Reliable Security And Intelligence vs National Faceless Appeal Centre
2025 Latest Caselaw 3309 Ori

Orissa High Court

Reliable Security And Intelligence vs National Faceless Appeal Centre on 11 August, 2025

               ORISSA HIGH COURT : CUTTACK

                   W.P.(C) No.11546 of 2025

 In the matter of an Application under Articles 226 & 227 of
               the Constitution of India, 1950

                            ***

Reliable Security and Intelligence Services (Orissa) Private Limited (a private limited company) Represented by its Director, Sri Jagabandhu Samal Aged about 62 years Son of Late Dhaneswar Samal Residing At: Room No.105 Barabati Stadium Buxibazar, Cuttack Odisha - 753 001. ... Petitioner

-VERSUS-

1. National Faceless Appeal Centre (NFAC) Represented by Commissioner of Income Tax (Appeal) Income Tax Department Ministry of Finance Government of India New Delhi.

2. Income Tax Officer Income Tax Department Ward 1(1), Cuttack.

3. Assessment Unit Income Tax Department Faceless Assessment At: North Block New Delhi - 110 001

4. Centralised Processing Centre Income Tax Department Bengaluru Represented by Deputy Director of Income Tax Central Processing Centre Bengaluru. ... Opposite Parties.

Counsel appeared for the parties:

For the Petitioner : Mr. Jagabandhu Sahoo, Senior Advocate Assisted by Ms. Kajal Sahoo, Mr. Ronit Ghosh, Mr. Romeet Panigrahi, Ms. Deepshikha Mallik, Mr. Subhajeet Sahu, Ms. Urmila Sahu, Advocates

For the Opposite Parties : Mr. Subash Chandra Mohanty, Senior Standing Counsel and Mr. Avinash Kedia, Junior Standing Counsel, Income Tax Department

P R E S E N T:

HONOURABLE CHIEF JUSTICE MR. HARISH TANDON AND

HONOURABLE JUSTICE MR. MURAHARI SRI RAMAN

Date of Hearing : 30.07.2025 :: Date of Judgment : 11.08.2025

J UDGMENT

MURAHARI SRI RAMAN, J.--

Aggrieved by adjustment of outstanding demand pertaining to Assessment Year 2018-19 (pertaining to Financial Year 2017-18), during pendency of statutory appeal, against the refund dues flown with respect to Assessment Years 2021-22, 2022-23, 2023-24 and 2024-25, notwithstanding deposits made as directed by the Income Tax Officer, Ward 1(1), Cuttack vide Orders under Section 220(6) of the Income Tax Act, 1961, the writ petition is filed to invoke extraordinary jurisdiction under the provisions of Articles 226 and 227 of the Constitution of India, with the following prayer(s):

"Under the aforesaid circumstances it is prayed therefore that this Hon‟ble Court may be graciously pleased to:

(A) Admit the Writ Application;

(B) Issue rule nisi calling upon the opposite party No. 2 to refund Rs.21,43,181/- realized/recovered from the petitioner over and above 20% of the assessed tax demand along with Interest;

(C) If the opposite parties do not show or show insufficient cause to make the rule absolute;

(D) Issue writ in the nature of mandamus or any other appropriate directing the opposite party No.2 to refund Rs.21,43,181/- along with Interest as may be directed by this Hon‟ble Court in the end of justice;

(E) To pass such order/orders, writ/writs as may be fit and proper;

(F) To allow this writ petition.

And for this act of kindness the petitioner shall as in duty bound ever pray."

Pleadings in the writ petition:

2. The Assessing Officer, opposite party No.3, having initiated proceeding by issue of notice under Section 148 of the Income Tax Act, 1961 ("IT Act", for short) upon scrutiny of self-assessment returns filed under Section 139 on 13.10.2018 for the Assessment Year 2018-19 alleging escapement of income framed assessment vide Order dated 28.03.2023 under Section 147 read with Section 144B raising demand to the tune of Rs.1,35,38,224/-.

