2019 (5) TMI 950 - HC - Income Tax

Court quashes order rejecting stay petition, emphasizes fair consideration of financial conditions and case merits.

The court quashed the Assessing Officer's order under Section 220(6) of the Income Tax Act, 1961, finding it non-compliant with legal standards for ... Stay petition - stay petition dismissed as the assessee has not paid any amount towards the disputed taxes, in accordance with the guideline issued by the Central Board of Direct Taxes (CBDT) - HELD THAT:- This Court has had occasion to deal with both the Office Memorandum and modification thereto in the case of Mrs.Kannammal V. Income Tax Officer [2019 (3) TMI 1 - MADRAS HIGH COURT] the impugned order is not in accordance with law and does not follow the settled principles to be applied in adjudication of stay application.The same is quashed.The petitioner will appear before the Officer on 03.04.2019 and the Officer shall, after hearing the petitioner and considering all materials placed before him, pass suitable orders in the light of the directions contained in the orders within a period of one(1) week from the date of conclusion of the personal hearing of petition i.e.09.04.2019. Till such time that is till 09.04.2019, stay of recovery shall be maintained. The writ petition is disposed of in the above terms. Issues Involved:1. Legality of the order passed under Section 220(6) of the Income Tax Act, 1961.2. Compliance with principles for deciding stay petitions.3. Application of CBDT guidelines in the adjudication of stay petitions.Issue-wise Detailed Analysis:1. Legality of the order passed under Section 220(6) of the Income Tax Act, 1961:The petitioner challenged an order under Section 220(6) concerning the assessment year 2016-17, where a demand of Rs. 2,09,00,205 was raised. The petitioner had filed an appeal with the Commissioner of Income Tax (Appeals) and sought a stay of recovery. The Assessing Officer (AO) rejected the stay petition on the grounds that the petitioner had not paid 20% of the demand as per CBDT guidelines. The court found this rejection to be non-compliant with legal standards and quashed the impugned order.2. Compliance with principles for deciding stay petitions:The court emphasized that the parameters for deciding stay applications are well-settled, involving the existence of a prima facie case, financial stringency, and balance of convenience. The petitioner’s stay petition included details regarding the merits of the case and financial difficulties. Despite the AO requesting grounds of appeal, the order dismissing the stay petition did not reflect any consideration of these factors, thus lacking the necessary application of mind and being non-speaking.3. Application of CBDT guidelines in the adjudication of stay petitions:The court referred to various CBDT guidelines and instructions, including Office Memorandum dated 29.02.2016 and its modification on 31.07.2017, which generally require the payment of 20% of the disputed demand for granting a stay. However, these guidelines also allow for discretion based on the merits of the case, financial hardship, and balance of convenience. The AO's rejection of the stay petition solely on the non-payment of 20% of the demand without considering the petitioner’s financial condition and merits of the case was deemed improper. The court noted that the AO should have passed a speaking order considering all relevant factors.Conclusion:The court held that the AO's order was not in accordance with law and did not follow the settled principles for adjudicating stay applications. The order was quashed, and the petitioner was directed to appear before the AO for a fresh hearing. The AO was instructed to pass a suitable order within one week from the date of the hearing, considering all materials and factors, including financial stringency and balance of convenience. Until the new order is passed, the stay of recovery was to be maintained. The writ petition was disposed of, and connected miscellaneous petitions were closed without costs.