- 1 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 31ST DAY OF OCTOBER, 2025 BEFORE THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 20535 OF 2025 (T-RES) BETWEEN: NASADIYA TECHNOLOGIES PRIVATE LIMITED, SONA TOWERS, 4TH FLOOR, NO. 2, 26,27 AND 3, KRISHNA NAGAR INDUSTRIAL AREA, HOSUR MAIN ROAD, BANGALORE – 560 029, (REPRESENTED BY MR. RANJEET PRATAP SINGH) DIRECTOR INCORPRATED UNDER THE COMPANIES ACT, 2013 …PETITIONER (BY SRI. KARANJOT SINGH KHURANA, SRI. DEVASHISH JAIN & SRI. ROMIL HOTWANI FOR SRI. RAVI RAGHAVAN, ADVOCATES) AND: 1. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3(1), BENGALURU CENTRAL REVENUE BUILDING, QUEEN’S ROAD, BENGALURU KARNATAKA – 560 001. 2. ASST. DIRECTOR OF INCOME TAX, CENTRALIZED PROCESSING CENTRE, BENGALURU, POST BAG NO. 1, ELECTRONIC CITY, POST OFFICE, BANGALORE, KARNATAKA – 560 100. 3. NATIONAL FACELESS ASSESSMENT CENTRE (NAFAC) 2ND FLOOR, JAWAHARLAL NEHRU STADIUM, NEW DELHI – 110 003 Digitally signed by CHANDANA B M Location: High Court of Karnataka - 2 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 4. NATIONAL FACELESS APPEAL CENTRE / COMMISSIONER OF INCOME TAX (APPEALS), INCOME TAX DEPARTMENT, DELHI C-BLOCK, 4TH FLOOR, S.P. M. CIVIC CENTER, NEW DELHI – 110 001 …RESPONDENTS (BY SRI. M. DILIP, ADVOCATE) THIS W.P. IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECTING THE RESPONDENTS TO FORTHWITH GRANT REFUND OF THE AMOUNT OF RS. 1,46,080/- DETERMINED AS REFUNDABLE TO THE PETITIONER VIDE INTIMATION ORDER DATED 30.09.2022 ISSUED UNDER SECTION 143(1) OF THE IT ACT BEARING DIN/ CPC/2122/A6/250469426 FOR THE AY 2021-22 (ANNEXURE- A) (ILLEGALLY ADJUSTED WITH THE OUTSTANDING DEMAND FOR THE AY 2018-19), ALONG WITH APPLICABLE INTEREST AND ETC., THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR ORAL ORDER In this petition, petitioner seeks for the following reliefs:- (a) Writ of mandamus or any other appropriate writ/order/direction therein ordering and directing the Respondents to forthwith grant refund of the amount of Rs. 1,46,080/- determined as refundable to the Petitioner vide intimation order dated 30.09.2022 issued under Section 143(1) of the IT Act bearing DIN: CPC/2122/A6/250469426 for the AY 2021-22 (Annexure- A) (illegally adjusted with the outstanding demand for the AY 2018-19), along with applicable interest. - 3 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 (b) Writ of mandamus or any other appropriate writ/order/direction therein ordering and directing the Respondents to forthwith grant refund of the amount of Rs. 76,90,450/- determined as refundable to the Petitioner vide intimation order dated 09.11.2022 issued under Section 143(1) of the IT Act bearing DIN: CPC/2223/A6/315506858 for the AY 2022-23 (Annexure-B) (illegally adjusted with the outstanding demand for the AY 2018-19), along with applicable interest. (c) Writ of mandamus or any other appropriate writ/order/direction therein directing the Respondents from any subsequent refund adjustment against the outstanding stayed demand for AY 2018-19 raised vide the notice of demand dated 13.09.2021 issued under Section 156 of IT Act bearing DIN & Notice No: ITBA/AST/S/156/2021-22/1035506590(1) (Annexure- F) till the disposal of the appeal by the Respondent No. 4. (d) Writ of mandamus or any other appropriate writ/order/direction therein directing the Respondent No. 4 to expedite the disposal of the appeal bearing Income Tax Appeal No. NFAC/2017 - 18/10087939 (Annexure -G) pending before it for AY 2018-19. (c) Pass any such orders/directions as this Hon'ble Court may deem fit and proper in the facts and circumstances of the present case in favour of the Petitioner and against the Respondents; - 4 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 (f) Award litigation costs incurred by the Petitioner in filing this Writ.” 2. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record. 3. A perusal of the material on record will indicate that the issue in controversy involved in the present petition is directly and squarely covered by the decision of this Court in the case of M/s. Price Waterhouse, Bengaluru Vs. National Faceless Appeal Centre, Delhi and Ors passed in W.P.No.23784/2024 dated 25.09.2024 and as such, the present petition also deserves to be allowed in terms of the said decision of this Court. 