2.1. Having disputed, the petitioner filed appeal before the Commissioner of Income Tax (Appeals) on 27.04.2023 and moved petition under Section 220(6) of the IT Act before the Assessing Officer for stay the realisation of above demand so as not to treat the petitioner-assessee not in default.

2.2. Referring to the Central Board of Direct Taxes Office Memorandum No.404/72/93-ITCC, dated 31.07.2017, the Income Tax Officer, Ward 1(1), Cuttack ("ITO", for convenience) vide Order dated 19.05.2023 against said

demand of Rs.1,35,38,224/- pertaining to Assessment Year 2018-19 issued following directions:

"As per your submission, the demand raised at Rs.1,35,38,226/- had been contested before the CIT(A) in your case on 27.04.2023. Considering the fact, stay of the recovery proceeding against the outstanding demand is granted subject to payment of 20% of the demand raised i.e. Rs.27.07.645/- (20% of Rs.1,35,38,226/-) within 17.06.2023 with an intimation evidencing payment of challan to this office. In case of failure on your part with regard to payment of Rs.27,07,645/- within the due date, the stay granted shall be treated as withdrawn. In case of payment of Rs.27,07,645/- within the time allowed, stay of balance demand of Rs.1,08,30,581/- is granted till disposal of 1st appeal by the Ld. CIT(A) subject to the following conditions:

1. Require an undertaking that you will cooperate in the early disposal of appeal before the CIT(A).

2. The undersigned has reserve the right to review that order passed after expiry of reasonable period (say 6 months) or if the assessee has not cooperated in the early disposal of appeal, or where as subsequent pronouncement by a higher appellate authority or court alters the above situations;

3. The undersigned has reserve the right to adjust refunds arising, if any against the demand to the extent of the amount required for granting stay and subject to the provisions of Section 245."

2.3. Due to certain financial constraints, the petitioner could deposit Rs.16,91,930/- and filed another application

under Section 220(6) on 31.08.2023 for stay realisation of rest of the demand, i.e., Rs.1,18,46,296/-. Vide Order dated 06.09.2023, the ITO has directed as follows:

"Considering the fact submitted by you and following the above stated CBDT OM stay of the recovery proceeding against the outstanding demand is granted subject to payment of 20% of the demand raised, i.e., 23,69,259/- (20% of Rs.1,18,46,296/-) evidencing payment of challan to this office.

In this context, you have paid the above stated outstanding tax demand of Rs.16,91,930/- evidencing challans produced till date. Moreover, you are required to pay the balance amount of Rs.6,77,329/- by 06.11.2023 to avail full stay of the balance outstanding demand of Rs.94,77,037/- till disposal of 1st appeal subject to the following conditions:

1. Require an undertaking that you will cooperate in the early disposal of appeal before the CIT(A).

2. The undersigned has reserve the right to review that order passed after expiry of reasonable period (say 6 months) or if the assessee has not cooperated in the early disposal of appeal, or where as subsequent pronouncement by a higher appellate authority or court alters the above situations;

3. The undersigned has reserve the right to adjust refunds arising, if any against the demand to the extent of the amount required for granting stay and subject to the provisions of Section 245."

2.4. The petitioner deposited said amount of Rs.6,77,330/-

on 08.11.2023.

2.5. While the matter stood thus, it is alleged, without any intimation as required under Section 245 of the IT Act, the ITO adjusted the refunds generated for the Assessment Years 2021-22, 2022-23 and 2023-24. However, intimation under Section 245 through e-mail on 21.10.2024 was issued with proposal to adjust the refund generated for the Assessment Year 2024-25. Having not granted further opportunity to explain, the ITO not only adjusted such refund against the outstanding dues of Assessment Year 2018-19 during the pendency of statutory appeal, even though the petitioner complied with the order granting conditional stay of recovery of demand, but also issued communication by Letter dated 30.11.2024/ 04.11.2024 to deposit 20% of the outstanding dues. Such action was challenged before the writ Court in W.P.(C) No.10226 of 2025, which came to be disposed of with the following Order on 21.04.2025:

"1. Learned counsel for the petitioner has furnished a copy of the stay order dated 21st April, 2025 passed by the ITO, WARD 1(1), Cuttack, which is taken on record. In view of aforesaid order dated 21st April, 2025, it is submitted that the relief prayed for in the instant writ petition has already been granted.

