Facts of the Case

The petitioner, M/s RELX India Private Limited, filed a writ petition seeking issuance of a refund amounting to ₹6,95,43,498/- along with applicable interest after adjusting 20% of the disputed tax demand.

The petitioner had earlier filed an application seeking stay of demand, which was rejected by the Assistant Commissioner of Income Tax on 17.12.2021. Subsequently, a notice under Section 226(3) of the Income Tax Act, 1961 was issued to the petitioner’s banker (CITI Bank) on 30.09.2022, leading to recovery of the entire amount for Financial Year 2013–14.

The petitioner contended that an appeal against the assessment order dated 31.03.2021 was already pending before the Commissioner of Income Tax (Appeals).

Issues Involved

  1. Whether recovery of the entire disputed demand during pendency of appeal is justified.
  2. Whether the rejection of stay application despite willingness to deposit 20% of demand is arbitrary.
  3. Whether the action of the revenue authorities violates CBDT circulars governing stay of demand.
  4. Whether the petitioner is entitled to refund of the recovered amount along with interest.

Petitioner’s Arguments

  • The petitioner argued that recovery of the entire demand was contrary to CBDT Circular dated 29.02.2016 (as amended on 31.07.2017), which provides that recovery should generally be restricted to 20% of the disputed demand.
  • It was submitted that the petitioner had already offered to deposit 20% of the demand; hence, rejection of the stay application and subsequent full recovery was unjustified.
  • The petitioner emphasized that since the appeal was pending before CIT(A), coercive recovery action should not have been taken.

Respondent’s Arguments

  • The revenue contended that recovery proceedings were carried out in accordance with law.
  • It was implied that the petitioner failed to take timely legal steps despite rejection of stay application and issuance of notice under Section 226(3).

Court’s Findings / Order

  • The Court observed that although the petitioner may be correct in asserting that full recovery should not have been made during pendency of appeal, the petitioner was also responsible for delay.
  • The Court noted that:
    • The petitioner did not take timely action after rejection of stay application in December 2021.
    • Even after issuance of notice under Section 226(3) in September 2022, no immediate legal remedy was pursued.
  • Final Order:
    • No relief was granted to the petitioner at this stage.
    • The Court directed the Commissioner of Income Tax (Appeals) to dispose of the pending appeal within four weeks.
    • The writ petition was disposed of accordingly.

Important Clarification

  • Mere pendency of appeal does not automatically entitle the assessee to relief if there is delay or lack of diligence in pursuing remedies.
  • Courts may deny equitable relief where the petitioner fails to act promptly against adverse orders or recovery notices.
  • Even if recovery appears excessive, procedural delay can weaken the petitioner’s case.

Sections Involved

  • Section 226(3), Income Tax Act, 1961 – Recovery of tax dues from third parties (e.g., banks)
  • CBDT Circular dated 29.02.2016 (as amended on 31.07.2017) – Guidelines for stay of demand

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/RAS20122022CW171352022_225420.pdf  

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