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of <h1>Court sets aside 50% predeposit order pending appeal, emphasizes natural justice</h1> <h3>Ladhabhai Damjibhai Panara Versus Principal Commissioner of Income-Tax, & 1</h3> Ladhabhai Damjibhai Panara Versus Principal Commissioner of Income-Tax, & 1 - [2017] 399 ITR 539 (Guj) Issues involved:Challenge to order requiring predeposit pending appealDetailed Analysis:1. Background and Facts:The petitioner, an individual government contractor, challenged an order requiring a 50% predeposit of the tax demand pending appeal against the assessment order for the year 2014-15. The Assessing Officer had determined a substantial tax demand, of which the petitioner had already paid 15%. The Principal Commissioner rejected the petitioner's request to limit the predeposit to 15%, citing the CBDT circular dated 29.02.2016.2. CBDT Circular and Guidelines:The CBDT circular aimed to streamline the process of granting stay on disputed demands and standardize the predeposit amount required for stay pending appeal before the Commissioner of Income Tax (Appeals). The circular prescribed a general rule of 15% predeposit, subject to deviations based on specific circumstances outlined in the guidelines.3. Discretionary Powers of Authorities:The circular allowed for deviations from the 15% predeposit rule in exceptional cases where the nature of the addition in the demand warranted a higher or lower predeposit amount. The Assessing Officer had the authority to refer such cases to the Principal Commissioner for a decision on the predeposit amount based on relevant facts.4. Flaws in the Principal Commissioner's Order:The Principal Commissioner's rejection of the petitioner's request was based on the petitioner's nonappearance during personal hearings and the lack of demonstrated financial hardship. However, financial hardship was not the sole criterion for opposing a reduction in predeposit. The Principal Commissioner failed to adequately consider the petitioner's written submissions and reasons for the requested reduction.5. Breach of Natural Justice:The Principal Commissioner's confirmation of the 50% predeposit without disclosing the reasons behind the Assessing Officer's proposal and the Commissioner's approval amounted to a breach of natural justice. The petitioner was not given the opportunity to respond to the grounds justifying the higher predeposit amount.6. Judgment and Directions:The High Court set aside the impugned order and directed the Principal Commissioner to pass a fresh order after providing the reasons for the 50% predeposit decision. The petitioner was given the opportunity to respond in writing, and the Principal Commissioner was instructed to consider the petitioner's objections before making a new decision. No further recovery was allowed until the fresh order was passed.7. Conclusion:The petition challenging the order requiring a 50% predeposit pending appeal was disposed of, emphasizing the importance of following principles of natural justice and considering all relevant factors before determining the predeposit amount in tax dispute cases.This detailed analysis highlights the key aspects of the legal judgment, including the background, CBDT guidelines, discretionary powers of authorities, flaws in the Principal Commissioner's order, breach of natural justice, the judgment, and the directions given for a fresh decision.
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