2. Mr. A. Kedia, learned Jr. Standing Counsel submits that the Officer concerned has passed the necessary order today and, therefore, there remains nothing for adjudication in the writ

petition. Hence, it is submitted that the writ petition has been rendered infructuous.

3. Faced with such situation, the writ petition stands disposed of as has been rendered infructuous."

2.6. Being dissatisfied by the unilateral action of the ITO in setting off/adjusting the refunds pertaining to the Assessment Years 2021-22, 2022-23, 2023-24 and 2024-25 against the demand showing outstanding for the Assessment Year 2018-19, notwithstanding compliance of orders of conditional stay restraining the recovery of balance demanded tax, the instant writ petition has been filed.

Hearing:

3. On the consent of the counsel for the respective parties, this matter is taken up for final hearing at the stage of "Fresh Admission" as short point is involved whether without affording opportunity of hearing and undertaking adjustment/set off the amounts of refunds for the Assessment Years 2021-22, 2022-23, 2023-24 and 2024-25 against the demand showing outstanding for the Assessment Year 2018-19, the ITO has acted within authority and such action can be held to be justified in law.

3.1. Heard Sri Jagabandhu Sahoo, learned Senior Advocate assisted by Ms. Kajal Sahoo, learned Advocate for the

petitioner and Sri Subash Chandra Mohanty, learned Senior Standing Counsel assisted by Sri Avinash Kedia, learned Junior Standing Counsel, for the Income Tax Department.

Submissions and arguments:

4. Sri Jagabandhu Sahoo, learned Senior Advocate submitted that in view of provisions of Section 245 of the IT Act, before adjustment of refunds against outstanding dues or amount remaining payable, the ITO is duty bound to issue intimation in writing with respect to action proposed to be taken for set off. He advanced his argument by urging that it is illegal and flagrant violation of tenet of natural justice inasmuch as the opposite parties have neither issued any intimation nor was the petitioner made aware of contemplated action for adjustment of refunds against outstanding dues. However, he would submit that for adjustment of refund in respect of the Assessment Year 2024-25, the petitioner was issued with intimation by e-mail on 21.10.2024, granting him 21 days only for reply. The petitioner could not file any response, but awaited for further intimation to reach at its end. He, therefore, essentially contended that the petitioner is liable to be restored with the amounts of refund so adjusted/set off treating the petitioner not in default as he complied with the orders of conditional stay.

5. Per contra, Sri Avinash Kedia, learned Junior Standing Counsel with his usual vehemence submitted that the argument advanced by Sri Jagabandhu Sahoo, Senior Advocate that the refund amounts have been adjusted against the outstanding demanded dues without issuing any intimation is a myth.

5.1. He submitted that the petitioner was made aware of outstanding amount due with respect to Assessment Year 2018-19 to be recovered by issue of Letter dated 30.10.2024/04.11.2024 (Annexure-12) and Letter dated 01.04.2025 (Annexure-13) and in the latter Letter, he was requested to deposit such demands on or before 10.04.2025. It was also requested to furnish information regarding stay order(s) passed and compliance thereof in tune with the Central Board of Direct Taxes Office Memorandum No.F.404/72/93-ITCC, dated 31.07.2017. It was also stated in the said Letters that "failure to pay the above demands within the stipulated period, it will be presumed that you have nothing to state in the matter and accordingly appropriate recovery measures may be taken as per the provisions of the Income Tax Act, 1961".

5.2. It is argued on behalf of the Income Tax Department that said Letters were subject-matter of challenge before this Court in W.P.(C) No.10226 of 2025. In the said case, as if the petition for stay dated 17.05.2023 was pending disposal by the ITO, the petitioner sought to pose that

excess of 20% of demanded dues, during pendency of statutory appeal, has been directed to be deposited. Despite clear request in the above Letters for furnishing details of payments made, the petitioner has not done the needful. It is asserted that the fact of Order dated 06.09.2023 passed by the ITO in consideration of petition for stay dated 31.08.2023 (Annexure-7 to the instant writ petition) was never brought on record in the earlier writ petition, though the same was filed on 11.04.2025. However, being apprised that the ITO has passed an Order dated 21.04.2025 on the petition for stay of recovery of demand, this Court passed Order dated 21.04.2025 disposing of the said writ petition as rendered infructuous.

