Court sets aside Assessing Officer's order, emphasizes fair procedure in tax matters

VIRGIN MOBILE INDIA PVT LTD Versus THE ASSISTANT COMMISSIONER OF INCOME-TAX

VIRGIN MOBILE INDIA PVT LTD Versus THE ASSISTANT COMMISSIONER OF INCOME-TAX - TMI Issues:
Challenge to order by Assessing Officer under Article-226 - Violation of principles of natural justice in rejection of stay application under Section 220(6) of Income Tax Act.

Analysis:
The petitioner, a telecom products trading company, challenged an order by the Assessing Officer (AO) under Article-226, questioning a TDS liability imposed under Section 194H of the Income Tax Act. The AO had conducted a survey and issued a show cause notice to the petitioner, ultimately imposing a TDS liability and demanding payment for defaults. The petitioner appealed to the CIT (A) and moved for a stay under Section 220(6) during the appeal proceedings. However, the AO, without a hearing, rejected the stay application, prompting the petitioner to challenge the order for violating principles of natural justice and lacking application of mind.

The petitioner argued that Section 220(6) requires the AO to exercise discretion and consider various elements before passing an order, citing a Division Bench ruling for a composite order dealing with prima facie case existence. The Revenue contended that the administrative Commissioner can be approached for suspension of default demand, referring to instructions and Circulars emphasizing the AO's discretionary power under Section 220(6).

The Court emphasized that the AO must apply his mind and consider relevant circumstances before passing an order under Section 220(6), highlighting that instructions cannot limit statutory powers. The Court referred to a previous ruling, setting aside the impugned order for not considering the petitioner's submissions and the existence of a prima facie case. Consequently, the Court set aside the AO's order and directed the petitioner to appear before the Assistant Commissioner for a reconsideration of the application after due consideration of submissions.

In conclusion, the Court allowed the Writ Petition, emphasizing the need for a comprehensive order under Section 220(6) and ensuring the AO considers all relevant factors before making a decision on stay applications, thus upholding principles of natural justice and fair procedure in tax matters.