Background
The Bombay High Court in the case of Vrinda Sharad Bal (the assessee) directed the Revenue to refund the excess amount adjusted against the outstanding demand, over and above the amount prescribed for obtaining stay on demand in accordance with the Instructions and Office memorandum issued by the Central Board of Direct Taxes (CBDT).
Brief Facts and Contentions
- The assessee, an individual and proprietor, filed an Income Tax Return for AY 2013-14, which was selected for scrutiny under section 143 of the Income Tax Act (the Act). The assessment order was passed against the assessee and accordingly, a notice of demand was issued.
- The assessee preferred an appeal against the assessment order, during the pendency of which, refunds pertaining to Assessment Years 2014-15, 2015-16 and 2016-17 were adjusted against the outstanding demand.
- Thereafter, the assessee, applied for stay on recovery of tax demand. The Assessing Officer (AO) granted the stay on the recovery of the balance demand, while reserving the right to adjust other refunds arising to the assessee against such balance demand.
- Subsequently, refunds for AY 2018-19 and 2019-20 were adjusted against the outstanding demand. The assessee made multiple representations/ raised grievances before authorities for payment of refund to the petitioner and finally filed a writ petition before the High Court.
- Before the High Court, the assessee submitted that the condition in the stay order regarding the reservation of the right to adjust the refund against the outstanding demand was illegal and without jurisdiction. Referring to the Office Memorandum dated 29th February, 2016, the assessee contended that right to adjust refunds against demand was limited to the extent of the amount required for granting stay and subject to Section 245. Therefore, the right to adjust refund is limited to 20% of demand, in accordance with the latest guidelines prescribed by CBDT