5.3. Refuting the contentions of the learned Senior Counsel it is stated that the records would reveal that since the petitioner could not comply with the first order of stay dated 19.05.2023, its second petition dated 31.08.2023 (Annexure-7) was considered by the ITO with a direction to deposit 20% of the demand raised pertaining to Assessment Year 2018-19 vide Order dated 06.09.2023. It is brought to fore that in the said Order it has been stipulated that "In this context, you have paid the above stated outstanding tax demand of Rs.16,91,930/- evidencing challans produced till date. Moreover, you are required to pay the balance amount of Rs.6,77,329/- by

06.11.2023 to avail full stay of the balance outstanding demand of Rs.94,77,037/- till disposal of 1st appeal". It was also stipulated therein that the Authority concerned reserves right to "adjust refund arising, if any against the demand to the extent of the amount required for granting stay and subject to the provisions of Section 245".

5.4. Laying emphasis on the above observation of the ITO, it was argued that even though such Order dated 06/07.09.2023 was passed with a direction to deposit the amount on or before 06.11.2023 for availing benefit of restraining the authority from taking coercive measure to recover the balance demand during pendency of appeal, the copy of challan enclosed to the instant writ petition at Annexure-9 depicts that the payment was made beyond the stipulated date, i.e., 08.11.2023.

5.5. Therefore, he submitted that there was no interdiction or impediment for the ITO to take action for set off/adjust the amount of refunds that flowed respecting 2021-22, 2022-23, 2023-24 and 2024-25 against the amount directed to be deposited in the Order dated 06.09.2023.

Discussions:

6. Having heard the arguments advanced by the counsel for the respective parties, diligent consideration of documents enclosed to the writ petition transpires that

the petitioner deposited an amount of Rs.6,77,330/- (shortfall) on 08.11.2023 despite the Order dated 06/07.09.2023 directing him to make payment by 06.11.2023. There is nothing on record to suggest that the petitioner has furnished the details of payment so made to the ITO concerned. The averment of the writ petition in this regard at paragraph 9 shows as follows:

"The petitioner made further deposit of Rs.6,77,330/- on 08.11.2023 pursuant to the Letter dated 06.09.2023."

This has been objected to by the learned Junior Standing Counsel to be contrary to record, for the petitioner has not complied with the direction by depositing requisite amount within the period stipulated in the Letter dated 06.09.2023.

7. Be that be, the sole contention now remains to be addressed to is whether in view of statutory provisions contained in Section 245 of the IT Act, the Authority is required to adhere to principles of natural justice before adjusting the refunds against outstanding demanded dues for an Assessment Year.

7.1. At this juncture it is apposite to have regard to Section 245 of the IT Act, which reads as follows:

"245. Set off of refunds against tax remaining payable.--

Where under any of the provisions of this Act, a refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section."

7.2. Sri Jagabandhu Sahoo, learned Senior Advocate laid stress on the following averments made at paragraph 11 of the writ petition:

"In the present case of the petitioner, no intimation has been issued to the petitioner before adjusting the amount of refund against the outstanding tax liability of the petitioner for the periods 2021-22 to 2023-24. The opposite party No.4 for the period Assessment Year 2024- 25 issued an intimation dated 21.10.2024 under the provisions of Section 245 of the Income Tax Act, 1961 to the petitioner seeking to adjust the refund which has been granted in favour of the petitioner and since the petitioner being unaware of the same could not reply to the same resulting which the opposite party No.4 without giving any further intimation/opportunity to the petitioner has adjusted the amount of refund against the outstanding tax liability of the petitioner for the Assessment Year 2018-19."

