Facts of the Case

The petitioner, Tirupati Buildings and Offices Private Limited, sought release of a refund amounting to ₹87,89,440 for Assessment Year (AY) 2018–19, which had been adjusted by the revenue authorities against an outstanding demand for AY 2011–12.

The total disputed demand for AYs 2008–09, 2009–10, and 2011–12 was approximately ₹14.90 crores. As per the CBDT Office Memorandum dated 31.07.2017, an assessee is entitled to a stay on recovery upon payment of 20% of the disputed demand.

The petitioner had already contributed substantial amounts through adjustment of earlier refunds and additional deposits to meet the 20% requirement. Despite this, the revenue adjusted further refunds, including the amount relating to AY 2018–19.

Subsequently, appellate proceedings resulted in significant relief to the petitioner, including deletion of additions for certain years and partial relief in others, thereby reducing the overall demand 

Issues Involved

  1. Whether the Revenue can adjust refunds beyond 20% of the disputed demand despite CBDT guidelines.
  2. Whether such adjustment violates the purpose of granting stay of demand pending appeal.
  3. Whether the petitioner is entitled to refund once the 20% threshold is satisfied.

Petitioner’s Arguments

  • The petitioner contended that it had already satisfied the requirement of depositing 20% of the disputed demand.
  • It was argued that further adjustment of refunds was arbitrary and contrary to the CBDT Office Memorandum.
  • The adjustment of refund for AY 2018–19 was unjustified, especially when no deficit existed.
  • The excessive recovery undermined the purpose of granting a stay and caused financial hardship.

Respondent’s Arguments

  • The Revenue argued that once recovery had been made against outstanding demand, the refund could not be released.
  • It was contended that the stay was granted later, and adjustments made prior thereto were valid.
  • The Revenue maintained that its actions were within statutory powers and justified under the circumstances.

Court’s Findings / Analysis

  • The CBDT Office Memorandum aims to balance the interests of the Revenue and the assessee.
  • Once 20% of the disputed demand is secured, further recovery defeats the purpose of granting stay.
  • Retaining amounts beyond 20% reflects a presumption that the Revenue will succeed entirely, which is legally impermissible.
  • Such an approach may adversely affect the assessee’s ability to conduct business operations.
  • Subsequent appellate relief significantly reduced the demand, further justifying refund entitlement.

Court Order / Final Decision

  • The writ petition was allowed.
  • The Revenue was directed to refund ₹87,89,440 to the petitioner within four weeks.

Important Clarification / Legal Principle

  • Recovery by the Revenue cannot exceed 20% of the disputed demand once the assessee qualifies for a stay under CBDT guidelines.
  • Adjustment of refunds beyond this threshold is arbitrary and legally untenable.
  • The judgment reinforces the principle that administrative circulars must be applied fairly and in spirit.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS24112023CW84972019_115158.pdf

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