Facts of the Case

The Petitioner, Skyline Engineering Contracts (India) Private Limited, filed writ petitions challenging recovery of tax demand during the pendency of appeals before the Commissioner of Income Tax (Appeals). The dispute pertained to Assessment Years 2015–16 and 2016–17.

The Assessing Officer had raised a total demand of ₹3,37,95,120/-, out of which ₹2,92,09,436/- (approximately 86.43%) was already recovered. The Petitioner contended that such recovery was excessive and contrary to CBDT Office Memorandum dated 31.07.2017, which mandates recovery of only 20% of the disputed demand where an appeal is pending.

The Petitioner sought refund of the excess amount recovered beyond the prescribed 20% and expeditious disposal of the pending appeals.

Issues Involved

  1. Whether the Revenue authorities can recover more than 20% of the disputed tax demand during pendency of appeal before CIT(A)?
  2. Whether such excess recovery without reasons violates CBDT guidelines?
  3. Whether the Petitioner is entitled to refund of the excess recovered amount?

Petitioner’s Arguments

  • The recovery exceeding 20% of disputed demand is contrary to CBDT Office Memorandum dated 29.02.2016 read with modification dated 25.08.2017.
  • Once an appeal is pending before CIT(A), the Assessing Officer is obligated to grant stay of demand upon payment of 20%.
  • The recovery of 86.43% of the demand is arbitrary and excessive.
  • No justification or order was passed invoking exceptions under Para 4(B) of the CBDT instructions.

Respondent’s Arguments

  • The Revenue argued that 20% pre-deposit is not an absolute rule and higher recovery can be justified in certain cases under Para 4(B) of the CBDT Office Memorandum.
  • The Assessing Officer had already directed that no further refunds be adjusted.
  • The appeals before CIT(A) were being pursued for expeditious disposal.

Court Order / Findings

  • The Court held that Government authorities are bound by their own rules and standards, and deviation without justification is invalid.
  • CBDT instructions clearly state that only 20% of disputed demand should ordinarily be recovered during pendency of appeal.
  • Any recovery beyond 20% requires specific reasons under Para 4(B), which were absent in this case.
  • No order under Section 245 of the Income Tax Act justifying adjustment of higher amount was passed.

Final Direction:

  • The Respondents were directed to refund the excess amount recovered beyond 20% of the disputed demand within four weeks.

Important Clarification by Court

  • 20% recovery is the standard rule, not merely a guideline.
  • Higher recovery is permissible only with recorded reasons and justification.
  • Administrative authorities must act consistently with CBDT circulars.
  • Arbitrary recovery violates principles of fairness and legality.

Sections Involved

  • Section 143(3) – Assessment Order
  • Section 245 – Set-off of refunds against tax remaining payable
  • CBDT Office Memorandum dated 29.02.2016
  • CBDT Office Memorandum dated 25.08.2017

Link to download the order - https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:2559-DB/MMH23082021CW61722021_133104.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools