 &!vp-19259-2020!vp-19259-2020 dt. I 0.09.2020 are attached herewith as Annexures A. l7 and A. I 8.respectively.respectively. 26. In response to such grievance petition, the l't respondentclosed the grievance by stating that the demand details for theAssessment Year 2017-18 were uploaded by the 2'd respondent andstated their inability to assist in the matter. The e-mail dt.12.09.2020is attached as Annexure A.19. 27. Thereafter, petitioner t-rled Writ Petition No.19259 of 2020seeking refur.rd of Rs.6,25,70,3901- with interest. Contentions of Detitioner 28. Petitioner contends : (a) in terms of the CBDT Instruction No.1914 r/w OfficeMemorandum and the 2nd respondent's order dt.29.01.2020, thepetitioner was mandated to only deposit a surn of ?lYo of theoutstanding demand and therefore, the respondents could nothave recovered a higher sum; (b) issuance of Notice under Section 245 of the Act is anecessary pre-requisite so as to enable the petitioner to fileobjections against orders of adjustment and the adjustment ofret-unds even prior to issuance of such notice is patently illegat.Petitioner places reliance on the decision of the A.P. HighCourt in Japson Estates (P) Ltd. vs. Dy. Commissioner of. Income Taxr and also a decision of the Delhi High Court in Glaxo Smith Kline Asia (P) Ltd. vs. Commissioner ofIncome Tax2; (c) recovery of demands which have been stayed by theRevenue Authorities has no legal sanction as held in MarutiSuzuki India Ltd. vs. D.C.I.T.3; (b) issuance of Notice under Section 245 of the Act is anecessary pre-requisite so as to enable the petitioner to fileobjections against orders of adjustment and the adjustment ofret-unds even prior to issuance of such notice is patently illegat.Petitioner places reliance on the decision of the A.P. HighCourt in Japson Estates (P) Ltd. vs. Dy. Commissioner of. Income Taxr and also a decision of the Delhi High Court in Glaxo Smith Kline Asia (P) Ltd. vs. Commissioner ofIncome Tax2; (c) recovery of demands which have been stayed by theRevenue Authorities has no legal sanction as held in MarutiSuzuki India Ltd. vs. D.C.I.T.3; (d) the action of the 1't respondent purportedly under Section245 of the Act in adjusting the refunds due to it for theAssessment Year 2018-19 against the outstanding dernand forAssessment Year 2017-18 when the 2nd respondent had granteda stay of the outstanding demand on29.01.2020 for AssessmentYear 2017-18 subject to the petitioner depositing 20% of suchdemand, is patently illegal; that in terms of Circulars issued bythe CBDT, adjustment of refunds only to the extent of 20,,/o ispermitted, and the 1't respondent had acted contrary to bindingCirculars of the CBDT; that the said adjustment was madewithout issuing any notice under Section 245 prior to suchadjustment, and a notice under Section 245 issued after suchadjustment of refund, is also illegal; and consequently, therespondents ought to refund Rs.i,06,06,7401- with interest inWrit Petition No.19243 of 2020; (e) the notice dt.08.07.2020 issued by the 1't respondentunder Section 245 of the Act and the consequential adjustmentof refunds due to the petitioner for Assessment yeat 2019_20 ' [r2oo:1 206 ][1.1.p.35 (DELHI)]'(2011\ 347 I.T.R. 43 (DELHt)'(2011\ 347 I.T.R. 43 (DELHt) ::9:: MSR.] & TA,Jwp_l9243_2020 &wp_19259 2020wp_19259 2020 against the outstanding demand for Assessmentyear 2017-lg,is illegal since recovery had already been stayed by the 2,dis illegal since recovery had already been stayed by the 2,drespondent post compliance of the 20% deposit as requir.ed; inany event there could not have been any adjustment even beforethe expiry ofthe 30 days period granted to petitioner to respondto tlre intimation under Section 245; and consequently, theany event there could not have been any adjustment even beforethe expiry ofthe 30 days period granted to petitioner to respondto tlre intimation under Section 245; and consequently, therespondents ought to refund Rs.6,25,70,390/- with interest inWrit Petition No.19259 of 2020:Writ Petition No.19259 of 2020: The stand of resnondent nos.l and 2: 29.The respondent nos.l and 2 filed counter_affidavits in both WritPetitions. 