Court sets aside tax order, emphasizes fair hearing, remands for reconsideration,

The court allowed the Writ Petition, setting aside the order directing payment of 20% tax demand for stay of remaining tax till appeal disposal. The court emphasized the need for a fair hearing and lawful decision-making process, remanding the matter for reconsideration by the respondent with proper adherence to legal principles and providing a fair opportunity for the assessee to present their case.

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Issues:
Challenge to order directing payment of 20% tax demand for stay of remaining tax till appeal disposal under Income Tax Act for assessment year 2015-16.

Analysis:
The petitioner challenged an order by the Assessing Officer directing payment of 20% of the tax demanded for the assessment year 2015-16 to be entitled for stay of the remaining tax till appeal disposal. The assessment revealed discrepancies in gross receipts reported by the assessee and as per form 26AS. The assessee explained the differences due to TDS wrongly deducted by a company supplying journals to Oil Marketing companies, where the assessee acted as a coordinator. Despite explanations and difficulties in rectification, the Assessing Officer added the difference amount to the returned income, leading to an appeal and a demand notice. The petitioner sought stay of the demand under Section 220(6) of the Act pending appeal before the Commissioner of Income Tax (Appeals).

The petitioner argued that the assessment was unduly high pitched, causing prejudice, and requested for stay. The respondent, citing a CBDT Office Memorandum, required payment of 20% of the demand for stay, emphasizing that mere pendency of an appeal does not guarantee stay. The court highlighted that the authority considering a stay application must assess if a prima facie case exists, balance of convenience favors the applicant, and refusal of stay would cause irreparable harm. The CBDT memorandum allowed exceptions, indicating that the officer should not be bound by fixed percentages.

The court noted that the respondent failed to consider the petitioner's financial position and the impact of the high assessment while passing the order. It raised a significant question for the CIT (A) to determine if a payment reflected in form 26AS can be taxed without proof of the assessee being the actual beneficiary. The respondent's additional arguments, not present in the impugned order, were deemed inappropriate as fresh reasons cannot be introduced post-challenge. Consequently, the court set aside the impugned order, remanding the matter for reconsideration, emphasizing the need for a fair hearing and lawful decision-making process.

In conclusion, the court allowed the Writ Petition, setting aside the order and instructing a fresh consideration by the respondent with proper adherence to legal principles and a fair opportunity for the assessee to present their case.

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