7.3. As is manifest from the words "an intimation" employed in Section 245, the article "an" has significance.

7.4. The word „a‟ has varying meanings and uses. „A‟ means „one‟ or „any‟, but less emphatically than either. It may mean „one‟ where only one is intended, or it may mean any one of a great number. It is placed before nouns of the singular number, denoting an individual object or quality individualized. The meaning depends on the context. [Refer, Black‟s Law Dictionary].

7.5. The interpretation of "a"/"an" fell for construction in many cases, but regard to the following would suffice for the present context.

7.6. In Gujarat University Vrs. Krishna Raghunath Mudholkar, (1963) Supp 1 SCR 112 it has been observed that „a‟ is the first letter of English alphabet denoting the primary vowel sound. It is used before singular nouns beginning with consonants. „A‟ may mean one of several things.

7.7. In Shri Ishar Alloy Steels Ltd. Vrs. Jayaswals Neco Ltd., (2001) 3 SCC 609, it is started thus,

"9. The use of the words "a bank" and "the bank" in the section is an indicator of the intention of the legislature. The former is an indirect (sic. indefinite) article and the latter is prefixed by a direct (sic. definite) article. If the legislature intended to have the same meanings for "a bank" and "the bank", there was no cause or occasion for mentioning it

distinctly and differently by using two different articles. It is worth noticing that the word "banker" in Section 3 of the Act is prefixed by the indefinite article "a" and the word "bank" where the cheque is intended to be presented under Section 138 is prefixed by the definite article "the". The same section permits a person to issue a cheque on an account maintained by him with "a bank" and makes him liable for criminal prosecution if it is returned by "the bank" unpaid. The payment of the cheque is contemplated by "the bank" meaning thereby where the person issuing the cheque has an account. "The" is the word used before nouns, with a specifying or particularising effect as opposed to the indefinite or generalising force of "a" or "an". It determines what particular thing is meant; that is, what particular thing we are to assume to be meant.

"The" is always mentioned to denote a particular thing or a person. "The" would, therefore, refer implicitly to a specified bank and not any bank. "The bank" referred to in clause (a) to the proviso to Section 138 of the Act would mean the drawee bank on which the cheque is drawn and not all banks where the cheque is presented for collection including the bank of the payee, in whose favour the cheque is issued."

7.8. As is apparent from bare reading of provision of Section 245 of the IT Act, it is unequivocal that once it is admitted that an intimation under said section has been received, it is incumbent on the part of the assessee to respond to the same, in absence of which the ITO is empowered to set off the amount to be refunded or any

part of that amount against any sum remaining payable under the Act "in lieu of payment of the refund".

7.9. The phrase "in lieu of" employed in the provision of Section 245 can seemly be understood from the following enunciation in Bhadauria Gram Sewa Sansthan Vrs. A.C.S.T., 2006 SCC OnLine All 73:

"17. In the Black‟s Law Dictionary, V Edition, page 708, the following meaning has been given to the words „in lieu of‟:

„in lieu of /in lyuw ev/, Instead of ; in place of ; in substitution of.‟

18. In the case of Hindustan Construction Co. Ltd.

(1965) 2 SCR 41, the apex Court has referred to the meaning ascribed to the expression „in lieu of‟ in the case of Stubbs Vrs. Director of Public Prosecutions (1890) 24 QBD 577, wherein it was held that where a liability has to be discharged by A in lieu of B, there must be a binding obligation on B to do it, before A can be charged with it. Considering the provision of Section 49E of the Indian Income-tax Act, 1922, which provided for set-off of the amount to be refunded in lieu of the payment of refund, the apex court has held that the expression „in lieu of‟ connotes that the payment is outstanding, i.e., there is a subsisting obligation on the Income-tax Officer to pay and if a claim of refund is barred by a final order, it cannot be said that there is a subsisting obligation to make the payment."

7.10. Since the petitioner admitted not to have taken step after receipt of such intimation, the outstanding demand as on that date could be considered for adjustment/set off against the refund(s) in conformity with the statutory provision contained in Section 245 of the IT Act.