30. They admit that intimation orgt,t to be given to the assesseebefore making an adj ustment of refund towards pending tax duesunder Section 245 of the Act. 31. As regards Writ petition No.19243 of 2020 is concerned, bothrespondents state that fbr Assessmentyear 2017-lg, the demand wascollectible on 23.01.2020, and for Assessment year 200g_09. it wascollectible on 29.01.2020. 32. It is conrended that the letter dt.zg.Ol.2020 merelycornmunicated the condition for consideration of the stay applicationfor staying the demand for Assessmen tyear Zll7_lgpending Appealbefore the CIT (Appeals), but it is contended that the stay was grantedlonly on 23.07.2020 and in the meantime the refund due to thepetitioner for 201 8- 1 9 was adj usted against the demands for :: l0::]\,ISR,J & TA..Ivtp_19243 2020 &wp 19259 2020 Assessment Years 2008-09 and Assessment Year 2017-18 on18.03.2020 and 22.07 .2020, i.e., prior to the order of stay as they weremarked as collectible in January, 2020 itself.18.03.2020 and 22.07 .2020, i.e., prior to the order of stay as they weremarked as collectible in January, 2020 itself. 32. It is conrended that the letter dt.zg.Ol.2020 merelycornmunicated the condition for consideration of the stay applicationfor staying the demand for Assessmen tyear Zll7_lgpending Appealbefore the CIT (Appeals), but it is contended that the stay was grantedlonly on 23.07.2020 and in the meantime the refund due to thepetitioner for 201 8- 1 9 was adj usted against the demands for :: l0::]\,ISR,J & TA..Ivtp_19243 2020 &wp 19259 2020 Assessment Years 2008-09 and Assessment Year 2017-18 on18.03.2020 and 22.07 .2020, i.e., prior to the order of stay as they weremarked as collectible in January, 2020 itself.18.03.2020 and 22.07 .2020, i.e., prior to the order of stay as they weremarked as collectible in January, 2020 itself. 33. It is also stated that the petitioner had raised an objection inregard to demand for Assessment Year 2008-09 on 06.09.2017 itselfcontending that the demand had already been paid, and the AssessingOfficer had taken action to resoive this error and initiated a refund forAssessment Year 2008-09 on 22.06.2020 which was then processedand issued on 09.12.2020. 34. It is however stated that intimation under Section 245 prior tothe adjustment was not issued by oversight and it was issuedsubsequently after the l't respondent became aware of the lacuna. 35. In the counter affidavits, there is no answer to the question whyprior intimation was not given to the petitioner as required underSection 245 of the Act before adjusting the refunds due to thepetitioner for Assessment Year 20 I 8- l9 against the outstandingdemand for Assessment Year 2017- 18. 36. Coming to Writ Petition No.19259 of 2020, it is contended thatintimation under Section 245 was given by the l't respondentproposing to adjust the determined refund of Assessment year 2019-20 against the outstanding demand for Assessment years 2008-09 and2017-18, and it is contended that this was not objected to by thepetitioner. 37. It is stated that intimation under Section 143(l) was passed on08.07.2020 determining the refund for Assessment year 2)i.g_20along with intimation under Section 245 of adjustment of such refundagainst the demand outstanding for Assessment year 2017- 1g and theadjustment was made on22.07.2020. 'fhe consideration bv the Court: 38. We have noted the contentions of the respective parties. 