Case Details:

Eko India Financial Services (P) Limited vs. ACIT

Appeal No.:

W.P.(C) 5819/2021

Order pronounced by:

Delhi High Court

Date of Order:

03-08-2021

In Favour of:

Assessee

Assessment Year:

2019-20

The petitioner is a private limited company M/s Eko India Financial Services (P) Limited which is aggrieved due to the fact that the entire refund available to it in A.Y. 2019-20 was adjusted against the demand of A.Y. 2017-18 which was in excess of 20% of the disputed demand. The petitioner plead that such adjustment is contrary to the guidelines contained in the Office Memorandum dated 29.02.2016 issued by the CBDT. The record shows that the petitioner had made several requests for the correction vide letters dated 14.01.2021, 26.02.2021 and 10.03.2021.

However, the Ld. D/R appearing on behalf of department argued that pre-deposit of 20% is not a rule of the thumb and the department has the discretion to direct a set off of a higher sum u/s 245 of the Income Tax Act

Office Memorandum dated 29^th Feb. 2016:

“In order to streamline the process of grant of stay and standardize the quantum of lump sum payment required to be made by the assessee as a pre-condition for stay of demand disputed before CIT(A), the following modified guidelines are being issued in partial modification of Instruction No. 1914:

1. In a case where the outstanding demand is disputed before CIT(A), the A.O. shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand, unless the case falls in the category discussed in para (B).”

Office Memorandum dated 25^th August, 2017:

“Vide Board’s O.M. of even number dated 31.07.2017, modifications were made to O.M. No. 404/72/93-ITCC dated 29-02-2016, to the effect that the standard rate prescribed in O.M. dated 29-02-2016 stood revised to 20% of the disputed demand, where the demand was contested before CIT(A).”

This Court is of the view that the Government is bound to follow the rules and standards they themselves had set on pain of their action being invalidated. [Amrit Singh Ahluwalia vs. State of Punjab & Ors. 1975 (3) SCR 82 and Ramana Dayaram Shetty vs. International Airport Authority of India & Ors. 1979 SCR (3) 1014.

This Court is also of the view that the Office Memorandum dated 29-02-2016 read with office memorandum dated 25-08-2017 stipulate that the A.O. shall normally grant stay of demand till disposal of the first appeal on payment of 20% of the disputed demand. In the event, the A.O. is of the view that the payment of a lumpsum amount higher than 20% is required, then the A.O. will have to give reasons to show that the case falls in para 4(B) of the aforesaid memorandum.

• If the A.O. is of the view that the payment of an amount higher than 20% of the disputed demand is warranted, then the A.O. will have to give reasons in terms of para 4(B) of the Office Memorandum dated 29-02-2016.
• Since, in this case, the order u/s 245 of the Act for adjustment of refund as well as the stay order u/s 220(6) of the Act do not give any particular reason as to why any amount in excess of 20% of the disputed demand should be recovered from the assessee, the department can seek pre-deposit of only 20% of the disputed demand during the pendency of the appeal.

• Accordingly, the Hon’ble High Court directed the department to refund the amount in excess of 20% of disputed demand as adjusted by the department back to the assessee