KERALA STATE BEVERAGES (M&M) CORPORATION LIMITED vs. JOINT COMMISSIONER OF INCOME TAX

The short facts involved in the writ petition would disclose that the petitioner, being an assessee before the 1st respondent under the Income Tax Act, 1961 (hereinafter referred to as 'the IT Act') filed returns for the assessment year 2012-13 admitting income of Rs.80,94,44,360/-. The assessing officer had accepted the return. However, the matter was taken for scrutiny and assessment was completed as per order dated 30/01/2015 under Section 143(3) of the IT Act. Ext.P1 is the said order. A letter dated 03/02/2015 was issued to the petitioner by which petitioner was informed that the refund for the assessment year 2007-08 to 2011-12 is proposed to be adjusted against the demand for Rs.340,93,85,170/- raised in the assessment year 2012-13. The total amount of refunds determined pertaining to the assessment years from 2007-08 to 2011-12 is Rs.223,57,34,050/-. The petitioner preferred an appeal against Ext.P1 order and a stay petition was also filed. The stay petition was disposed by Ext.P7 order by giving effect to the adjustment and staying the outstanding demand of Rs.105.79 Crores. Petitioner, by letter dated 20/02/2016, requested the Joint Commissioner of Income Tax to refund an amount of Rs.223.57 Crores due to them over a period of time. It is stated that they have no liability in view of the orders of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal. Since no action has been taken in the matter, this writ petition is filed.

Petitioner submits that the order Ext.P7 granting stay of recovery of tax after adjusting the refund is illegal. The amount payable in terms of Ext.P2 is liable to be paid to the petitioner. As per Finance Act, 2016, a provision has been incorporated by which it is open for the petitioner to move an application for stay of collection of tax on remitting 15% of the demand. The maximum that can be levied is only 15% and therefore, when the petitioner had made a request for such adjustment, it ought to have been permitted.

A statement is filed by the learned Standing Counsel on behalf of the respondents inter alia stating that the outstanding demand of Rs.340.93 Crores arose on account of the disallowance of the petitioner's claim for deduction of surcharge on sales tax and turnover tax. The refunds in respect of the respective assessment years have arisen on account of deletion of similar disallowances for the earlier assessment years. It is stated that the order passed by the Appellate Tribunal have not become final and departmental appeals are pending before this Court. Further reference is made to Section 245 of the IT Act wherein power is available to the assessing officer to set off the amount to be refunded against any amount remaining payable under the Act. It is submitted that when such a power had been exercised, the petitioner cannot legally sustain a claim for payment of the amount.

Petitioner had filed a reply stating that, it was on receipt of Ext.P2 order by which the petitioner came to know about the refund orders. However, petitioner was served with copies of the orders dated 06/02/2015 wherein the 1st respondent had suo motu adjusted the money refundable to the petitioner against the dues in Ext.P1. Ext.P10 series are the orders passed. It is contended that Ext.P2 cannot be said to be a notice for the purpose of setting off refund against dues.

Heard learned counsel for the petitioner and the learned counsel appearing for the respondents.

The main contention urged by the learned counsel for the petitioner is that before issuing Ext.P2, no orders had been served on the petitioner by which the refund had been adjusted. In fact, the main challenge in the writ petition is against Ext.P7, which is an order passed by the Joint Commissioner of Income Tax while considering an application for stay. Stay has been granted on condition of the adjustments already made. When the appellate authority had taken such a view in the matter, I do not think that there will be any justification on the part of this Court in setting aside the said order, as no infirmity can be pointed out to the said order.

Learned counsel for the petitioner, however, would submit that Ext.P10 series have never been served on the petitioner and it was preceded by Ext.P2 notice dated 3/2/2015. It might be correct to say that Ext.P2 ought to have been issued after the order dated 06/02/2015, which is produced as Ext.P10 series. But the fact remains that once Ext.P10 series had been issued and the appellate authority had taken cognizance of the said fact while granting stay, a direction to refund the amount, as claimed, is not sustainable. As rightly pointed out by the learned counsel for the petitioner, under normal circumstances, stay could be obtained by remitting 15% of the amount demanded. But the said provision may not apply when a right to set off is available to the Department in terms of Section 245 of the Act which reads as under: “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

True that, at the time when Ext.P1 order was passed on 30/01/2015, the refund order was not in existence and it came into effect only on 06/02/2015. However, merely for the reason that there is some irregularity in the procedure adopted by the Department, I do not think that any direction can be issued, as prayed for. Writ petition is, hence, dismissed.