[Cites 9, Cited by 0]
Calcutta High Court
Gaurav Enterprises vs Union Of India And Ors on 1 December, 2025
O-17 ORDER SHEET
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
ORIGINAL SIDE
WPO/700/2025
GAURAV ENTERPRISES
VS
UNION OF INDIA AND ORS
BEFORE:
The Hon'ble JUSTICE OM NARAYAN RAI
Date:1st December, 2025.
Appearance:
Mr. Amit Agarwal, Adv.
Mr. Bhaskar Sengupta, Adv.
Mr. Aasish Choudhury, Adv.
Ms. Rwtika Dhandhania, Adv.
Mr. Tabbish Wasi, Adv.
...for Petitioner.
Mr. Aryak Dutt, Adv.
Mr. Amit Sharma, Adv.
Mr. Abhishek Kr. Agrahari, Adv.
Ms. Riya Kundu, Adv.
...for Respondents.
1. This writ petition takes exception to the action of the respondent
Income Tax authorities in recovering/adjusting amounts in excess of
20% of the disputed demand from the amounts refundable to the
petitioner in respect of several other assessment years pertaining to
the assessment year 2018 -19.
2. The facts leading to the institution of this writ petition may briefly be
noted. A notice of demand dated April 17, 2021 under Section 156 of
the Income Tax Act, 1961 was issued to the petitioner, pursuant to
an assessment order dated April 17, 2021 passed under Section
143(3) read with Section 144B of the Income Tax Act, 1961 for the
assessment year 2018-19, thereby calling upon the petitioner to pay a
sum of Rs.9,19,33,664/-.
3. The said assessment order dated April 17, 2021 was carried in appeal
by the petitioner on August 3, 2021 before the Commissioner
(Appeals) (hereafter "CIT (Appeals)") under Section 246A of the Income
Tax Act, 1961.
4. During pendency of the appeal, the petitioner made an application
before the Income Tax Officer (i.e. the concerned assessing officer) on
September 29, 2021 requesting for stay of the demand.
5. While the said application remained pending, the Income Tax
authorities proceeded to recover the outstanding demand from the
amounts refundable to the petitioner for assessment years 2020-21 to
2023-24 and, in fact, recovered a sum of Rs.5,01,16,180/-.
6. Being aggrieved by such recovery/adjustment, the petitioner has
approached this Court by way of the instant writ petition.
7. Mr. Agarwal, learned Advocate appearing for the petitioner submits
that in view of the law laid down by this Court in the case of Danieli
India Limited Vs. Assistant Commissioner of Income Tax, Central Circle
2(2), Kolkata (WPO 2294 of 2022 decided on September 1, 2023),
while relying on an earlier judgment of this Court in the case of M/s.
Graphite India Limited Vs. Deputy Commissioner of Income Tax, Circle
11(1) Kolkata and Ors. (WPO 113 of 2018 decided on February 15,
2022), the respondent Revenue authorities could not have recovered
any sum in excess of 20% of the disputed demand raised pursuant to
the assessment order dated April 17, 2021 in respect of assessment
year 2018-19.
8. Mr. Sharma, learned Standing Counsel appearing for the Revenue
authorities submits that the recovery which has been impugned in
the present writ petition, has been done in accordance with law. It is
submitted that unless the petitioner puts in a sum equivalent to 20%
of the disputed demand, recovery of the entire outstanding demand is
permissible.
9. It is further submitted that there is no prohibition in law to recover
the entire demand if stay of demand is not granted and that stay of
demand can be granted only upon deposit of 20% of the demand. In
support of his submission he relies on the judgment of the Hon'ble
High Court at Delhi in the case of Chemester Food Industry (P.) Ltd.
vs. Central Processing Centre reported in [2025] 174 taxmann.com
791 (Delhi).
10. Heard the learned Advocates appearing for the respective parties and
considered the materials on record.
