2023 (8) TMI 518 - HC - Income Tax

Madras HC stays demand notice as petitioner not liable to prove seller's tax returns or pay 25% during appeal

The Madras HC granted stay of demand notice where the petitioner had submitted four replies explaining transactions, but the respondent issued assessment ... Stay of demand - contention of the petitioner is that he has submitted four replies on different dates thereby proper explanation was submitted, but the respondent was not satisfied and issued the assessment order - respondents claim that the sellers from whom the purchase made were not filed their income tax returns and hence the respondents claim it as doubtful transaction - HELD THAT:- This Court has given its anxious consideration. Even though, prima facie this Court is of the considered opinion that the petitioner is not liable to submit any evidence to prove the seller’s return and other particulars of the seller, this Court is not inclined to pass order on merits, when the statutory appeal is pending. Question remains is whether the petitioner is liable to pay 25% of the demand. Since prima facie this Court is of the opinion the petitioner is not liable, consequently the petitioner is not liable to pay the 25% demand, more so when the statutory appeal is pending before the appellate authority. However, it is made clear that only for the limited extent to decide the payment of 25% demand, this Court is of the considered opinion that the petitioner is not liable to submit seller’s stock register. The appellate authority shall consider the issue on its own merits, uninfluenced by the observation of this order. This Court is inclined to grant stay of the demand notice alone. It is made clear that it will not affect the rights of the petitioner as well as the department to consider the issue on own merits. The appeal shall be considered within a period of six months from the date of receipt of a copy of the order. Issues Involved:- Challenge to Assessment order for the Assessment year 2021-2022- Maintainability of writ petition for stay of demand noticeChallenge to Assessment order for the Assessment year 2021-2022:The petitioner, engaged in trading waste materials, filed IT Returns for the Assessment Year 2021-2022, setting off carried forward business loss and declaring NIL return. The respondent issued notices under Section 142(1) for purchase transaction details, despite documentary evidence and GST returns filed. The respondents doubted transactions due to sellers not filing income tax returns, requested supporting documents, and questioned discrepancies in vehicle numbers. The assessment order was passed, leading to a demand notice. The petitioner challenged the order citing proper explanations provided, but the respondents remained unsatisfied. The High Court, while acknowledging the pending statutory appeal, granted stay of the demand notice, ruling the petitioner not liable to pay the 25% demand.Maintainability of writ petition for stay of demand notice:The respondents contended that the petitioner, having the option to file a stay application before the appellate authority or the Assessing Officer, should not have directly filed the writ petition for stay of demand. Citing a relevant judgment, the respondents argued that the statutory appeal process should have been followed before seeking writ relief. Despite this objection, the High Court considered the petitioner's case, emphasizing that the petitioner is not required to prove the seller's return and other particulars at this stage. The Court granted stay of the demand notice, clarifying that this decision does not set a precedent and that the appellate authority would review the matter independently within six months.