2011 (9) TMI 1072 - HC - Income Tax

Court Overturns Tribunal's Denial of Stay on Tax Demand, Emphasizes Prima Facie Evaluation

The court set aside the Tribunal's order denying a stay on a substantial tax demand for the assessment year 2007-08. The court emphasized the need for a ... - Issues involved: The petition challenges an order of the Income Tax Appellate Tribunal regarding a demand for assessment year 2007-08.Details of the judgment:1. The petitioner filed a return of income for assessment year 2007-08, which was assessed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961. Various additions and disallowances were made, leading to a demand of Rs. 840,61,70,960. The Commissioner (Appeals) partly allowed the appeal, and a rectification order was passed by the First Respondent. The petitioner applied for stay before the Tribunal, which was rejected. The Tribunal's order of 16 September 2011 rejected the application for stay.2. The petitioner argued that the demand was due to a disallowance under Section 40(a)(ia) for failure to deduct tax at source on payments to MSETCL and PGCIL. The Assessing Officer held the petitioner liable under Section 194J, while the Commissioner (Appeals) ruled for liability under Section 194C.3. The petitioner cited a decision of the Jaipur Bench of the ITAT, which held that there was no liability to deduct tax at source on similar payments. The Tribunal acknowledged the petitioner's submissions but focused on the petitioner's financial position, noting a loss before tax but substantial net current assets. Based on this, the Tribunal denied the stay.4. The petitioner claimed relief based on a direction from the Commissioner (Appeals) for the previous assessment year, which could reduce the demand. The court left this issue for the Tribunal to determine.5. The court found that the Tribunal did not adequately consider the petitioner's arguments based on the Jaipur Bench decision. A remand was ordered for a fresh consideration of the application for stay, emphasizing the need for a prima facie evaluation of merits in such cases.6. The impugned order was set aside, and the matter remitted back to the Tribunal for reevaluation. No costs were awarded, and a two-week stay on coercive recovery measures was granted to allow the petitioner to pursue further remedies before the Tribunal.