4. This Court in the case of M/s. Price Waterhouse, (supra) has held as under: In this petition, the petitioner seeks the following relief's: “(i) Directing the 3rd Respondent to forthwith refund Rs.21,08,91,940/-, being demand recovered in excess of 20% of the demand raised for the assessment year 2012-13, along with applicable interest; (ii) Directing the 1st / 2nd Respondent to dispose of the appeal pending before it for the assessment year 2012-13 in Appeal No.CIT(A), Bengaluru-1/10224/2015-16 (old appeal No.9/10002/2017-18 (Manual Appeal Register - 5 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 No.:40/BU/2015-16)) (Annexure0B dated 29.04.2015 in a time bound manner, expeditiously; (iii) Directing the Respondents not to enforce the balance demand raised vide demand notice dated 31.03.2015 (Annexure-A2) until disposal of the appeal by the 1st / 2nd Respondent and for a period of three weeks thereafter; and (iv) Pass such other or further orders as this Hon’ble Court may deem fit in the facts and circumstances of the case, in the interests of justice and equity.” 2. Heard the learned Senior Counsel appearing for the petitioner and the learned counsel appearing for the respondents and perused the material available on record. 3. In addition to reiterating the various contentions urged in the petition and referring to the material available on record, the learned Senior Counsel for the petitioner submitted that aggrieved by the demand notice dated 31.03.2015 issued by respondent No.3 in relation to the assessment year 2012-13, the petitioner filed an appeal before respondent No.1 on 29.04.2015. In addition thereto, the petitioner filed stay applications before respondent No.3 seeking stay of the demand raised for the assessment year 2012-13 and the said applications were filed on 05.05.2015, 18.05.2015, 12.06.2015, 30.11.2016. On 05.10.2017, the petitioner filed written submissions and application for additional evidence and the proceedings before respondent No.1 are still pending adjudication. It is submitted that though the petitioner would be liable to pay only 20% by way of pre-deposit for the purpose of stay before the Appellate Authority in terms of the Circular dated - 6 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 31.07.2017 and the petitioner would be entitled to refund of all the amounts payable to him in excess of the aforesaid 20%, the respondents have proceeded to adjust the amounts in excess of 20%, which is the maximum of amount of pre-deposit to be made by the petitioner, who is before this Court seeking direction for refund of the amounts adjusted in excess of 20% and for direction to the Appellate Authority to dispose of the appeals as expeditiously as possible. 4. In support of his submissions, the learned Senior Counsel appearing for the petitioner placed reliance on the judgment of this Court in the case of Pan Synthetics Private Limited and Centralized Processing Centre and others –W.P.No.9835/2024 dated 23.07.2024 as well as the Office Memorandum dated 31.07.2017 issued under Section 220 of the Income Tax Act, 1961. 5. Per contra, learned counsel appearing for the respondents submits that respondent No.1 would take up the appeals and dispose of the same as expeditiously as possible. 6. A perusal of the material available on record will indicate that it is an undisputed fact that the petitioner filed an appeal on 29.04.2015 and multiple stay applications were also filed by him between 05.05.2015 and 30.11.2016 and the petitioner is making earnest efforts to get the appeals as well as the stay applications disposed of. In this context, perusal of the Circular/Office - 7 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 Memorandum dated 31.07.2017 will indicate that in the event, the petitioner deposits 20% by way of pre-deposit, there shall be stay of demand till disposal of the appeal by the Appellate Authority. However, in the instant case, despite the petitioner having filed the appeal as long back as in the year 2015 and multiple stay applications between 2015 to 2016, the Assessing Officer has neither passed any orders on the stay applications nor as the Appellate Authority disposed of the appeals. On the other hand, the respondents have proceeded to adjust the refunds payable to the petitioner in excess of maximum 20%, which is clearly impermissible in law, particularly, having regard to the office memorandum dated 31.07.2017 and the judgment of this Court in W.P.No.9835/2024 dated 23.07.2024 referred supra wherein it is held as under: ORAL ORDER The petitioner has sought for directions to the respondents to refund an amount of Rs.1,99,98,090/- being the demand raised for the assessment year 2015-16 and 2016-17 which is stated to have been adjusted as against the refund due for the assessment year 2023-24. 