Tax Recovered In Violation Of Judicial Stay Ordered To Be

Tax Recovered In Violation Of Judicial Stay Ordered To Be Refunded Exceeding Twenty Percent PreDeposit

Issue

Whether an order passed on a stay/waiver application under Section 220 should be quashed and the illegally recovered demand refunded when the Revenue aggressively appropriated the entire disputed tax amount despite a subsisting High Court interim stay order.

Facts

The petitioner-assessee filed a first appeal against a raised tax demand and moved an application seeking a waiver or dispensation of the standard $20\%$ pre-deposit required to prosecute the pending appeal.
On 08.03.2024, Respondent No. 1 issued a personal hearing notice scheduling an appearance for the very next day (09.03.2024), which the petitioner contested as grossly insufficient. Respondent No. 1 subsequently rejected/disposed of the waiver request via an impugned order dated 20.11.2024.
The petitioner challenged this in writ proceedings, where the High Court granted a categorical interim stay on the recovery of the entire disputed demand on 17.04.2025.
Despite the judicial stay order, Respondent No. 5 directly recovery-recovered the entire disputed tax amount along with interest from the assessee.
The respondents later admitted before the Court that due to internal miscommunication and lack of coordination, the entire amount was inadvertently appropriated, and they proposed to refund the amount collected in excess of the mandatory $20\%$ pre-deposit.

Decision

Held, yes: In view of the clear violation of the judicial stay and the joint submissions made by both parties, the impugned order dated 20.11.2024 passed by Respondent No. 1 was set aside.
The matter was officially remitted back to Respondent No. 1 for a fresh reconsideration of the waiver/dispensation request in accordance with the law, giving the petitioner a fair opportunity to present their contentions.
To remedy the illegal recovery, the Revenue was directed to immediately refund the collected amount that exceeded the standard $20\%$ pre-deposit threshold.

Key Takeaways

Sanctity of Interim Stays: Revenue authorities cannot bypass or ignore an active judicial stay order issued by a Constitutional Court. Any recovery made in defiance of a stay order is legally untenable and must be refunded.
Administrative Miscommunication Is No Excuse: Internal operational lapses or a “lack of coordination” between different wings of the Income Tax Department cannot be used as a valid justification for violating a taxpayer’s rights or disobeying Court orders.
Pre-Deposit Protection: While a stay application is under review or fresh consideration, the department’s recovery entitlement is generally restricted to the standard $20\%$ threshold, and any excess recovery must be promptly returned.

HIGH COURT OF KARNATAKA

Cashfree Payments India (P.) Ltd.

Principal Commissioner of Income-tax

S.R.Krishna Kumar, J.

WRIT PETITION NO. 2495 OF 2025 (T-IT)

OCTOBER 28, 2025

Ganesh.V. Shandage, Adv. for the Petitioner. E.I. Sanmathi and Aravind.V. Chavan, Advs. for the Respondent.

ORDER

1. In this petition, petitioner seeks for the following reliefs:-

” (a) Issue a Writ of Certiorari, or such other Writ, Order or direction in the nature of a Writ of Certiorari, quashing and setting aside the Impugned Order passed by the Respondent No. 1 bearing DIN & Letter No. ITBA/COM/F/17/2024-25/1070492467(1) dated 20.11.2024 herein enclosed and marked as Annexure-A, as being manifestly illegal, invalid, null & void, unjust, unfair, arbitrary, irrational and violative of Article 14, 19 and 21 of the Constitution of India;

(B) Issue a Writ of Mandamus, or such other Writ, Order or direction, as this Honourable Court may deem fit, restraining Respondent No. 4 from precipitating any coercive recovery proceedings in pursuance of Impugned Order passed by the Respondent No. 1 bearing DIN ITBA/COM/F/17/2024-25/1070492467(1) dated 20.11.2024 herein enclosed and marked as Annexure-A; and & Letter No.

(C) Pass such other or further orders as this Honourable Court may deem fit and proper in the facts and circumstances of the case, and in the interests of justice and equity, including the costs of writ petition.”

2. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record.

3. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned counsel for the petitioner invited my attention to the impugned order at Annexure-A passed by the 1^st respondent in order to point out that notice of personal hearing through video conferencing was issued by him only on 08.03.2024 asking him to appear on 09.03.2024 was not sufficient for the petitioner to appear before him and make his submissions regarding his request to waive / dispense with deposit of 20% of the tax demand for the purpose of prosecuting the appeal filed by him, which is pending before the first Appellate Authority. It is also submitted that though this Court passed the interim order of stay in relation to the entire disputed demand amount on 17.04.2025 in the present petition, the respondents have proceeded to recover the entire amount together with interest is illegal and petitioner is entitled for refund of the entire amount. In this regard, an application I.A.2/2025 is filed by the petitioner.

4. Per contra, learned counsel for respondents 1 to 4 and learned counsel for 5^th respondent jointly submit that due to lack of co-ordination and miscommunication, the 5^th respondent inadvertently appropriated the entire tax demand amount along with interest from the petitioner and the present petition may be disposed of by setting aside the impugned order and remitting the matter back to the 1^st respondent for reconsideration afresh in accordance with law and by directing the 4^th respondent to refund the entire amount in excess of 20% back to the petitioner within a stipulated timeframe.

5. In view of the aforesaid facts and circumstances and the joint submissions made by both sides and in order to provide one more opportunity to the petitioner to put forth his contentions before the 1^st respondent, I deem it just and appropriate to set aside the impugned order and remitting the matter back to the concerned respondents for reconsideration afresh by issuing certain directions.

6. In the result, I pass the following:-

ORDER

(i)

Petition is hereby allowed.

(ii)

The impugned order at Annexure-A dated 20.11.2024 passed by the 1^st respondent is hereby set aside.

(iii)

The matter is remitted back to the 1^st respondent for reconsideration afresh in accordance with law.

(iv)

The petitioner shall appear before the 1^st respondent either physically or through video conferencing on 17.11.2025 at 2.30 p.m.

(v)

A sum of Rs.5,95,28,624/- together with applicable interest is directed to be refunded back to the petitioner within a period of two weeks from the date of receipt of a copy of this order.

(vi)

The deposit of remaining amount shall be subject to final outcome of the proceedings before the 1^st appellate authority.

(vii)

The 1^st respondent shall reconsider the claim of the petitioner for waiver / dispensation of 20% pre-deposit bearing in mind the judgments of this Court in the cases of (i) Flipkart India (P.) Ltd. v. Asstt. CIT, Circle 3(1)(1), Bengaluru [2017] (Karnataka) and (ii) InstaKart Services (P.) Ltd. v. Pr. CIT [W.P. No. 464 of 2022, dated 23.07.2024] within a period of two months from 17.11.2025.

(viii)

Liberty is reserved in favour of the petitioner to take recourse to such remedies as available in law including approaching this Court subsequently in the event the petitioner is not satisfied with the interest granted by respondent No.1.