Case Law Details
LSI India Research And Development Private Limited Vs Assistant Director Of Income Tax Centralized Processing Center (Karnataka High Court)
In the case of LSI India Research And Development Pvt. Ltd. vs Assistant Director of Income Tax, the Karnataka High Court addressed an erroneous adjustment of a refund for the assessment year 2014-15 against an income tax demand for 2017-18. LSI India had a refund of Rs. 17.48 crore due for 2014-15, which was mistakenly adjusted against a disputed demand for 2017-18, despite a stay order being in place on the latter demand. The company had already complied with the requirement of depositing 20% of the disputed tax amount for 2017-18, and thus the remaining demand was stayed pending appeal.
The court found that the adjustment of the refund was unlawful since a stay order had been granted for the 2017-18 demand. Referring to the Central Board of Direct Taxes (CBDT) office memos, the court noted that once 20% of the disputed demand is paid, the assessing officer must grant a stay, which had occurred in this case. Consequently, the Karnataka High Court directed the tax department to refund the amount of Rs. 17.48 crore to LSI India within eight weeks, along with applicable interest.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner has sought for issuance of directions to respondents to forthwith refund an amount of Rs.17,48,31,871/- being the refund determined for the assessment year 2014-15 erroneously adjusted towards the demand for the assessment year 2017-18 along with applicable interest.
2. Though the relief is sought for refund of an amount of Rs.9,50,32,320/- being the balance refund due to the petitioner for the assessment year 2014-15, the said prayer is not pressed in light of the submission that the said amount has been refunded.
3. Learned Senior Counsel appearing for the petitioner submits that as regards assessment year 201415, the petitioner was entitled for refund in terms of the order giving effect insofar as an amount of Rs.26,98,64,191/- which order was passed on 24.01.2024. It is submitted that insofar as assessment year 2017-18, the demand was raised after the assessment order was passed which was taken up in appeal. After paying the amount of 20%, order of stay was also passed on 10.08.2021 at Annexure-G.
4. It is submitted that despite such order of stay as regards demand for the assessment year 2017-18, refund amount due to the petitioner for the year 2014-15 was adjusted towards such demand. Accordingly, it is submitted that petitioner is entitled for refund of the amount adjusted towards his refund order which effectively stood stayed which order of stay was extended. The above facts are not in dispute.
5. The refund order at Annexure-B could not have been adjusted once there is an order of stay as regards the demand for the assessment year 2017-18. The receipt at Annexure-F indicates demand of 20% of filing of appeal. If that were to be so, the adjustment of refund towards the demand for the assessment year 2017-18 is without authority of law considering that there was an order of stay as against such demand in light of the appeal.
6. In terms of the Office Memo No.404/72/93-ITCC dated 29.02.2016 and subsequently followed by O.M.No.404/72/93-ITCC dated 31.07.2017, it is clear that once demand of 20% of the disputed demand (15% of the disputed amount in terms of earlier O.M.No.29.02.2016 was enhanced to 20% in the notification on 31.07.2017) is paid, the assessing officer “shall grant stay” of the demand till disposal of appeal. In light of such demand the assessing officer has no discretion once the deposit is made.
7. Noticing the interim order of stay at Annexure-G was passed prior to adjustment, the impugned action of adjustment of demand would be wholly illegal.
8. Accordingly, the third respondent is directed to refund an amount of Rs.17,48,45,320/- within a period of eight weeks with applicable interest.
9. Accordingly, the petition is disposed off.
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