7.11. With the aforesaid perspective, this Court is not persuaded by the suave argument advanced by the learned Senior Counsel inasmuch as the authority concerned was not required to issue "further intimation"

and no step being taken by the assesse, affording further "opportunity" to the petitioner before effecting adjustment/set off of amount of refund pertaining to the Assessment Year 2024-25 against the outstanding tax liability for the Assessment Year 2018-19 is uncalled for.

8. With respect to non-issue of intimation/notice for other periods, the learned Junior Standing Counsel was not in a position to put forth factual details as to whether the ITO has issued intimation before taking measure to set off of amount of refunds for the Assessment Years 2021- 22, 2022-23 and 2023-24 against outstanding dues relating to Assessment Year 2018-19.

8.1. It is strenuously argued by Sri Jagabandhu Sahoo, learned Senior Advocate assisted by Ms. Kajal Sahoo, learned Advocate that in view of legal position as made unambiguous in Skyline Engineering Contracts (India)

Private Limited Vrs. Deputy Commissioner of Income Tax Circle-22(2), 2021 SCC OnLine Del 4133; Essjay Ericson Private Limited Vrs. Commissioner of Income Tax, 2021 SCC OnLine Del 5562 and Jindal Stainless Ltd. Vrs. Deputy Commissioner of Income Tax, 2023 SCC OnLine Del 5204, the excess amount over and above 20% as envisaged under Office Memorandum dated 29.02.2016 as amended by Office Memorandum dated 31.07.2017 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, deserves consideration.

8.2. The Office Memorandum dated 29.02.2016 and the Office Memorandum dated 31.07.2017 issued by the Central Board of Direct Taxes are reproduced hereunder:

"F.No.404/72/93-ITCC Government of India Ministry of Finance Central Board of Direct Taxes (CBDT)

New Delhi, Dated 29th February, 2016

Office Memorandum

Sub.: Partial modification of Instruction No.1914, dated 21.03.1996 to provide for guidelines for stay of demand at the first appeal stage.

Instruction No.1914 dated 21.03.1996 contains guidelines issued by the Board regarding procedure to be followed for recovery of outstanding demand, including procedure for grant of stay of demand.

2. In part „C‟ of the Instruction, it has been prescribed that a demand will be stayed only if there are valid reasons for doing so and that mere filing of an appeal against the assessment order will not be a sufficient reason to stay the recovery of demand. It has been further prescribed that while granting stay, the field officers may require the assessee to offer a suitable security (bank guarantee, etc.) and/or require the assessee to pay a reasonable amount in lump sum or in instalments.

3. It has been reported that the field authorities often insist on payment of a very high proportion of the disputed demand before granting stay of the balance demand. This often results in hardship for the tax payers seeking stay of demand.

4. 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:

(A) In a case where the outstanding demand is disputed before CIT(A), the assessing officer 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) hereunder,

(B) In a situation where,--

(a) the assessing officer is of the view that the nature of addition resulting in the disputed demand is such that payment of

a lump sum amount higher than 15% is warranted (e.g. in a case where addition on the same issue has been confirmed by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of Revenue or addition is based on credible evidence collected in a search or survey operation, etc.) or,

(b) the assessing officer is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount lower than 15% is warranted (e.g. in a case where addition on the same issue has been deleted by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee, etc.), the assessing officer shall refer the matter to the administrative Pr. CIT/CIT, who after considering all relevant facts shall decide the quantum/proportion or demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand.

(C) In a case where stay of demand is granted by the assessing officer on payment of 15% of the disputed demand and the assessee is still aggrieved, he may approach the jurisdictional administrative, Pr. CIT/CIT for a review of the decision of the assessing officer.

(D) The assessing officer shall dispose of a stay petition within 2 weeks of filing of the petition.

If a reference has been made to Pr. CIT/CIT under para 4(B) above or a review petition has been filed by the assessee under para 4(C) above, the same shall also be disposed of by the Pr. CIT/CIT within 2 weeks of the assessing officer making such reference or the assessee filing such review, as the case may be.

