Order Requiring 20% Tax Payment for Stay Set Aside; Case Remanded for Fair Hearing and Independent Assessment.

The HC set aside the order dated 02.02.2023, which required the petitioner to pay 20% of outstanding income tax dues for a stay of demand, as it merely followed CBDT circulars without independent assessment. The case was remanded to the first respondent to issue a new order after a fair hearing, to be completed within six weeks. The court prohibited any coercive recovery actions during this period. The writ petition was allowed, and pending applications were closed without costs, underscoring the need for independent judgment by tax authorities.

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Issues:
Assailed legality and validity of the order dated 02.02.2023 passed by the first respondent regarding outstanding income tax dues and stay of demand under Section 220(6) of the Income Tax Act, 1961.

Analysis:

1. Assailing Legality and Validity of the Order:
The petitioner, Zoos and Parks Authority of Telangana, challenged the order dated 02.02.2023 passed by the first respondent regarding the outstanding income tax dues totaling Rs. 41,38,07,520.00 for the assessment years 2016-17 to 2021-22. The petitioner filed a petition under Article 226 of the Constitution of India, contending that the order was not in accordance with the law.

2. Granting Stay of Demand and Conditions Imposed:
The first respondent had granted a stay of demand subject to the payment of 20% of the total demand by 10.02.2023, as per the Circulars of the Central Board of Direct Taxes (CBDT) dated 29.02.2016 and 31.07.2017. Failure to make this payment within the specified period would automatically vacate the stay order, leading to the initiation of recovery proceedings by the department.

3. Judicial Review of the Order:
The High Court observed that the first respondent had merely followed the CBDT circulars in directing the petitioner to pay 20% of the demand for obtaining a stay of demand. However, the Court emphasized that the income tax authority, when exercising jurisdiction under Section 220(6) of the Act, must apply quasi-judicial powers independently, not solely relying on departmental instructions. The Court cited the Supreme Court's decision in the case of Principal Commissioner of Income Tax Vs. M/s. L.G. Electronics India Private Limited to support this principle.

4. Setting Aside the Order and Remand:
In light of the above, the High Court set aside the order dated 02.02.2023 and remanded the matter back to the first respondent for passing fresh orders in accordance with the law. The Court directed the first respondent to provide a fair opportunity of hearing to the petitioner and to complete the process within six weeks from the date of receiving the order. During this period, the respondents were prohibited from taking any coercive measures to recover the outstanding demand for the mentioned assessment years.

5. Final Decision and Closure:
The writ petition was allowed accordingly, with any pending miscellaneous applications being closed without any order as to costs. The judgment highlighted the importance of independent application of mind by income tax authorities while exercising quasi-judicial powers under the Income Tax Act, ensuring due process and fairness in dealing with tax matters.

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