Court sets aside Assessing Officer's rejection of stay application for disputed demands, emphasizes factors to consider.

The Court set aside the Assessing Officer's order rejecting the petitioner's application for stay of recovery of disputed demands for Assessment Years 2016-17 and 2017-18. The Court emphasized the need for the Assessing Officer to consider factors such as the existence of a prima facie case, financial stringency, and balance of convenience before deciding on stay applications. The Court directed the Assessing Officer to reconsider the stay application, maintaining status quo on further recovery until the application is disposed of. The writ petitions were disposed of with no costs.

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Issues Involved:
1. Legality of the order passed by the 1st respondent/Assessing Officer rejecting the petitioner’s application for stay.
2. Adherence to principles and guidelines by the Assessing Officer while disposing of the stay application.
3. Impact of subsequent notices under Section 226(3) of the Income Tax Act, 1961.

Issue-wise Analysis:

1. Legality of the Order Passed by the 1st Respondent/Assessing Officer:
The petitioner challenged the order dated 28.02.2019 by the 1st respondent/Assessing Officer, which rejected the petitioner’s application for stay of recovery of disputed demands for Assessment Years 2016-17 and 2017-18. The Assessing Officer’s order required the petitioner to pay 20% of the disputed demand in compliance with CBDT’s Office Memorandum dated 31.07.2017, failing which coercive action would be taken. The Court noted that the Assessing Officer failed to consider the existence of a prima facie case, financial stringency, and balance of convenience, which are crucial factors in deciding stay applications.

2. Adherence to Principles and Guidelines by the Assessing Officer:
The Court emphasized that the Assessing Officer is expected to evaluate the existence of a prima facie case, financial stringency, and balance of convenience before deciding on the stay application. The Court referenced its previous judgment in the case of Kannammal v. Income Tax Officer, which reiterated the necessity of considering these factors. The Court also highlighted various CBDT Circulars and Instructions, including Instruction No. 1914 and subsequent modifications, which provide guidelines for granting stay of demand. These guidelines stress the need for a speaking order and discretion in demanding a percentage of the disputed amount based on the specific circumstances of each case.

3. Impact of Subsequent Notices Under Section 226(3) of the Income Tax Act, 1961:
The Court acknowledged that after the impugned order, notices under Section 226(3) of the Income Tax Act, 1961, were issued to various banks attaching the petitioner’s accounts. The Court directed that these attachments would continue but the banks should not appropriate any balance until the stay application is disposed of by the 2nd respondent. The Court ordered the petitioner to appear before the Assessing Officer on 02.04.2019 with all supporting materials for the stay application, which should be disposed of by 16.04.2019. Status quo regarding further recovery was to be maintained until the disposal of the stay application.

Conclusion:
The Court set aside the impugned order due to the absence of reasoning and directed the Assessing Officer to reconsider the stay application, taking into account the principles of prima facie case, financial stringency, and balance of convenience. The writ petitions were disposed of with no costs, and the connected Miscellaneous Petitions were closed.

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