11. A Co-ordinate Bench of this Court has in the aforesaid judgment of
Danieli India Limited (supra), which has been passed by relying on
M/s. Graphite India Limited (supra), held that the action of the
assessing officer in recovering any amount in excess of 20% of the
disputed demand pertaining to a given assessment year by way of
adjustment from the admitted refunds relating to other assessment
years, while an appeal before the CIT (Appeals) assailing the
assessment order in respect of the said relevant assessment year is
pending, cannot be sustained in law. This Court finds no good reason
to take a divergent view.
12. Mr. Sharma is indeed right in submitting, that there is no express
prohibition in law for the Income Tax Authorities to recover a sum in
excess of 20% of the disputed demand. Section 220(6) of the Income
Tax Act, 1961 vests discretion with the assessing officer not to treat
the assessee in default in respect of the disputed tax demand
(commonly called "stay of demand") while an appeal is pending before
the CIT (Appeals) but such discretion is guided by the instructions
issued by the Central Board of Direct Taxes (CBDT). To wit, the Office
Memorandum dated February 29, 2016 issued by the CBDT, (which
was later partially modified by the subsequent Office Memorandum
dated July 31, 2017), instructs that in a case where the outstanding
demand is disputed before the CIT (Appeals), the assessing officer
shall grant stay of demand till disposal of first appeal on payment of
20% of the disputed demand, excepting situations mentioned in
paragraph 4B of the said Office Memorandum February 29, 2016.
13. If in terms of the said office memorandum, the assessing officer is
obliged to stay the demand upon payment of 20% of the disputed
demand by the assessee (except in the situations mentioned in
paragraph 4B thereof), it would be unfair on the part of the income
tax authorities to recover any sum in excess of 20% of the disputed
demand during pendency of the appeal in the absence of any of the
situations mentioned in paragraph 4B of the Office Memorandum.
14. As regards the judgment in the case of Chemester Food Industry (P.)
Ltd. (supra), it is noticed that the same was rendered in the peculiar
facts of the case where a notice under section 245 of the Income Tax
Act, 1961 had been issued by the Income Tax Department and where
the assessing officer had found that grant of stay was not permissible.
In fact the Hon'ble Delhi High Court also proceeded to hold against
the assessee in the said case of Chemester Food Industry (P.) Ltd.
(supra) on being satisfied that adjustment of the amount was not
contrary to the Office Memorandum dated 31.07.2017 as claimed by
the assessee. The case at hand is evidently not so.
15. As recorded hereinabove, the assertion of the revenue authorities is
that unless the petitioner puts in a sum equivalent to 20% of the
disputed demand, recovery of the entire outstanding demand is
permissible. It has not been demonstrated before this Court to any
degree of satisfaction that any such situation as mentioned in
paragraph 4B of the Office Memorandum dated February 29, 2016 as
amended by the office memorandum dated July 31, 2017 exists in the
case at hand. In such view of the matter, this Court is inclined to
pass the same order as passed by the Co-ordinate Bench of this
Court in the case of Danieli India Limited (supra) while relying on M/s.
Graphite India Limited (supra).
16. Accordingly, the respondent Income Tax authorities are directed to
refund to the petitioner the amount recovered by them, in excess of
20% of the disputed demand (on the strength of the notice of demand
dated April 17, 2021 issued pursuant to the assessment order dated
April 17, 2021 against which an appeal is pending), from the amounts
refundable to the petitioner in respect of assessment years 2020-21 to
2023-24 within a period of eight weeks from the date of
communication of this order upon due verification of the actual
amount recovered thus far. The respondent Income Tax authorities
shall be free to afford an opportunity of hearing to the petitioner for
the purpose of any clarification in respect of the petitioner's claim as
regards the amount recovered.
17. It is submitted that the appeal that has been preferred before the CIT
(Appeals) under Section 246A of the Income Tax Act, 1961 has been
pending since 2021. In such view of the matter, the appellate
authority being the respondent no. 6 herein is requested to expedite
the hearing of the appeal and dispose of the same as early as
possible.
18. WPO/700/2025 stands disposed of. No costs.
(OM NARAYAN RAI, J.)
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