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 order claiming sellers had not filed income tax returns, making transactions doubtful. The court held prima facie the petitioner was not liable to submit evidence proving seller's returns or pay 25% of demand while statutory appeal was pending. The court clarified this ruling was limited to the 25% payment issue and would not affect either party's rights in the appeal, which must be decided within six months.

---

---

Issues Involved:
- Challenge to Assessment order for the Assessment year 2021-2022
- Maintainability of writ petition for stay of demand notice

Challenge 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.

---