39. Section 245 of the Income Tax Act states : "245. lVhere undcr any of the provisions of this Act, a refund isfound [to ][be ][due ]to any person, the Assessing Ofiicer, DeputyCommissioner (Appeals), Commissioner (Appeals), or principal ChiefCommissioner or Chief Commissioner or principal Commissioner orCommissioner, as the cose may be, may, in tieu of payment of therefund, set off the omounl to be refunded or any port of that amounr,agqinst the sum, iJ' any, rcmaining payable under this Act by theperson to v,hom the refund is due, after sivins an inlimalion in writinslo such oerson o/' the aclion orooosed Io be taken un r thissection. [" ](emphdsis supplied) 40. It is admitted in para no.8 of the counter-affidavit filed by l'1respondent in Writ Petition No.19243 of Z02O that intimation underSection 245 of the Act was not issued by oversight by the l'trespondent before adjusting on 15.04.2020 the refund due to thepetitioner for Assessment Year 2018-19 of Rs.1,g6,3g,333/- againstthe outstanding demand for Rs.1,30,45,813/- for Assessment year2017-18 and for Rs.55,92,520/-, the alleged outstanding demand forAssessment year 2008-09. Only thereafter under Annexure A.gdt.13.05.2020, after such adjustmenr was rnade, intimation underSection 245 of the Act was issued to the petitioner. 40. It is admitted in para no.8 of the counter-affidavit filed by l'1respondent in Writ Petition No.19243 of Z02O that intimation underSection 245 of the Act was not issued by oversight by the l'trespondent before adjusting on 15.04.2020 the refund due to thepetitioner for Assessment Year 2018-19 of Rs.1,g6,3g,333/- againstthe outstanding demand for Rs.1,30,45,813/- for Assessment year2017-18 and for Rs.55,92,520/-, the alleged outstanding demand forAssessment year 2008-09. Only thereafter under Annexure A.gdt.13.05.2020, after such adjustmenr was rnade, intimation underSection 245 of the Act was issued to the petitioner. 41, A Division Bench of the,Andhra pradesh High Court in JapsonEstates (P) Ltd. (i supra) held that absence of prior intimation intems of section 245 of the Act deprives an assessee of the right toraise objections to the order of adjustment. It held that intimationallegedly given under sec.143(r) ofthe Act that there has been anadjustment of refund cannot be valid because there ought to be anintimation of a proposed adjustment and not post_facto and that theassessee had no occasion to , dispute it. It therefore quashed theintimation to the extent of adjusting the refund. 42. The Delhi High Court in Glaxo Smith Ktine Asia p. Ltd.(2 supra) held that the pre-requisite for invoking Section 245 of theAct is giving of prior intimation in writing about the proposedadjustment of refund and that the revenue must also be satisfied thatthe assessee would not be in a position to satisfy the demand of taxand that but for the set ofi the outstanding tax cannot be recovered atall. It observed that a mechanical invocation of the power undersection 245 irrespective of the fact situation can lead to misuse ofpower by the Revenue in order to delay the refund tilr such time afresh demand for the subsequent assessment years is finalized. 43. Therefore, we are of the opinion that the adjustment made on15.04.2020 by the l,t respondent of the entire refund due to thepetitioner for the assessment year 2OIg-1g towards the outstanding taxdemands for the Assessment years 2017_ l g and 200g-09 is per seillegal, as it was done without issuing a prior intination underSec.245 of the Act; more so, when the demand for tax for the : : l3::MSR,J & TA,Jwp _t9243 '2020 &wp _19259 -2020 Assessment Year 2017-18 vide the Assessment Order dt.23.12.2019 isunder cl.rallenge before the C.I.T. (Appeals) and the 2nd respondentthrough an order dt.29.01.2020 granted stay subject to deposit of 20Yoof the outstanding demand, and the petitioner deposited on 3 I .01 .2020under cl.rallenge before the C.I.T. (Appeals) and the 2nd respondentthrough an order dt.29.01.2020 granted stay subject to deposit of 20Yoof the outstanding demand, and the petitioner deposited on 3 I .01 .2020Rs.80,00,000/- and requested the 2nd respondent to adjust theremainder of Rs.80,3 1,593/- against the determined refund forremainder of Rs.80,3 1,593/- against the determined refund forAssessment Year20l8-19 vide letter dt.10.02.2020 (Annexure A.5). 44. Even according to the respondents, there was no liability duefor the Assessment Year 2008-09 since the assessee had objected on06.09.2017 itself stating that the demand for the said Assessment Yearhad already been paid and proceedings were initiated for refund forAssessment Year 2008-09 on 22.06.2020 which was processed andallegedly issued on 09.12.2020. 45. We nray also point out that as per Office memorandumF.No.404172193-1TCC dt.29.2.2016 issued by the CBDT clarifying it'sInstruction No.l9l4 dt.21.3.1996, the Assessing Officer can, whilegranting stay of the demand, reserye the right to adjust refundsarising, if any, ctgainst the demand, to lhe extent of amount requiredfor [grant ]ing stay subject to [provisions ]ofSec.245. There is no disputethat the Office Mernorandurn is binding on both the respondents. 45. We nray also point out that as per Office memorandumF.No.404172193-1TCC dt.29.2.2016 issued by the CBDT clarifying it'sInstruction No.l9l4 dt.21.3.1996, the Assessing Officer can, whilegranting stay of the demand, reserye the right to adjust refundsarising, if any, ctgainst the demand, to lhe extent of amount requiredfor [grant ]ing stay subject to [provisions ]ofSec.245. There is no disputethat the Office Mernorandurn is binding on both the respondents. 46. So at best the l'r respondent could have adjusted a portion oftl.re total refund due to the petitioner for the Assessment Year 201 8- 1 9i.e., Rs.80,3 1,593/- onlysought by the petitioner, since thepetitioner had already deposited Rs.80,00,000/- towards the dues on31.\.2020 in part compliance of the condition of 20% deposit of the tax liability for Assessment Year 2017-18 (20% comes toRs.1,60,3 1,593/-); and the I't respondent could not have adjustedRs.1,30,45,813/- out of total refund determined for Assessment year2018-19 of Rs.1,86,38,333/- towards the outstanding demand forAssessment Year 2017-18 (as opposed to the agreed sum ofRs.80,31,593/-) and Rs.55,92,520/- against an alleged outstandingdemand for Assessment Year 2008-09. 47. We reject the plea of the respondents that demands forAssessment Year 2017-18 were collectible on 23.01 .2020 and forAssessment Year 2008-09 was collectible on 29.01 .2020, that the stayof collection of the demand for Assessment year 2Ol7 - l g wasgranted only on 23.07.2020, and therefore, the adjustment madeagainst the demands for Assessment Year 2008-09 and AssessmentYear 2017-18 on 18.03.2020 and.22.07.2020 was prior to the order ofgrant of stay and so the adjustment was valid. 48. The dates of adjustments mentioned above i.e. 18.03.2020 and22.07.2020 are factually incorrect and no documentary evidence insupport thereof has been filed by the respondents. We may point outthat Annexure ,4-6, 'Refund Status' downloaded from the website ofthe Income Tax Department TIN NSDL filed by the petitioner showsthat the date of adjustment is in fact 15.04.2020. 49. The date 18.03.2020 referred to by the respondenrs in thecounter-affidavit is the date of raising of demand for Assessment year2008-09 as can be seen from Intimation d1.09.05.2020 issued underSection 245 of the Act and it is not the adjustment date. :: l5::MSR,J & TA,Jwp 19241 2020 &wp_19259_2020 50. Even 22.07 .2020 given by respondents as date of adjustrnent ofrefund of Assessment Year 2019-20 is incorrect and the correct date is24.07.2020 as can be seen frorn Form 26-45 of the petitioner for theAssessment Year 2017-18 (Annexure A-14 in W.P.No.19259 of2020). 