High Court sets aside tax demand requirement, directs timely stay application filing & decision

Debasish Moulik Versus Deputy Commissioner Of Income-Tax And Another

Debasish Moulik Versus Deputy Commissioner Of Income-Tax And Another - [1998] 231 ITR 737, 150 CTR 387 Issues:
1. Stay of demand under section 220(6) of the Income-tax Act.
2. Jurisdiction of appellate authority to grant stay of tax collection.
3. Validity of assessing authority's order requiring payment before considering stay application.
4. Disposal of writ petition and directions for stay application.

Analysis:
The petitioner, an assessee, appealed against a demand of Rs. 10,41,633 raised under section 143(3) of the Income-tax Act for the assessment year 1995-96. The assessing authority directed the petitioner to pay 50% of the demand pending appeal, failing which recovery measures would be initiated. The petitioner challenged this order through a writ petition, arguing that the assessing authority's order was passed without due consideration. The High Court noted that the appellate authority has inherent power to grant stay of tax collection, as established in various judgments, including those of the Supreme Court and High Courts. The Court emphasized that the appellate authority should be approached for stay before seeking relief through a writ petition under Article 226 of the Constitution of India.

Regarding the assessing authority's order, the Court found it to be arbitrary and not in line with legal principles. The order mandated payment of 50% of the demand before considering the stay application, without evaluating the merits of the case. Consequently, the Court set aside the assessing authority's order and directed the petitioner to file a stay application before the appellate authority within one week. The appellate authority was instructed to decide on the stay application within thirty days, ensuring a stay on tax recovery until a decision is made. The Court clarified that failure to file the application within the specified period would result in the vacating of the stay order.

In conclusion, the writ petition was disposed of with no costs imposed on any party. The Court provided directions for the disposal of the stay application, emphasizing cooperation from the petitioner and adherence to the specified timelines. All parties were instructed to act upon a signed copy of the order, with the usual undertaking.