Northern Coal Fields Limited vs Assistant Commissioner of Income Tax & Ors.

The challenge in the present writ petition is to an

action of the Revenue in adjusting the amount refundable for

the Assessment Year 2012-13 against the tax demands raised

for the Assessment Years 2013-14 and 2014-15.

Some facts are required to be mentioned. The

Income Tax Appellate Tribunal, Jabalpur Bench, Jabalpur (for

short "Tribunal") vide order dated 03.06.2016 allowed the

appeal of the assessee, the present petitioner for the Assessment

Year 2012-13. As a consequence of said order, an amount of

Rs.899,83,91,210/- became refundable to the petitioner. It was

on 05.01.2007, the Assessing Officer (The Assistant

Commissioner of Income Tax-2 Jabalpur) served a notice on

the assessee in terms of Section 245 of the Income Tax Act (for

short "the Act") proposing to set off the amount of refund

against the tax demand of Rs.729.33 Crores due for the

Assessment Year 2013-14 and Rs.791.25 Crores due to the

Assessment Year 2014-15.

It may be stated that the assessment for the

Assessment Year 2013-14 was finalized by the Assessing

Officer on 18.03.2016 and that of the Assessment Year 2014-

15 was finalized on 28.12.2016. It is thereafter, a notice for

adjustment was issued on 05.01.2017, which was received by

the assessee on 12.01.2017 and response was submitted by the

petitioner on 12.01.2017 (Annexure-P/17). After considering

the reply filed, an order of adjustment was passed on

16.01.2017 adjusting Rs.729,33,48,880/- as a demand raised for

the Assessment Year 2013-14 and Rs.170,50,42,330/- from the

demand of tax for the Assessment Year 2014-15. The amount

of refund was thus adjusted against the tax payable amounting

to Rs.899,33,91,210/-.

Learned counsel for the petitioner has vehemently

argued that in respect of the Assessment Year 2013-14, the

Assessing Officer has passed an order of stay of the demand for

a period of six months whereas the order of refund has been

passed within the period of stay, therefore, the refund amount

could not be adjusted against demand for the Assessment Year

2013-14 as such demand was stayed. The order of stay of the

Assessing Officer reads as under:

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

OFFICE OF ASSISTANT COMMISSIONER OF INCOME TAX-2(1)

ANNEXE BUILDING, NAPIER TOWN, JABALPUR

F.No.ACTT/C-2(1)/JBP/Stay of Demand /2016-17 / Dated 12.09.2016

To,

The Northern Coalfields Ltd.,

Panjresh Bhawan,

Singrauli Colliery,

District Sidhi.

Sir,

Sub: Application for stay of demand of A.Y. 2013-14 regarding.

Ref: Please refer to your letter regarding stay of demand for A.Y. 2013-14, dated 22.03.2016-reg.

Kindly refer to the subject cited above.

In this connection, it is to state that the stay petition filed by you vide your letter dated 22.03.2016 is re-considered. It has been verified that the first appeal in this case is pending before Hon''ble CTT-(A-II), Jabalpur. Demand raised u/s 143(3) for the year under consideration is Rs.873,41,98,340/- and out of this demand refund of A.Y. For Rs.144,08,49,460/- has been adjusted by the CPC. Your stay application is considered in light of CBDT memorandum dated-29.02.2016 and balance demand is stayed for a period of 6 months or upto the decision of 1st appeal whichever is earlier.

Yours faithfully

( -sd- )

Assistant Commissioner of Income-tax,

Circle-2(1), Jabalpur

Learned counsel for the petitioner relies upon an

order passed by the Delhi High Court reported as (2012) 347

ITR 43 (Delhi) in Maruti Suzuki India Ltd. Vs. Deputy

Commissioner of Income-Tax and that of the Bombay High

Court reported as (2013) 354 ITR 77 (Bom) in HDFC Bank

Ltd. Vs. Assistant Commissioner of Income-Tax and

Others. It is further argued that no notice of demand was

served upon the assessee in respect of Assessment Year

2014-15, therefore, there could not be any order of adjustment.

The order of assessment is said to have been passed on

28.12.2016 (Page 184 of the paper book) whereas the notice of

adjustment has been issued on 05.01.2017 itself. It is contended

that the demand becomes due after the expiry of 30 days and

since the assessee has not been given 30 days for depositing the

due amount, therefore, demand was not due and payable which

could be adjusted against the refund due to the assessee for the

Assessment Year 2012-13. It is also argued that the demand

raised in the Assessment Years 2013-14 and 2014-15 is an

identical grounds which have been set aside by the Tribunal for

the Assessment Year 2012-13. Infact, the Tribunal has

consistently set aside the demand raised against the petitioner

from the Assessment Year 1998-99.

On behalf of the Revenue, it is pointed out that the

orders passed by the Tribunal for the earlier Assessment Years

have not attained finality and are pending consideration in

appeals before this Court. The following are the appeals

pending in respect of earlier Assessment Years including the

appeal arising out of order of the Tribunal pertaining to

Assessment Year 2012-13:

"MAIT 79/2004, MAIT 80/2004, ITA 71/2014, ITA 72/2014, ITA 70/2015, ITA 74/2015, ITA 75/2015, ITA 76/2015, ITA 77/2015, ITA 78/2015 and ITA 79/2015"

In view of the said fact, it cannot be said that the

legality and validity of the assessment proceedings is final.

