Income tax demand stay application refused; installment facility reduced and appeal to be decided within three months

Application for stay of an income tax demand was refused while the installment facility was curtailed to 20 installments or until installments equal 20% of total tax liability or disposal of the appeal. The court observed the demand vastly exceeded returned income and tax paid, noted an interim deposit and an existing interim order, and recorded that the statutory appeal has been pending over 11/2 years. The court directed the Appellate Authority to decide the pending statutory appeal in accordance with law within three months from receipt of certified copy.

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Issues: Whether, in view of a pending statutory appeal and partial deposits made by the assessee, the Appellate Authority should be directed to decide the appeal within a fixed short period and the interim order restraining recovery should continue until disposal of the appeal.

Analysis: The appeal against the assessment under Section 147 of the Income-tax Act, 1961 is pending before the Commissioner of Income Tax (Appeals) for over one year and five months. The demand raised under Section 156 of the Income-tax Act, 1961 is significantly higher than the returned income and tax paid, and the assessee has made deposits towards the demand and is protected by an interim order. Balancing the prolonged pendency of the statutory appeal, the partial deposit already made, and the need for finality in revenue recovery, a direction for expeditious adjudication of the statutory appeal is warranted to avoid prejudice to the assessee while preserving the revenue's rights.

Conclusion: The Appellate Authority is directed to consider and decide the statutory appeal in accordance with law within three months from receipt of certified copy of the judgment, and the interim order preserving status quo on recovery shall remain in operation until the appeal is decided.

Ratio Decidendi: Where a statutory appeal against a high demand remains pending for an extended period and the assessee has made partial deposits with an interim order in place, the Appellate Authority may be directed to decide the appeal expeditiously and the interim stay on recovery may be continued until disposal to prevent undue prejudice to the assessee while safeguarding revenue interest.

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