Recovery of tax: Adjustment of refund against demand: S/s. 220(6) and 245: A. Y. 2006-07: Appeal pending before Tribunal: Tribunal has power to stay recovery and not permit adjustment of refund.

For the A. Ys. 2003-04 and 2004-05, the assessee was entitled to refund of Rs. 122.57 crore and Rs. 107.42 crore respectively. In the normal course, refund should have been paid by the authorities to the petitioner. However, the refund amount was not paid to the petitioner. The refund was adjusted against the demand for A. Y. 2006-07 in respect of which the assessee was in appeal before the Tribunal. The petitioner had made an application before the Assessing Officer u/s. 220(6) for stay of recovery till the disposal of the appeal by the Tribunal. The petitioner had also made a stay application before the Tribunal. The Tribunal held that the Assessing Officer should first dispose of the application u/s. 220(6) of the Act.

The petitioner therefore filed a writ petition before the Delhi High Court, requesting for the stay of the recovery and refund of the amounts. Delhi High Court allowed the petition and held as under:

“i) Section 220(6) which permits the Assessing Officer to treat the assessee as not in default is not applicable when an appeal is referred before the Tribunal, as it applies only when an assessee has filed an appeal u/s. 246 or 246A.

ii) As per Circular No. 1914 dated 2nd December, 1993, the Assessing Officer may reserve a right to adjust, if the circumstances so warrant. In a given case, the Assessing Officer may not reserve the right to refund. Further, reserving a right is different from exercise of right or justification for exercise of a discretionary right/power. Moreover, the circular is not binding on the Tribunal.

iii) The Tribunal has power to grant stay as an inherent power vested in the appellate authority as well as u/s. 254 and the rules. The Tribunal is competent to stay recovery of the demand and if an order for “stay of recovery” is passed, the Assessing Officer should not pass an order of adjustment u/s. 245 to recover the demand. In such cases, it is open to the Assessing Officer to ask for modification or clarification of the stay order to enable him to pass an order of adjustment u/s. 245 of the Act.

iv) Different parameters can be applied when a stay order is passed, against use of coercive methods for recovery of demand and when adjustment is stayed. Therefore, the Tribunal can stay adoption of coercive steps for recovery of demand but may permit adjustment u/s. 245. When and in what cases, adjustment u/s. 245 of the Act should be stayed would depend upon the facts and circumstances of the case.

v) The discretion should be exercised judiciously. The nature of addition resulting in the demand is a relevant consideration. Normally, if the same addition/ disallowance/issue has already been decided in four of the assessee by the appellate authority, the Revenue should not be permitted to adjust and recover the demand on the same ground. In exceptional cases, which include the parameters stated in section 241 of the Act, adjustment can be permitted/allowed by the Tribunal.

vi) The action of the Revenue in recovering the tax in respect of additions to the extent of Rs. 96 crore on issues which were already covered against them by the earlier orders of the Tribunal or the Commissioner (Appeals) was unjustified and contrary to law.

vii) Accordingly, directions are issued to the respondents to refund Rs. 30 crore, which will be approximately the tax due on Rs. 96 crore.”