Court Grants Stay on Tax Recovery for Assessment Years, Emphasizes Need for Prompt Appeal Decisions

The court granted a stay of recovery of demands by coercive steps for Assessment Years 2009-2010, 2013-2014, and 2014-2015, subject to the petitioner depositing a portion of the disputed tax amount. The petitioner disputed the finding of a permanent establishment in India by Mitsui & Co. Ltd., Japan, citing tribunal decisions and high sea sales. The delay in appeal decisions by the CIT(A) was highlighted as a concern. The court directed the filing of a counter-affidavit and allowed for a rejoinder, emphasizing the need for thorough consideration of arguments. The pendency of a writ petition would not impede the CIT(A) from deciding on pending appeals.

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Issues: Stay of recovery of demands by coercive steps for Assessment Years 2009-2010, 2013-2014, and 2014-2015; Disallowance under Section 40(a)(i) of the Income Tax Act, 1961; Delay in deciding appeals by the Commissioner of Income Tax (Appeals) [CIT(A)]; Non-reasoned order directing deposit of disputed tax; Stay of recovery subject to deposit; Filing of counter-affidavit and rejoinder; Pendency of writ petition and appeal decision by CIT(A).

Stay of Recovery of Demands: The petitioner sought a stay of recovery of demands by coercive steps for the Assessment Years 2009-2010, 2013-2014, and 2014-2015. The issue revolved around whether Mitsui & Co. Ltd., Japan had a permanent establishment (PE) in India, leading to tax implications. The petitioner challenged the finding of the Assessing Officer that Mitsui & Co. Ltd., Japan had a PE in India, citing previous tribunal decisions and high sea sales as reasons for the incorrect assessment. The petitioner also argued for a restricted disallowance under Section 40(a)(i) of the Income Tax Act, 1961, based on a CBDT Circular.

Delay in Appeal Decisions: The petitioner had filed appeals for the Assessment Years 2009-2010 and 2013-2014 in January 2017, but the Commissioner of Income Tax (Appeals) [CIT(A)] had not decided on them despite multiple requests for early disposal. The delay in appeal decisions was a significant concern for the petitioner, impacting the resolution of tax disputes and the stay of recovery of demands.

Non-Reasoned Order and Deposit Requirement: The petitioner contested an order directing them to deposit 20% of the disputed tax amount, amounting to Rs. 15,00,00,000 for the three Assessment Years. The petitioner argued that the order was non-reasoned and non-speaking. However, subject to depositing Rs. 5,00,00,000 within seven days, there would be a stay of recovery of the impugned demand by coercive steps until the next hearing date.

Filing of Counter-Affidavit and Rejoinder: The court directed the filing of a counter-affidavit within four weeks and allowed for a rejoinder to be filed within four weeks after the counter-affidavit is served. This procedural step aimed to ensure a comprehensive consideration of arguments and evidence before the court.

Pendency of Writ Petition and Appeal Decision: The court clarified that the pendency of the writ petition would not hinder the CIT(A) from deciding on appeals pending before it. The petitioner could still request early disposal of appeals, which the CIT(A) would consider. The case was scheduled for a relist on 10.5.2018, with further instructions for procedural actions to be taken.

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