2019 (1) TMI 1365 - HC - Income Tax

Court sets aside order requiring 20% deposit for stay of demand, emphasizes discretion for tax officials

The Court set aside the impugned order that required a 20% deposit for considering a stay of demand, directing the Assessing Officer to reevaluate the ... Stay Petition - Held that:- AO had to necessarily apply his/her mind to the application for stay of demand and pass appropriate orders having regard to the extant directions and circulars including the memorandum of 29.02.2016. This in turn meant that AO could not have imposed a precondition of the kind that has been done in the impugned order. Consequently, the impugned order is hereby set aside. The AO shall consider the application for stay of demand made by the AO in its letter dated 04.05.2018 and pass necessary and appropriate orders, and exercise his discretion having regard to the facts and circumstances of the case, within three weeks from today. In the meanwhile, the respondents are directed not to take any coercive action for enforcing the demands. Issues:Petitioner's request for stay of demand not considered on merits, imposition of 20% deposit condition, compliance with CBDT instructions, validity of impugned order.Analysis:The petitioner raised concerns regarding the non-consideration of their request for stay of demand for Assessment Year 2011-2012, pertaining to Financial Year 2010-2011. The Assessing Officer (AO) required a 20% deposit of the demand as a pre-condition for considering the application for exemption/stay of demand. The Court examined the relevant CBDT instructions, specifically Instruction No.1914 dated 02.12.1993, and its subsequent amendment in 2016, which outlined principles for considering applications for stay of demand.The 2016 instructions directed that in cases where the outstanding demand is disputed before CIT(A), stay of demand should be granted on payment of 15% of the disputed demand, unless specific conditions warrant a higher or lower lump sum amount. The figure was later increased to 20% by an Office Memorandum dated 31.07.2017. The Court emphasized that tax officials must apply their discretion and not impose a per se condition of a minimum deposit pending the application's consideration.In the present case, the impugned order demanded a 20% payment of the disputed demand as per the CBDT OM dated 31.07.2017, failing which the application for stay of demand was rejected. The Court held that the AO must consider the application for stay of demand without imposing such conditions, in line with the extant directions and circulars. Consequently, the impugned order was set aside, directing the AO to reevaluate the application within three weeks, exercising discretion based on the case's merits.Furthermore, the Court directed the respondents not to take any coercive action during this period and partially allowed the writ petition. The judgment highlighted the importance of tax officials adhering to prescribed guidelines and exercising discretion in considering applications for stay of demand, ensuring a fair and just process for taxpayers.