(E) In granting stay, the Assessing Officer may impose such conditions as he may think fit. He may, inter alia,--

(i) require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled;

(ii) reserve the right to review the order passed after expiry of reasonable period (say 6 months) or if the assessee has not cooperated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations;

(iii) reserve the right to adjust refunds arising, if any, against the demand, to the extent of the amount required for granting stay and subject to the provisions of section

5. These instructions/guidelines may be immediately brought to the notice of all officers working in your jurisdiction for proper compliance.

Sd/-

(A.K. Sinha) Director (ITCC)"

                  ***              ***               ***

                       "F. NO.404/72/93-ITCC
                             (FTS:284146)
                         Government of India
                          Ministry of Finance
                        Department of Revenue
                     Central Board of Direct Taxes

            New Delhi,                         31st July, 2017

                           Office Memorandum

     Subject:    Partial modification of Instruction No.1914, dated

21.03.1996 to provide for guidelines for stay of demand at the first appeal stage.

Reference: Board‟s O.M. of even number dated 29.2.2016.

Instruction No.1914 dated 21.3.1996 contains guidelines issued by the Board regarding procedure to be followed for recovery of outstanding including procedure for grant of stay of demand.

Vide O.M. No.404/72/93-ITCC, dated 29.2.2016. Revised guidelines were issued in partial modification of Instruction No.1914, wherein, inter alia, vide para 4(A) it had been laid down that in a case where the outstanding demand is disputed before CIT(A), the Assessing Officer 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) there under. Similar references to the standard rate of 15% have also been made in succeeding paragraphs therein.

The matter has been reviewed by the Board in the light of feedback received from field authorities. In view of the Board‟s effort to contain over pitched assessments through several measures resulting in fairer and more reasonable assessment orders, the standard rate of 15% of the disputed demand is found to be on the lower side. Accordingly, it has been decided that the standard rate prescribed in O.M. dated 29.2.2016 be revised to 20% of the disputed demand, where the demand is contested before CIT(A). Thus, all references to 15% of the disputed demand in the aforesaid O.M. dated 29.2.2016 hereby stand modified to 20% of the disputed demand. Other guidelines contained in the O.M. dated 29.2.2016 shall remain unchanged.

These modifications may be immediately brought to the notice of all officers working in your jurisdiction for proper compliance.

Sd/-

(A.K. Sinha) Director (ITCC)"

8.3. In Skyline Engineering Contracts (India) Private Limited Vrs. Deputy Commissioner of Income Tax Circle-22(2), 2021 SCC OnLine Del 4133 it has been observed thus:

"10. 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 assessing officer shall normally grant stay of demand till disposal of the first appeal on payment

of 20% of the disputed demand. In the event, the assessing officer is of the view that the payment of a lump sum amount higher than 20% is warranted, then the assessing officer will have to give reasons to show that the case falls in Para 4(B) of the office memorandum dated 29.02.2016.

11. This Court finds that in the present matters no order has been passed by the assessing officer under Section 245 of the Act for adjustments of refunds. Moreover, there is no order by the assessing officer giving any special/particular reason as to why any amount in excess of 20% of the outstanding demand should be recovered from the petitioner assessee at this stage in accordance with Para 4(B) of the office memorandum dated 29.02.2016.

12. Consequently, this Court is of the view that the respondents are entitled to seek predeposit of only 20% of the disputed demand during the pendency of the appeals in accordance with Para 4(A) of the Office Memorandum dated 29.02.2016, as amended by the office memorandum dated 25.08.2017.

13. Accordingly, Respondent 1 is directed to refund the amount adjusted in excess of 20% of the disputed demand for the Assessment Years 2015-2016 and 2016-2017 within four weeks."

8.4. In Essjay Ericson Private Limited Vrs. Commissioner of Income Tax, 2021 SCC OnLine Del 5562 it has been stated thus:

"11. Keeping in view the aforesaid mandate of law as well as non-compliance of order dated 07th February,

2020 and the fact that the refunds have been adjusted against the outstanding tax demand by the Authority without following the procedure prescribed under Section 245 of the Act, inasmuch as no notice or opportunity of pre-decisional hearing had been provided to the Petitioner prior to such adjustment of refund in excess of 20%, this Court is of the opinion that the Petitioner is entitled to refund of adjustments made in excess of 20% of the disputed tax demands. (See: Glaxo Smith Kline Asia Pvt. Ltd. Vrs. The Commissioner of Income Tax, (2007) 94 DRJ 681 (DB) and The Oriental Insurance Co. Ltd. Vrs. Deputy Commissioner of Income Tax, 2014 (10) TMI 746).

