Can’t regulate total refund towards outstandings, guidelines HC in reduction for taxpayers


(This story initially appeared in on Might 05, 2021)

The Bombay excessive courtroom just lately held that earnings tax (I-T) officers can not regulate the refunds as a result of taxpayers towards excellent calls for in extra of the bounds laid down in directions, circulars and pointers issued by the Central Board of Direct Taxes (CBDT).

This order comes as a reduction, particularly for India Inc and excessive internet price people the place the quantities at stake are important. If refunds which are due are totally adjusted towards any tax demand, even when the quantity demanded has been appealed towards, it adversely impacts taxpayers.

In keeping with Sanjay Tolia, companion at Worth Waterhouse & Co, “This can be a welcome judgment, particularly throughout the pandemic when taxpayers want funds to fulfill their day-to-day administrative and operative bills. This judgment will strengthen the requests of taxpayers to I-T officers to chorus from adjusting your complete quantity of the refund towards excellent calls for and prohibit the adjustment to the restrict specified within the directions issued by the CBDT.”

On this case, the I-T returns for the monetary yr 2012-13 filed by Vrinda Sharad Bal, a proprietor of a land improvement agency, was chosen for scrutiny. Consequent to this, a tax demand discover of Rs 6.1 crore was raised. The I-T officer adjusted the refunds due for 3 subsequent monetary years. Nonetheless, the refunds adjusted had been greater than 20% of the tax demand that had been raised—the restrict prescribed beneath newest CBDT directions.

The taxpayer filed an attraction towards this demand and sought a keep. Whereas a keep on restoration of the steadiness demand was granted, the I-T officer reserved the correct to regulate different refunds arising to the taxpayer towards the steadiness quantity of dues. This sample continued and refunds for 2 subsequent monetary years (FY18 and FY19) had been additionally adjusted towards the excellent tax dues. This led to Bal submitting a writ petition with the Bombay HC.

Within the petition, Bal highlighted the monetary difficulties that companies had been dealing with because of the pandemic and lockdowns. It was additionally identified that CBDT’s workplace memorandum dated February 29, 2016, which offers with keep on demand, offers that the I-T officer can regulate refunds solely to the extent of 20% of the tax demanded. The writ petition sought a refund of the surplus quantity that had been adjusted.

The HC held that the CBDT’s directions issued once in a while must be utilized. It dominated that any quantity adjusted from the refunds over and above the bounds prescribed was to be returned to the taxpayer with relevant curiosity. Refunds arising in future wouldn’t be adjusted till the disposal of the attraction filed by the taxpayer for the monetary yr 2012-13, it added.

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