Court overturns stay order, emphasizes hearing opportunity and compliance with Circulars. Petitioner granted chance for new decision.

The court set aside the stay order issued by the Principal Commissioner of Income Tax, directing the petitioner to pay 20% of the disputed demand in installments. The court emphasized the necessity of granting a hearing opportunity and passing a speaking order considering financial stringency and prima facie case. It criticized the assessing officer for not following the CBDT Circulars and Instructions, leading to the impugned order being overturned. The petitioner was instructed to appear before the Commissioner with relevant materials for a new decision within four weeks, halting recovery proceedings in the meantime.

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Issues Involved:
1. Challenge to the stay order passed by the Principal Commissioner of Income Tax.
2. Lack of opportunity for a hearing before passing the impugned order.
3. Consideration of financial stringency and prima facie case in the stay application.
4. Compliance with CBDT Circulars and Instructions regarding stay of disputed demand.

Issue-wise Detailed Analysis:

1. Challenge to the Stay Order Passed by the Principal Commissioner of Income Tax:
The petitioner challenged a stay order issued by the Principal Commissioner of Income Tax, which required the petitioner to pay 20% of the disputed demand in installments. The order stated that the balance demand could be stayed subject to the payment of 20% of the demand, as per CBDT Circular No. F.No.404/72/93-ITCC dated 31/07/2017. The petitioner had only paid 5% of the demand and was directed to pay the remaining 15% in 10 equal monthly installments. Failure to pay any installment would result in the automatic vacation of the stay facility without further notice.

2. Lack of Opportunity for a Hearing Before Passing the Impugned Order:
The petitioner expressed grievance that no opportunity for a hearing was granted before the impugned order was passed. The petitioner argued that the order was cryptic and did not consider the prima facie case or the submission of financial stringency made in the detailed stay application. The court emphasized the necessity of granting an opportunity for a hearing and passing a speaking order that considers all relevant factors.

3. Consideration of Financial Stringency and Prima Facie Case in the Stay Application:
The court referred to its previous judgment in the case of Mrs. Kannammal V. Income Tax Officer, highlighting that the parameters for granting a stay of disputed demand are well settled. The existence of financial stringency, irreparable injury, and undue hardship must be considered. The court reiterated that the assessing officer must exercise discretion based on these factors and issue a speaking order. The court criticized the assessing officer for rejecting the stay petition with a non-speaking order, failing to consider the conditions precedent for granting a stay and the relevant CBDT Circulars.

4. Compliance with CBDT Circulars and Instructions Regarding Stay of Disputed Demand:
The court examined various CBDT Circulars and Instructions, including Office Memorandum F.No.1/6/69-ITCC dated 21.08.1969, Instruction No.1914 dated 21.03.1996, and subsequent modifications by Office Memoranda dated 29.02.2016 and 31.07.2017. These guidelines assist assessing authorities in granting stay and emphasize the importance of considering a prima facie case, financial stringency, and balance of convenience. The court noted that the Principal Commissioner of Income Tax, as an administrative authority, must consider these aspects while granting a stay. The court found that the impugned order did not adequately address these factors and set it aside.

Conclusion:
The court set aside the impugned order and directed the petitioner to appear before the Principal Commissioner of Income Tax on a specified date with relevant materials. The Principal Commissioner was instructed to pass a speaking order within four weeks, considering the submissions made by the petitioner. Until then, no recovery proceedings were to be initiated. The writ petition was disposed of accordingly, with no costs.

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