Tax Recovered Illegally Must Be Refunded | ITAT

Case Deatsils: TLG India (P.) Ltd. vs. Assistant Commissioner of Income-tax - [2026] 182 taxmann.com 216 (Mumbai - Trib.) 

Judiciary and Counsel Details

• Sandeep Gosain, Judicial Member
•  Girish Agrawal, Accountant Member
• Hiten Thacker for the Appellant.
• Virabhadra Mahajan, Sr. DR for the Respondent.

Facts of the Case

Assessee filed its return of income reporting total income at nil. Transfer pricing adjustment of Rs. 113,11,80,000 were proposed by the ld. Transfer Pricing Officer (TPO) vide order dated 26.10.2023 which was objected to by the assessee before the ld. Disputes Resolution Panel (DRP).

The proposed adjustment was confirmed by the ld. DRP based on which the final assessment order was passed by the ld. Assessing Officer on 23.10.2024, assessing total income at Rs. 113,11,80,000, raising a demand of Rs. 23,30,67,630.

Against this final assessment order, the assessee filed an appeal before the Tribunal. However, during the pendency of the appeal, the assessee filed an application before the Tribunal for the refund of demand already recovered by the Assessing Officer (AO) during the pendency of the appeal.

Assessee contended that post passing of rectification order under section 154 by the learned AO, there remained no demand to be recovered from the assessee. Since there was no tax payable by the assessee, there was nothing to be stayed under the present stay application before the Tribunal.

ITAT Held

The Mumbai Tribunal held that the assessee was seeking direction from the Tribunal for the refund of the money which was recovered unlawfully during the pendency of the rectification application. For the purpose of grant of refund, the Tribunal has the power to ensure that the assessee is not left high and dry only on account of illegal and high-handed action on the part of the revenue and its Assessing Officer.

In the instant case, it was not merely a case of procedural defect adopted for recovery of demand during the pendency of the rectification application. Instead, such a recovery of tax resulted in double jeopardy in the hands of the assessee, well established by the outcome of the rectification order passed under section 154 by the learned AO.

Thus, the prayer for the refund of recovery made by the learned AO leading to double jeopardy carries a heavy force in favour of the assessee. Therefore, the Tribunal exercised powers under section 254 of the Act to direct the AO to grant the refund of recovery of tax made by him to the assessee for the year under consideration.

List of Cases Referred to

• Maharashtra Housing & Area Development Authority v. ADIT (Exemptions) [2014] 49 taxmann.com 341/66 SOT 66 (Mumbai) (para 5)
• ITO v. M.K. Mohammed Kunhi (1969) 71 ITR 615 (SC) (para 7)
• RPG Enterprises Ltd. v. Dy. CIT [2002] 74 TTJ 391 (Mumbai) (para 7).