Yogesh Choudhary Vs ITO (Rajasthan High Court)
Summary: The Rajasthan High Court directed the Income Tax Department to refund, with applicable interest, any amount recovered or adjusted from Yogesh Choudhary in excess of 20% of the disputed demand for Assessment Year 2018-19. The petitioner had filed its return on 30.10.2018. An assessment under Section 143(3) of the Income-tax Act, 1961 was completed on 12.03.2021 determining total income at Rs. 5,39,58,417/- and raising demand of Rs. 2,78,32,572/-. The petitioner filed an appeal before the CIT(A) on 10.04.2021, which remained pending. Subsequently, a rectification order dated 17.08.2023 under Section 154 granted TDS credit of Rs. 80,77,683/- and credit of Rs. 64,05,820/- towards an earlier refund adjustment, revising the outstanding demand to Rs. 1,35,94,685/-. According to the petitioner, the disputed demand was Rs. 2,00,00,505/- and a cumulative Rs. 73,96,840/-, approximately 37%, had been recovered through payments and adjustment of subsequent refunds.
The petitioner sought stay of the balance demand and refund of the amount recovered beyond 20%. By order dated 24.07.2025, the Department stayed recovery of the remaining demand until disposal of the first appeal or twelve months, whichever was earlier, expressly recording that more than 20% had already been deposited. It nevertheless declined to refund the excess and permitted adjustment of future refunds. The petitioner contended that this was contrary to the CBDT Office Memoranda dated 29.02.2016 and 31.07.2017.
The High Court observed that the CBDT instructions prescribe recovery of 20% of disputed demand as the ordinary condition for stay during pendency of the first appeal. Departure may be justified upon recorded reasons, including where the assessee’s case is not prima facie sustainable or exceptional circumstances require recovery beyond 20%. No such reason or circumstance had been recorded in the present case. Once the competent authority itself granted stay after recording that recovery exceeding 20% had already been made, continued retention of the excess could not be justified. Further adjustment of refunds during the subsistence of the stay could not be permitted in a manner defeating the protection granted to the petitioner.
The Court held that the Revenue could retain 20% of the disputed demand as security while the appeal remained pending, but the amount recovered beyond that level had to be restored. Since the petitioner stated that the excess was approximately 17% of the disputed demand, the exact amount was left for verification and calculation by the Assessing Officer from the relevant demand, payment and refund-adjustment records. The competent authority was directed to determine the aggregate amount recovered or adjusted and refund any amount exceeding 20% of the disputed demand, with applicable interest, within six weeks from uploading of the order. The Court expressly clarified that it had not adjudicated the merits of the assessment or the pending appeal and that its direction merely regulated recovery during pendency of the statutory appeal in conformity with CBDT instructions.
Appellant was represented by Shri Sidharth Ranka, Adv.
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
1. The petitioner seeks a direction to the respondents to refund the amount recovered in excess of 20% of the disputed demand for Assessment Year 2018–19, together with applicable interest. The petitioner further seeks restraint against adjustment of future refunds towards the outstanding demand until disposal of the appeal pending before the Commissioner of Income-tax (Appeals) [“CIT(A)”].
2. Briefly stated, the petitioner is assessed to income tax by the Income Tax Officer, Ward-1, Bharatpur. For Assessment Year 2018–19, the petitioner filed its return of income on 30.10.2018.
2.1 Upon scrutiny, an assessment order dated 12.03.2021 was passed under Section 143(3) of the Income-tax Act, 1961 (“the Act”), assessing the petitioner’s total income at Rs. 5,39,58,417/- and raising a demand of Rs. 2,78,32,572/-. The petitioner preferred an appeal before the learned CIT(A) on 10.04.2021, which remains pending.
2.2 Thereafter, by rectification order dated 17.08.2023 passed under Section 154 of the Act, the petitioner was granted TDS credit of Rs. 80,77,683/- and credit of Rs. 64,05,820/- towards refund earlier adjusted by the Centralised Processing Centre (“CPC”). Consequently, the outstanding demand was revised to Rs. 1,35,94,685/-. According to the petitioner, the disputed demand is Rs. 2,00,00,505/-.
2.3 The petitioner made payments towards the demand, and refunds due for subsequent assessment years were also adjusted by the Department. According to the petitioner, a cumulative amount of Rs. 73,96,840/- was recovered against the disputed demand of Rs. 2,00,00,505/-, which is approximately 37% of the disputed demand.
