Court grants relief in stay application for penalty imposition under Income Tax Act

The court set aside the Assessing Officer's order rejecting the petitioner's stay application for penalty imposition under Section 220(6) of the Income Tax Act. The court directed the Assessing Officer to provide reasons for the reduced notice period and make a fresh decision on the stay application in line with legal precedents. The withdrawn amount from the petitioner's account was ordered to be redeposited. The petitioner agreed to retain the attached amount in the account until the stay application's decision and for an additional two weeks. No coercive recovery actions would be taken for two weeks if the stay application was denied.

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Issues:
Challenge to order under Section 220(6) of Income Tax Act for stay of penalty imposition.

Analysis:
The petitioner challenged the order dated 26th March, 2018, passed by the Assessing Officer under Section 220(6) of the Income Tax Act, 1961, rejecting the petitioner's application for stay of the penalty imposed on 16th March, 2018. The petitioner sought a stay of the penalty of Rs. 1.88 crores until the disposal of its appeal before the Commissioner of Income Tax (Appeals) as the normal 30-day period to file an appeal had been reduced to 7 days in the notice under Section 156 of the Act. The Assessing Officer rejected the stay application without considering it, stating that it would only be considered after 20% of the penalty was paid by the petitioner.

The petitioner's bank account was attached by the Assessing Officer on 26th March, 2018, under Section 226 of the Act. The petitioner filed a petition challenging the rejection of the stay application. Despite attempts to serve the petition, the Assessing Officer withdrew Rs. 9.88 lakhs from the petitioner's account before the petition could be heard. The court directed the revenue to deposit the withdrawn amount back into the petitioner's account, citing a previous court order.

During the hearing, the court pointed out that the impugned order was contrary to previous court decisions regarding the disposal of stay applications under Section 220(6) of the Act. The court emphasized that while the Revenue can reduce the notice period under Section 156 of the Act, the reasons for such reduction should be communicated to the petitioner. Ultimately, a consent order was passed setting aside the order rejecting the stay application, directing the Assessing Officer to provide reasons for the reduced notice period, and requiring a fresh decision on the stay application in accordance with the law and previous court decisions.

The petitioner agreed to keep the attached amount in the bank account until the stay application was decided and for an additional two weeks thereafter. It was also agreed that no coercive recovery proceedings would be initiated by the Revenue for two weeks if the Assessing Officer's decision on the stay application was adverse to the petitioner. The petition was disposed of accordingly with no order as to costs.

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