2. It is the case of the petitioner that for the assessment year 2016-17, the third respondent has passed an assessment order and raised a demand on 26.05.2023, and for the assessment year 2015-16, the third respondent has passed an assessment order and raised the demand on 30.05.2023. 3. Aggrieved by such orders, appeals were filed before the Commissioner of Income Tax and the petitioner had filed an application seeking for stay of the demand for the assessment year 2015-16 as per Annexure-M and similar - 8 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 application was filed seeking stay of demand for the Assessment Year 2016-17 at Annexure-N. Petitioner submits that in terms of Annexure-P as against outstanding demand noticing that refund was granted upon processing the return for the assessment year 2023-24 and determination of refund of Rs.1,99,98,090/-, the said refund was adjusted for the demand as regards the assessment year 2015-16 and 2016-17. 4. It is the contention of the petitioner that the entirety of refund was adjusted and in light of their application for stay, if the demand for 2015- 16 and 2016-17 is stayed, the question of adjustment of entirety of refund would not arise. 5. It is noticed that the assessment order for the year 2015-16 was passed on 16.02.2024 and for the year 2016-17 was passed on 26.05.2023. 6. It is not in dispute that the application for stay was filed on 11.01.2024 as regards assessment year 2015-16 and on the same date i.e., on 11.01.2024 application for stay was filed as regards the assessment year 2016-17. As on the date of filing of the application for stay, the petitioner had the benefit of order of refund for the year 2023-24. If as on the date of filing the application for stay dated 11.01.2024, if the petitioner had made payment of 20% remaining 80% would have been stayed. 7. In light of adjustment at Annexure-P, only manner of moulding the relief would be adjustment of refund to an extent of 20% of the demand for the year 2015-16 and 2016-17. Once adjusted, the remaining amount of 80% of refund adjusted towards demand requires to be reversed by crediting the same to the petitioner. Accordingly, the third respondent is directed to refund the amount of 80% of the demand for the assessment year 2015-16 and 2016-17 as already been adjusted. Such refund to be made within a period of eight weeks from today. 8. Accordingly the petition is disposed off. - 9 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 7. In view of the aforesaid facts and circumstances, I am of the considered opinion that the respondents were clearly not justified in adjusting the refund amounts payable to the petitioner in excess of 20% and consequently, necessary directions have to be issued to the respondents to refund the entire amounts payable to the petitioner in excess of 20% of the demand for the assessment year 2012-13 within a stipulated time frame and by directing respondent No.1 to dispose of the appeals within a stipulated time frame. 8. In the result, I pass the following: ORDER (i) The petition is hereby allowed. (ii) The concerned respondents are directed to refund the entire amount in excess of 20% of the demand raised for the assessment year 2012-13 together with the applicable interest back to the petitioner after due verification within a period of six weeks from the date of receipt of a copy of this order. (iii) The concerned respondent / Appellate Authority is directed to dispose of the appeal within a period of three months from the date of receipt of a copy of this order. (iv) Respondents are directed not to enforce the balance demand raised by any demand notice at Annexure-A2 dated 31.03.2015 till the expiry of period of three weeks after - 10 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 disposal of the appeal by the Appellate Authority. 5. It is also pertinent to note that pursuant to the assessment order dated 13.09.2021 for the assessment year 2018- 19, the petitioner filed an appeal under Section 246A of the Income Tax Act on 12.10.2021. Subsequently, the petitioner filed an application dated 31.12.2021 before the Income tax Officer, Ward 5(1)(1) seeking a stay from the recovery of the disputed tax demand for Assessment Year 2018-19 until disposal of its appeal. On 04.01.2022, petitioner deposited 15% of the disputed tax demand i.e., Rs.3,81,57,960/-. Subsequently, on 06.01.2022, Income-tax Officer, Ward 5(1)(1) acknowledged the payment of 15% of the disputed tax demand and granted an unconditional stay against the recovery of the balance tax demand (i.e., 85%) till the disposal of the appeal, which reads as under: STAY ORDER In this case assessee filed the application for stay