FACTS OF THE CASE

  • The petitioner, Tata Teleservices Limited, challenged orders imposing a condition to deposit 20% of penalty demand amounting to ₹293.28 crores for multiple assessment years (2006–07 to 2010–11).
  • The Court earlier directed deposit of ₹10 crores as an interim measure.
  • During pendency:
    • Penalty for AY 2009–10, 2010–11, and 2011–12 was deleted/dropped.
    • Remaining penalty pertained only to AY 2006–07 to 2008–09 totaling ₹8.55 crores, where 20% amounted to ₹1.71 crores.
  • Petitioner sought refund of excess ₹8.28 crores already deposited.

ISSUES INVOLVED

  1. Whether the Revenue can retain amounts exceeding 20% of the surviving penalty demand.
  2. Whether deposit conditions under CBDT circulars justify retention of excess amounts after reduction/deletion of penalty.
  3. Whether refund is warranted when underlying penalty demand substantially reduces.

PETITIONER’S ARGUMENTS

  • The company is a loss-making entity, and excessive deposit causes hardship.
  • Additions in assessment were debatable, particularly classification of expenditure as capital.
  • Relied on CIT v. Reliance Petroproducts Pvt. Ltd. (SC) to argue that penalty is not automatic.
  • Since penalty demands were largely deleted, retaining excess deposit is unjustified.

RESPONDENT’S ARGUMENTS

  • Appeals on quantum additions were still pending before ITAT, and liability may revive.
  • Hence, retention of amount was justified as a protective measure.

COURT’S FINDINGS / ORDER

  • The Court held that:
    • Maximum deposit required under CBDT guidelines is 20% of the surviving demand, i.e., ₹1.71 crores.
    • There was no justification for Revenue to retain excess ₹8.28 crores.
  • Direction issued:
    Excess amount must be refunded within four weeks.
  • Writ petitions were disposed of accordingly.

IMPORTANT CLARIFICATIONS BY COURT

  • CBDT circulars limit deposit requirement to 20%, not beyond.
  • Revenue cannot retain excess deposits when underlying demand is reduced.
  • Pendency of quantum appeal does not justify withholding excess amount.

SECTIONS INVOLVED

  • Income Tax Act, 1961
    • Section 271(1)(c) – Penalty provisions
  • CBDT Circulars on Stay of Demand (20% deposit rule)
  • Principles governing stay of penalty demand

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:3292-DB/MMH19112020CW47902018_201122.pdf

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