51. Admittedly, the respondents have adjusted an amount ofRs.55.92 lakhs towards dernand for Assessment Year 2008-09 out ofthe refund deterurined for Assessment Year 201 8- 19 without issuir.rgany Section 245 Intimation. They also admit that they have realizedthe error and have issued a refund of only Rs.54.78 lakhs which isshorl by Rs. I .13 lakhs of the actual adjustment amount of Rs.55.92lakhs. The respondents have to therefore release the balance refund ofRs.l.13 lakhs also because there is no valid reason why a short refundwas granted. 52. The respondents defence for not issuing Section 245 Intimationbefole making adjustment was that subsequently on 13.05.2020 suchintimation was issued under Section 143( 1 ) of the Act, but the saidIntimation is not valid in law as held in Japson Estates PrivateLimited ( 1 supra), 53. The letter dt.29.01.2020 issued by the 2nd respondent stated thatin respect of Assessment Year 20 1 7- I 8 petitioner was required todeposit 20o/o of the disputed demand in terms of CBDT instructions.In para-6 of the counter, the respondents state that this is only acommunication and the actual stay was granted on23.07.2020. 52. The respondents defence for not issuing Section 245 Intimationbefole making adjustment was that subsequently on 13.05.2020 suchintimation was issued under Section 143( 1 ) of the Act, but the saidIntimation is not valid in law as held in Japson Estates PrivateLimited ( 1 supra), 53. The letter dt.29.01.2020 issued by the 2nd respondent stated thatin respect of Assessment Year 20 1 7- I 8 petitioner was required todeposit 20o/o of the disputed demand in terms of CBDT instructions.In para-6 of the counter, the respondents state that this is only acommunication and the actual stay was granted on23.07.2020. We do not agree with the said [plea ][because ][the ][said]communication specifically states that the [stay ]will [be ][granted ][on]payment of 20%o, and on 30.01.2020 itseif part [payment ]was made ofRs.80.00 lakhs with a request letter dt.10.2.2020 to adjust [the ][balance]of Rs.80.31 lakhs from the deterrnined refunds of [Assessment Year]201 8- 19. 54. So the 1't respondent ought to have held that the [petitioner]complied with the 20% deposit as dilected in the order dt.29.01.2020on 10.02.2020 itself and ought to have refrained from [proceeding ]withthe adjustment on 22.07.2020 for the demand for Assessment Year'2017-I8. Also admittedly, there was no tax payable for AssessmentYear 2008-09. 55. There was thus no occasion for uraking any such adjustment of the refund detennined for Assessment Year 201 8- [1 ]9 and consequentlywe are of the opinion that out of the sum of Rs.1,86,38,333/- which isthe refund determined for that Assessment Year, after deductingRs.80,31,593/- (the 20% of Rs.8,01,57,967 [: ]Rs.1,60,3 1,593/- lessRs.80,00,000/-), a sum of Rs.1,06,06,7401- is refundable to thepetitioner with interest at l5o/o per annum fron.r the date on which itwas determined, i.e., 02.10.2019 till the date of payment of the sameto the petitioner. 56. As regards W.P.No.19259 of 2020, the issue pefiains toAssessment Year 20\9-20 and is regarding the illegal adjustment ofrefunds arising for the said Assessment Year against the demands for Assessment year 2017_1g when there was in subsistence a stay orderof recovery granted by 2nd respond enton23.07.2020. 57. In para-6 of the counter_affidavit of the l,t respondent and inpara-7 of the counter_affidavit of 2nd respondent, it was wongly statedthat the adjustment of refunds of Assessment year 2019_20was doneon 22.07.2020, but the said date is incorrect as seen fiom AnnexuresA-13 and A-14 filed in the Writ petition. The correct date ofadjustment is 24.07.2020 afrer thestay was granted on 23.07 .2020. 