Court strikes 20% payment condition, supports refund claim.

The court struck out the 20% payment condition imposed by the Deputy Commissioner under section 220(6) of the Income-tax Act, allowing the assessee to not be treated as a defaulter during the appeal process. The petitioner's claim for refund of certain disallowed amounts was supported by previous decisions, resulting in a lower tax liability than initially demanded. The court directed the petitioner to file a fresh application for the certificate under section 220(6) and instructed the authority to issue the certificate within two weeks. The ruling was made absolute with no order as to costs.

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Issues:
Challenge to order under section 220(6) of the Income-tax Act, 1961.

Detailed Analysis:

The petitioner contested an order made under section 220(6) of the Income-tax Act, 1961, challenging the decision that the assessee may not be treated as in default if the conditions imposed were fulfilled and no coercive measures would be taken until the appeal's disposal. The order under section 143(3) of the Act raised a demand of Rs. 52,03,43,426, with an outstanding amount of Rs. 43,77,21,488, prompting the assessee to seek non-default treatment until the appeal's resolution. The petitioner claimed that certain disallowed amounts, including interest and expenses, should be refunded, negating the need for tax payment. The petitioner relied on Circular No. 530, dated March 6, 1989, which allowed discretion under section 220(6) in certain situations, such as when issues were decided in favor of the assessee in previous orders.

The petitioner argued that various disallowed amounts were covered by previous decisions, such as disallowance of interest and depreciation, citing specific cases to support their claim. The Department recalculated the tax demand excluding the disallowed amounts, showing a significantly lower tax liability than initially claimed. Given the substantial refund claim by the petitioner, there was deemed to be no justification for the 20% payment condition imposed by the Deputy Commissioner under section 220(6). Consequently, the court struck out this condition, ensuring the assessee would not be treated as a defaulter during the appeal's pendency. The petitioner was directed to file a fresh application for the certificate under section 220(6), with the authority instructed to issue the necessary certificate within two weeks of receiving the application. The ruling concluded by making the rule absolute, with no order as to costs.

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