Puri Commercial Co-operative Vs ITO (Orissa High Court)
Facts of the Case:
- By way of instant writ petition, the petitioner has questioned the rejection of refund of the recovered amount during the pendency of the appeal by order dated 22.01.2025 for the assessment year 2016- 17 (corresponding to the financial year 2015-16)
- The petitioner is a registered Co-operative Society involved in providing credit services exclusively to its members. A reassessment was initiated under Section 147 of the Income Tax Act, with notice under Section 148, for A.Y. 2016–17.
- The petitioner, registered Co-operative Society, engaged in facilitating credit services and collection of deposits and giving loans exclusively to its members, has been assessed to tax, treating cash deposit of Rs. 2,10,44,000/- in the Allahabad Bank Account as unexplained during the financial year 2015-16 relating to assessment order 2016-17
- The entire cash deposit of ₹2,10,44,000 in Allahabad Bank was treated as unexplained under Section 69A, culminating in a demand of ₹3,49,57,935.
- The petitioner appealed against this reassessment to the Commissioner of Income Tax (Appeals), later handled by the National Faceless Appeal Centre (NFAC).
- Despite the appeal being pending, the Income Tax Officer (ITO) initiated recovery proceedings under Section 226(3) and directed the petitioner’s banker to pay ₹63,92,435, which was done via demand draft on 03.01.2025. Subsequently, on 24.02.2025, the CIT(A), NFAC allowed the appeal, effectively nullifying the demand.
- However, the Department refused to refund the recovered amount, prompting the petitioner to file this writ petition.
Issues:
1. Whether recovery during the pendency of the appeal was valid.
2. Whether the Department was obligated to refund the recovered amount after the petitioner succeeded in the appeal.
3. Whether any statutory mechanism exists under the Income Tax Act for a refund in such a situation.
Arguments:
- The petitioner argued that, post-appeal allowance, the Department’s refusal to refund the amount is arbitrary and illegal, especially since the basis of the demand has been annulled.
- The Revenue could not cite any provision of the Income Tax Act or Rules prescribing an alternative mechanism or bar for refund in such cases.
Judgment:
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