We have heard learned counsel for the parties and

find no merit in the present petition. In respect of an argument

that demand for the Assessment Year 2013-14 was stayed by

the Assessing Officer in exercise of powers conferred under

Section 220(6) of the Act, we do not find any merit. A perusal

of the order of stay passed by the Assessing Officer on

12.09.2016 in terms of Section 220(6) of the Act shows that

even in the said order, an amount of Rs.144,08,49,460/- has

been adjusted. After adjustment, the balance amount was

stayed for a period of 6 months or upto the decision of the first

appeal, whichever is earlier. After passing of such order, the

assessment for the Assessment Year 2014-15 was finalized on

28.12.2016. The order under Section 220(6) of the Act as well

as the intimation under Section 245 of the Act was issued by

the same Assessing Officer. Therefore, the argument of the

learned counsel for the petitioner that the Assessing Officer

should have modified its order of 12.09.2016 before the order

of adjustment is not tenable as the order of stay was not passed

by any other superior authority but by the Assessing Officer

himself. The Hon''ble Supreme Court in M/s. Shree Chamundi

Mopeds Ltd. v. Church of South India Trust Association,

Madras AIR 1992 SC 1439 has examined the effect of an

interim order of stay. The Supreme Court held that distinction

has to be made between quashing of an order and stay of an

order. Quashing of the order results in restoration of the

position as stood on the date of passing of the order which has

been quashed but the stay of operation of the order does not

however lead to such a result. In view thereof, the order of

Assessing Officer not to recover the demand for the

Assessment Year does not lead to setting aside of the demand

itself. The said demand could very well be adjusted against the

refund due for the previous year 2012-13.

Similarly, the assessment was completed for the

Assessment Year 2014-15 on 28.12.2016. The demand for

recovery of the tax due was issued on 13.01.2017 giving time

to the assessee to deposit the tax due within 30 days. Such

demand notice is for the recovery of the amount which is

payable within 30 days and after 30 days, the consequences as

contemplated under Section 156 of the Act follows but

assessment having been finalized on 28.12.2016, the Assessing

Officer could adjust the amount against the refund payable as it

was amount due and payable by the assessee though it had 30

days time to deposit the same.

The order of the Delhi High Court referred to by the

learned counsel for the petitioner infact draws a distinction

between stay of coercive measures to recover the demand and

stay of adjustment under Section 245 of the Act. The Court has

held to the following effect:

"......We do not think that set off or adjustment cannot be regarding as a mode of recovery or is not a recovery mechanism. The term "recovery" is comprehensive and includes adjustment thereby reducing the demand. At the same time, different parameters and requisites may apply when the appellate authority considers the request for stay against coercive measures to recover the demand and when stay of adjustment under Section 145 of the Act is prayed for. In the first case, coercive steps are taken with the idea to compel the assessee to pay up or by issue of gamishee notice to recover the amount. In the second case, money is with the Revenue and is refundable but adjusted towards the demand. Thus, while granting stay, the appellate authority or the Income-tax Appellate Tribunal (for that matter, even under section 220(6)), the authority can direct stay of recovery by coercive methods but may not grant stay of adjustment of refund. However, when an order of stay of recovery is simplistic and absolute terms is passed, it would be improper and inappropriate on the part of the Revenue to recover the demand by way of adjustment. In case of doubt or ambiguity, an application for clarification or vacation/modification of stay to allow adjustment can be, and should be filed. But no attempt should be made and it should not appear that the Revenue has tried to over- reach and circumvent the stay order . Obedience and compliance with the stay order in letter and spirit is mandatory. A stay order passed by an appellate/higher authority must be respected. No deviancy or breach should

be made. We do not, in the present case, intend to lay down propositions or broad principles when and in what case there should be total stay of demand, or stay of recovery through coercive steps but no stay of adjustment under section 245 of the Act. We would like to restrict ourselves to the facts of the present case and the contentions raised by the petitioner that when an issue or contention has been decided in favour of the assessee in earlier years whether adjustment under section 245 of the Act is permissible in respect of arrears pertaining to the same issue or subject-matter." 11. The Delhi Court has categorically held that it did

not intend to lay down propositions or broad principles when

and in what case there should be total stay of demand or stay of

recovery but no stay under Section 245 of the Act can be made.

Section 245 of the Act infact permits the Revenue to set off any

demand from the amount to be refunded but the only condition

is of intimation in writing to such person against whom action

is proposed to be taken. We find that demand having been

raised against the petitioner for the Assessment Years 2013-14

and 2014-15 and intimation having been sent to the petitioner

on 05.01.2017, the mandate of Section 245 of the Act was

satisfied by the Revenue before making adjustment from the

refund due to the assessee from the tax due to the assessee for

the subsequent years.

In view thereof, we do not find any merit in the writ

petition, the same is dismissed.

At this stage learned counsel for the petitioner has

sought intervention of this Court for directing the

Commissioner of Income Tax (Appeal) to decide the appeals

preferred by the petitioner for the Assessment Years 2013-14

and 2014-15 expeditiously as having received the tax amount,

the petitioner has the apprehension that the appeals will not be

decided.

In view of the argument raised, we deem it

appropriate to direct the jurisdictional Commissioner of Income

Tax (Appeal) to decide the appeals of the petitioner

expeditiously preferably within a period of six months from the

date of receipt of this order.