Income Tax Refund Adjustment Stayed Pending Rectification & Appeal Disposal: Kerala HC

Attakkalari Public Charitable Trust of Contemporary Performing Arts Vs ITO (Exemption) (Kerala High Court)

The Kerala High Court considered a writ petition filed by a public charitable trust challenging proceedings initiated through a notice proposing adjustment of its income tax refund for Assessment Year (AY) 2025-26 towards outstanding demands relating to AYs 2014-15 and 2018-19.

The petitioner contended that, for AY 2014-15, an appeal had already been filed before the First Appellate Authority and was pending. It also submitted that 15% of the disputed demand had already been remitted and, therefore, no recovery proceedings could be initiated.

With regard to AY 2018-19, the petitioner submitted that it had filed a rectification application, contending that the assessment order and demand notice contained serious mistakes. On that basis, it challenged the proposed adjustment of the refund.

After hearing both sides, the High Court observed that the rectification application relating to AY 2018-19 was pending and that the petitioner had alleged serious discrepancies in the assessment order. The Court held that the first respondent should first consider the rectification application and pass appropriate orders.

Accordingly, the Court directed the first respondent to dispose of the rectification application within two months after providing the petitioner an opportunity of hearing. Until such decision is taken, the proposed adjustment of the refund for recovery of the demand relating to AY 2018-19 was directed to remain in abeyance.

Regarding AY 2014-15, the Court noted that the appeal had been pending since 2016. It directed the second respondent to expedite and dispose of the appeal within three months after granting the petitioner an opportunity of hearing. The Court further directed that no recovery proceedings shall be initiated in respect of AY 2014-15 until the appeal is decided.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The petitioner, a Public Charitable Trust and is an assessee under the Income Tax Act, has approached this Court, being aggrieved by the proceedings initiated against it, as per Ext.P1 notice for the adjustment of the refund amount in respect of the assessment year 2025-26, for realizing the amount payable by the petitioner pertaining to the assessment years 2014-15 and 2018-19.

2. The case of the petitioner is that, as far as the assessment for the year 2014-15 is concerned, the petitioner has already submitted Ext.P4 appeal, which is now pending before the First Appellate Authority and the petitioner had already remitted 15% of the disputed amount as evidenced by Ext.P6 and therefore, no recovery is possible. In respect of the adjustment of refund for realizing the amount covered by the assessment year 2018-19, it is pointed out that, the petitioner had already submitted Ext.P10 rectification application, as according to the petitioner, Ext.P8 assessment order and Ext.P9 demand notice contain serious mistakes. It was in these circumstances the petitioner has approached this Court challenging the adjustment sought as per Ext P1.

3. I have heard the learned Counsel for the petitioner and the learned Standing Counsel for the respondents.

4. As far as the refund adjustment pertaining to the year 2018-19 is concerned, it is discernible from the records that, the rectification application is pending and according to the petitioner, there is a serious discrepancy in the assessment order, which needs to be rectified. After perusing the records, I find that, since the rectification application has been filed by the petitioner, it is only proper that, the 1St respondent considers the same and pass appropriate orders.

Therefore, this writ petition is disposed of directing the 1St respondent to take up Ext.P10 and to pass appropriate orders as expeditiously as possible, at any rate, within a period of two months from the date of receipt of a copy of this judgment, after giving the petitioner an opportunity for being heard. Till such a decision is taken, adjustment of refund proposed in Ext.P1 for realizing the amount in respect of the assessment year 2018-19 shall be kept in abeyance. With regard to Ext.P4, since it is pending 2016 onwards, there shall be a direction to the 2n^d respondent to expedite the proceedings and finalize the same, within a period of three months from the date of receipt of a copy of this judgment, after giving the petitioner an opportunity for being heard. Till such time, no recovery proceedings shall be initiated in respect of the said assessment year also.