2023 (1) TMI 324 - HC - Income Tax

Court sets aside assessment order, directs fresh orders within 6 weeks, emphasizing adherence to legal principles.

The Court set aside the adverse assessment order and directed the respondents to pass fresh orders within six weeks, considering established legal ... Stay of demand - recovery proceedings - petitioner has not paid the prescribed 20% of the disputed amount till the date of passing of the impugned order - HELD THAT:- This Court finds that the impugned order cannot be sustained inasmuch despite the specific directions of this Court [2022 (2) TMI 1334 - MADRAS HIGH COURT] to take into account the trinity test, the impugned order has been made overlooking the same in gross disregard to the above directions. Though, normally discretionary orders are not interfered with under Article 226 of the Constitution of India, however, discretionary orders are amenable to Writ jurisdiction, and would warrant interference, if it suffers from the vice of being perverse or arbitrary. The impugned order is arbitrary and perverse inasmuch as it has been made in gross disregard to the directions of this Court [supra] inasmuch as the trinity principles has been ignored. Hence, the impugned order is set aside, the respondents are directed to pass fresh orders in the stay application filed, keeping in mind the trinity principles laid down by this Court in the case of Queen Enterprises 2021 (4) TMI 609 - MADRAS HIGH COURT and the case of Kannammal 2019 (3) TMI 1 - MADRAS HIGH COURT The stay application should be disposed of within a period of six weeks from the date of receipt of a copy of this order, until the stay application is disposed of, no further proceedings shall be taken against the petitioner. Issues involved:Challenge to order under Section 220(6) of the Income Tax Act, 1961 regarding stay application.Detailed Analysis:1. Facts of the Case: The petitioner, an Association of persons running a Petrol Bunk, received a notice under Section 142(1)(i) of the Income Tax Act, 1961, for filing a correct Income Tax Return. An assessment order was passed assessing the total income and levying a tax under Section 69A of the Act. The petitioner's contention regarding acceptance of demonetized currency was rejected in the assessment.2. Adverse Assessment Order and Stay Application: The petitioner filed an appeal against the assessment order and a stay application. Despite the pending appeal and stay application, recoveries were made, leading to the filing of a writ petition seeking a refund. The Court directed the 3rd Respondent to dispose of the application under Section 220(6) of the Act, referencing relevant judgments.3. Grounds of Challenge in Stay Application: The stay application raised various grounds, including lack of opportunity, improper invocation of provisions, and non-consideration of relevant facts and laws. The petitioner argued that the impugned order did not account for the amount already recovered and was cryptic and non-speaking.4. Court's Observations and Decision: The Court found the impugned order arbitrary and perverse for disregarding the trinity principles laid down in previous judgments. Despite discretionary nature, the Court held that interference was warranted due to the order's arbitrary nature. The impugned order was set aside, and the respondents were directed to pass fresh orders considering the trinity principles within six weeks.5. Conclusion: The writ petition was disposed of with no costs imposed, and no further proceedings were allowed against the petitioner until the stay application was re-evaluated. The Court emphasized the importance of following established legal principles in such matters for a fair and just decision.