58. In Maruthi Suzuki India Limited (3 supra), the Delhi HighCourt had held that once an absolute stay of recovery of demand oftax was granted to the assessee, it is improper and inappropriate forthe Revenue to recover the money through adjustment of refunds. Itdeclared that a stay order passed by an appellate/higher authority mustbe respected and no deviancy or breach should be made. 59. It is conrended by respondents that intimation dt.Og.O5.20ZOunder Section 245 was given by the I,,respondent proposing to adjustthe determined refund of Assessment year 2llg_20 against theoutstanding demand for Assessment years 200g_09 and 2017_lg, butthis was not objected to by the petitioner. 60. The online reply dt.07.06.2020 filed as Annexure A.9 and theletter dt. 15.06.2020 filed as Annexure A. l0 belie this stand of therespondents. Ihe respondents therefore cannot contend that petitionerhad not objected to the proposed adjustment indicated in the noticedt.09.05.2020 issued under Sec.245 to the petitione ,. MSR.J & TA.J::18::\\p_)9243 _2020 &wp_19259_2020 59. It is conrended by respondents that intimation dt.Og.O5.20ZOunder Section 245 was given by the I,,respondent proposing to adjustthe determined refund of Assessment year 2llg_20 against theoutstanding demand for Assessment years 200g_09 and 2017_lg, butthis was not objected to by the petitioner. 60. The online reply dt.07.06.2020 filed as Annexure A.9 and theletter dt. 15.06.2020 filed as Annexure A. l0 belie this stand of therespondents. Ihe respondents therefore cannot contend that petitionerhad not objected to the proposed adjustment indicated in the noticedt.09.05.2020 issued under Sec.245 to the petitione ,. MSR.J & TA.J::18::\\p_)9243 _2020 &wp_19259_2020 61. There [is ][also ][no explanation ][forthcoming from ][the ][respondents]why on 24.7.2020, [even before ][the ][expiry ][of ][30 ][days ][fixed ][under ][the]second notice [of ][intimation under ][Section ][245 ][dt'8'7 ]['2020' ][the]adjustment [was ][made ][without ][adverting ][to ][the ][objections ][filed ][on]7.6.2020 and [15.6.2020. ][In ][fact, petitioner ][filed ][his ][objection ][under]AnnexureA-l5on2g.oT.2020withinthe30dayperiodrequiredbytheintimationdt.0s.0T.2020.ThereforethepetitionercannotbedeniedrefundofRs.6,25,70,390/-fortheAssessmentYear2019-20with 15% interest [thereon either.] 62,Accordingiy,boththeWritPetitionsareallowedwithcostsofRs.5,000/- [each ][to ][be ][paid ][by ][respondents ][to ][petitioner; and ][the]respondents [are ][directed ][to ][refund ][a ][sum ][of ][Rs'1,06,06,740l- ][and]Rs.6,25,70,390/-, [after ][deducting ][a ][srLm ][of ][Rs'54'78 lakhs ][which ][is]refundedalreadytothepetitioner,withinterestatl5yop'a'fromthedates of adjustment [of ][the ][said amounts ][till ][the ][date ][of ][payment ][within]four (04) weeks [from ][the ][date ][ofreceipt ][ofcopy ofthe ][order'] 63.Consequently, [miscellaneous ][petitions, pending ][if ][any, ][shall]stand closed. MEMORANDUM Writ Petition [Nos: ][19243 ][And ][19259 ][Ol ][2020] Rs.Ps. Costs Quantified [by ][Hon'ble Court ][(That ][the]ResDondents in both [the Writ ][Petitions ][are]diredted to [pav ]costs [of ][Rs.5,000/- ][(Rupees]Five Thousand [Only) each to ][the ][petitioner ][in]both the Writ [Petitions.] 10,000-0010,000.00 TOTAL SD/- I.NAGALAKSHMIASSISTANTEGIARSECOFFICER //TRUE COPY// To,TheAssistantCommissioneroflncomeTax,Cilc]e?(-1),sthFloor,SignatureTowers'onn sotlnicat Garden, Kondapur, [Hyderabad-sOO ][084']2idJei.irir"ibr;;i;;;i [i;;il,e ][tax'cpc, ][centralized ][processins- ][centre ][prestise ]. [.]niiinl'i.ii'ie/i;87i, [eeritenagranara ][Begur Hobli, Hosur Road, Bengaluru, Karnataka-]560100 v 3I:iar""T:j?ird#inister [of Finance Department of Revenue, ][Union ][of ][tndia, ]North Btocko.7.5.4.?,ffi one One 33 CC CC ["y,L^ to Sri Namavaraori to Sri G Narendra Chetty Advocate [OpUClMa mati c no Rajelhwar u oa,v. senio nJo I s'6"ro AisiEoficitor iri'.ii,il General tOpUClY" i j<ipUtr " "'[/BC\d\-r\l DATED: 2210112021 1,dStoux2r EB20n* COMMON ORDER WP NOS: 19243 AND 19259 OF 2020 ALLOWING OF THE WRIT PETITION WITH COSTS ;$\t+'-,'