12. Consequently, this Court directs the Respondents to verify the facts stated in the writ petition and if they find them to be true and correct then refund the amount adjusted in excess of 20% of the disputed tax demands for the Assessment Year 2016-2017 to the Petitioner within six weeks. With the aforesaid directions, present writ petition and application stand disposed of."

8.5. It has been observed in Jindal Stainless Ltd. Vrs. Deputy Commissioner of Income Tax, 2023 SCC OnLine Del 5204 that,

"14. No material has been furnished by the respondent/ revenue which would suggest that the petitioner/ assessee‟s case would fall within 4(B)(a)1.

1 4. (B) In a situation where, (a) the assessing officer is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount higher than 15%* is warranted (e.g. in a case where addition on the same issue has been confirmed by appellate authorities in

15. Given this position, the writ petition is disposed of with the direction to the respondents/revenue to release the amount, along with applicable interest, which is in excess of 20% of the disputed demand, concerning the aforementioned AYs.

16. We may also note (something we have recorded in our order dated 14.07.2023), according to the petitioner/assesse, the excess amount which is available with the respondents/revenue is Rs.32,07,13,625/-.

17. The respondents/revenue will make their own calculation and ascertain whether the amount indicated by the petitioner/assessee is the excess amount. Thus, the excess amount beyond 20%, along with applicable interest, will be released to the petitioner within four (4) weeks of the receipt of a copy of the judgment."

8.6. It is not argued nor placed as a matter fact with respect to the status of the assessee having deposited the amount beyond the period stipulated in Order dated 06.09.2023 and whether before set off of refunds for the Assessment Years 2021-22, 2022-23 and 2023-24 against outstanding dues relating to Assessment Year 2018-19 any intimation was issued and the Assessing Officer complied with the principles of natural justice in terms of Section 245 of the IT Act. Thus, certain factual adjudication is required to be undertaken by the

earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of Revenue or addition is based on credible evidence collected in a search or survey operation, etc.) *. Increased to 20%, as per OM dated 31.07.2017.

competent authority in this regard to verify the veracity of the statement as to whether amount of refunds have been set off/adjusted beyond 20% in terms of aforesaid Office Memoranda issued by the Central Board of Direct Taxes against the outstanding demand pertaining to Assessment Year 2018-19 during the pendency of the appeal.

Conclusion:

9. Since at the stage of "fresh admission" on the consent of counsel for the parties this Court heard the matter finally, in view of decisions cited at the Bar and taking into consideration the tenor of the Office Memoranda issued by the Central Board of Direct Taxes, it is felt expedient to issue following directions:

i. the Assessing Officer/competent authority concerned shall issue intimation to the petitioner within a period of one week hence,

ii. on its appearance, said authority shall afford it opportunity of hearing and examine whether any amounts of refund pertaining to Assessment Years 2021-22, 2022-23 and 2023-24 got adjusted/set off in excess of what is required under the Office Memoranda against outstanding dues relating to Assessment Year 2018-19 during the pendency of the appeal;

iii. in the event of such fact, necessary step be taken to restore the excess amount to the petitioner.

10. The writ petition is allowed to the extent mentioned above, and pending interlocutory applications, if any, shall also stand disposed of accordingly. In the circumstances there shall be no order as to costs.

I agree.

                                   (HARISH TANDON)                (MURAHARI SRI RAMAN)
                                    CHIEF JUSTICE                       JUDGE



Signature Not
Verified
Digitally Signed
Signed by: ASWINI KUMAR
SETHY
Designation: Personal Assistant
(Secretary-in-Charge)
Reason: Authentication
Location: ORISSA HIGH
COURT, CUTTACK
Date: 11-Aug-2025 13:55:07




                      High Court of Orissa, Cuttack

The 11th August, 2025//Bichi/Laxmikant