2.4 The petitioner submitted an application dated 10.06.2025 seeking stay of the balance demand during pendency of the appeal and refund of the amount allegedly recovered in excess of 20%.
2.5 By order dated 24.07.2025, the respondents stayed recovery of the remaining demand until disposal of the first appeal or for twelve months, whichever was earlier. The order recorded that the petitioner had already deposited more than 20% of the disputed demand. However, it declined refund of the excess amount and permitted adjustment of future refunds against the outstanding demand.
2.6 Hence, the present writ petition.
3. Learned counsel for the petitioner contends that, under the CBDT Office Memoranda dated 29.02.2016 and 31.07.2017, recovery during pendency of the appeal could not exceed 20% of the disputed demand, i.e., Rs. 40,00,101/-. A notice dated 23.05.2025 was thereafter issued, stating that Rs. 1,28,63,442/- remained outstanding and requiring payment, failing which coercive recovery proceedings would follow.
3.1 Learned counsel for the petitioner submits that the respondents have acted contrary to the CBDT Office Memoranda dated 29.02.2016 and 31.07.2017 by recovering and retaining more than 20% of the disputed demand during pendency of the appeal.
3.2 It is submitted that no exceptional circumstance has been recorded to justify recovery beyond 20%. The respondents, being subordinate to the CBDT, are bound by its instructions and cannot retain the excess amount without a reasoned departure from the prescribed norm.
4. Per contra, learned counsel for the respondents submits that the assessment for Assessment Year 2018–19 was completed on 12.03.2021 under Sections 143(3), 143(3A) and 143(3B) of the Act, determining the petitioner’s total income at Rs. 5,39,58,417/- and raising a demand of Rs. 2,78,32,572/-.
4.1 It is submitted that the petitioner’s earlier stay application dated 19.10.2022 was rejected on 06.01.2023 for non-compliance with the condition of payment of 20% of the disputed demand. The petitioner was granted time up to 30.11.2022 to deposit the required amount but failed to do so. According to the respondents, no exceptional circumstance existed for reducing the amount recoverable under the CBDT Office Memoranda.
5. We have heard learned counsel for the parties and perused the material on record.
6. The order dated 24.07.2025 unequivocally records that the petitioner has already deposited more than 20% of the disputed demand. The respondents do not dispute this factual position. Indeed, this is also the express finding recorded by the Assessing Officer while granting stay of the balance demand.
6.1 The CBDT Office Memoranda dated 29.02.2016 and 31.07.2017 prescribe recovery of 20% of the disputed demand as the ordinary condition for grant of stay during pendency of the first appeal. A departure from that norm may be justified only upon recording reasons, such as where the assessee’s case is not prima facie sustainable or where recovery beyond 20% is necessary on account of exceptional circumstances. No such circumstance or reason has been recorded in the present case.
6.2 Once the competent authority has granted stay of the remaining demand upon recording that recovery exceeding 20% has already been made, continued retention of the excess amount cannot be justified. The stay order cannot operate as a basis to retain an amount beyond the very threshold on which stay was granted. Nor can the respondents, during the subsistence of the stay, make further adjustment of refunds in a manner that defeats the protection granted to the petitioner.
6.3 The Revenue may retain 20% of the disputed demand as security during the pendency of the appeal, but the amount recovered beyond that level must be restored.
6.4 During the course of hearing, learned counsel for the petitioner submitted that the amount recoverable in excess of the 20% threshold is approximately 17% of the disputed demand. The exact amount, however, shall be verified and calculated by the Assessing Officer from the relevant demand, payment and refund-adjustment records.
7. Accordingly, the instant petition is disposed of with a direction that competent authority of the respondents shall determine the aggregate amount recovered or adjusted from the petitioner against the disputed demand for Assessment Year 2018–19. Any amount found to have been recovered in excess of 20% of the disputed demand shall be refunded to the petitioner with applicable interest within six weeks from the date of uploading of this order on the website of this Court. We make it clear that our direction does not adjudicate the merits of the assessment or the appeal pending before the CIT(A); it merely regulates recovery during the pendency of the statutory appeal in conformity with the governing CBDT instructions.
8. The writ petition is disposed of accordingly.
9. All pending application(s) also stand disposed of.