of demand on 05.01.2022 or the Asst. Year 2018-19. An order u/s 143(3) dated 22nd September 2021 was passed in this case and demand raised is Rs. 25,43,86,380/-. i) The Total Disputed Demand is Rs.25,43,86,380/- - 11 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 ii) For stay 20% of the disputed demand is payable is Rs. 5,08,77,276/- (ii) Disputed demand paid 15% on 04/01/2022 at Rs.3,81,57,960/- 2. Assessee is a startup company, the case was selected for scrutiny under CASS, the Faceless Assessment Officer made major additions under the following issues. i) Disallowance u/s 56(2)(viib) Rs. 5,16,71,370/- ii) Disallowance u/s 68 Rs. 22,97,59,852/- 3. The CBDT has directed the Officers not to take coercive steps in recovering pending taxes from startups, with a move aimed to help budding entrepreneurs in the country. Further as per Circular dated 22/2019 dated 30st August 2019, it is specifically mentioned that not pursue the issue relating to section 56(2)(viib) of the Income Tax Act. 4. The Disallowance u/s 68 made by Faceless Assessment Officer is Rs. Rs.22,97,59,852/-. Tax at special rate will be Rs. 17,23,67,484 (Tax 13,78,55,911 + Rs. Surcharge 3,44,63,978 + Edn Cess Rs. 47,595/-) and 20% of tax on this issue is Rs. 3,44,73,496/-. The Assessee has made payment of Rs. 3,81,57,960/- which is - 12 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 more than 20% including other additions as per assessment order. 5. In this case assessee paid 15% of the Total disputed demand at Rs. 3.81,57,960/-. In case if the amount is paid is less than 20% of the Total disputed demand, the matter shall be referred to the Administrative Pr. CIT, who after considering all relevant facts shall decide the quantum/proportion of demand to be paid by the assessee as lump sum payment for granting of stay of the balance demand. The matter has referred to the Competent Authority and in view of the facts and circumstance of the case Competent Authority has agreed for 15% payment of demand and Balance tax demand of 85% to be stayed. 6. In view of the above, stay application of the assessee has been considered and balance demand of 85% is stayed upto the disposal of first appellate authority (CIT (Appeal)).” 6. Subsequently, when the aforesaid appeal was pending, petitioner filed its Income Tax Return on 15.03.2022 for the assessment year 2021-2022 under Section 139(1) of the Income Tax Act. Subsequently, the respondents initiated proceedings under Section 143 of the Act for the assessment year 2021-22 against the petitioner by issuing several notices. - 13 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 Thereafter, respondent No.2 passed intimation orders for the assessment years 2021-22 and 2022-23 under Section 143(1) of the Income Tax Act, determining an amount of Rs.1,46,080/- and Rs.76,90,450/- respectively as refund payable and the said refund was suo-moto adjusted against the petitioner’s tax demand for assessment year 2018-19, which had been stayed earlier. 7. In pursuance of the aforesaid order, the petitioner submitted detailed written submissions and other supporting documents along with stay granted against recovery of demand for the assessment year 2018-19 before respondent No.4 on 23.02.2024, 11.03.2024, 20.05.2024, 30.05.2025 and 17.06.2025, seeking to refund the aforesaid amounts for the assessment years 2021-22 and 2022-23, which were not considered by respondent No.4. Under the aforesaid facts and circumstances of the case, I am of the considered opinion that the petitioner would be entitled to refund of entire amount in excess of 15% for the assessment year 2018-19. 8. In the result, I pass the following: - 14 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 ORDER i) The petition is hereby allowed and disposed of in terms of M/s. Price Waterhouse, Bengaluru Vs. National Faceless Appeal Centre, Delhi and Ors passed in W.P.No.23784/2024 dated 25.09.2024. ii) The intimation orders dated 30.09.2022, 09.11.2022 and 13.09.2021 at Annexures-A, B, F are hereby quashed. iii) The concerned respondents are directed to refund the entire amount in excess of 15% for the assessment year 2018-19 together with interest, if applicable, back to the petitioner after due verification within a period of six weeks from the date of receipt of copy of this order. iv) The concerned respondent No.4 is directed to disposal of the appeal at Annexure-G pending before it for the assessment year 2018-19 as - 15 - HC-KAR NC: 2025:KHC:44510 WP No. 20535 of 2025 expeditiously as possible in accordance with law. Sd/- (S.R.KRISHNA KUMAR) JUDGE MDS List No.: 2 Sl No.: 31