2025 (3) TMI 723 - HC - Income Tax

Court Remits Tax Dispute; Highlights Need for Proper Evaluation of Stay Petitions Under Section 220(6) of IT Act.

The HC set aside the impugned order rejecting the petitioner's stay on the recovery of disputed tax and remitted the matter back to the respondent for ... Rejection of stay demand - case of the petitioner is that while the appeal is pending, the respondent issued a demand notice requesting the petitioner to furnish the details of 20% of the tax paid in total arrears as per the notification of the Central Board of Direct Taxes HELD THAT:- Upon reviewing the order of this Court in Queen Agencies [2021 (4) TMI 609 - MADRAS HIGH COURT] it is found that this Court had elaborately discussed the powers to be exercised by the Assessing Officer that Principal Commissioner of Income Tax is only the reviewing authority. It is only when the assessing officer makes a reference or if the assessee is aggrieved by the order passed by the assessing officer, by virtue of Circular dated 29.02.2016, the Principal Commissioner of Income Tax will get the jurisdiction to exercise his power under Section 220(6) of the Act and not otherwise. The impugned order in the writ petition is set aside and the matter is remitted back to the respondent for fresh consideration. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are: Whether the demand notice and the rejection of the stay of demand by the respondent were lawful. Whether the petitioner is entitled to a stay on the recovery of the disputed tax pending the appeal before the Commissioner of Income Tax (Appeals). The applicability of the principles established in the case of Queen Agencies v. Assistant Commissioner of Income Tax to the present matter.ISSUE-WISE DETAILED ANALYSIS1. Lawfulness of the Demand Notice and Rejection of StayRelevant legal framework and precedents: The assessment order was issued under Section 147 read with Section 144B of the Income Tax Act, with an addition under Section 69A. The petitioner sought a stay under Section 220(6) of the Act, which allows for the stay of recovery proceedings pending an appeal.Court's interpretation and reasoning: The Court referred to the precedent set in Queen Agencies, which provides guidance on the powers of the Assessing Officer and the procedures to be followed when a stay petition is filed. The Court noted that the assessing officer must consider the stay petition with all relevant particulars and cannot assume jurisdiction unless specific conditions are met.Key evidence and findings: The petitioner filed an appeal against the assessment order, and the stay petition was rejected by the respondent based on a circular from the Central Board of Direct Taxes. The Court found that the respondent's rejection did not fully align with the procedural requirements outlined in the Queen Agencies case.Application of law to facts: The Court applied the principles from Queen Agencies, emphasizing the need for the assessing officer to properly evaluate the stay petition and the jurisdictional limitations of the Principal Commissioner of Income Tax.Treatment of competing arguments: The respondent argued that the rejection was in line with the circular issued by the Central Board of Direct Taxes. However, the Court found that the circular did not override the procedural requirements established by case law.Conclusions: The Court concluded that the rejection of the stay petition was not in accordance with the law, as it failed to consider the procedural guidelines established in precedent.2. Entitlement to Stay on Recovery of Disputed TaxRelevant legal framework and precedents: Section 220(6) of the Income Tax Act provides for the stay of recovery proceedings pending an appeal. The precedent in Queen Agencies outlines the procedure and jurisdiction for such petitions.Court's interpretation and reasoning: The Court reiterated the principles from Queen Agencies, emphasizing that the assessing officer must evaluate the stay petition with due consideration of all relevant particulars.Key evidence and findings: The petitioner submitted multiple applications for a stay, which were rejected without proper consideration of the procedural requirements.Application of law to facts: The Court applied the principles from Queen Agencies, determining that the assessing officer must reconsider the stay petition in light of the established procedural guidelines.Treatment of competing arguments: The respondent's reliance on the circular was deemed insufficient to override the procedural requirements established by case law.Conclusions: The Court determined that the petitioner is entitled to a reconsideration of the stay petition, with the respondent required to pass orders in accordance with the law.SIGNIFICANT HOLDINGSThe Court set aside the impugned order and remitted the matter back to the respondent for fresh consideration, with specific instructions to pass orders in accordance with the law within three months. The Court also ordered that no coercive steps be taken against the petitioner to collect the disputed tax pending the appeal.Preserve verbatim quotes of crucial legal reasoning: The Court referenced the Queen Agencies case, stating: 'It is needless to say that the petition under Section 220(6) of the Act will have to be filed only before the assessing officer after filing the statutory appeal... The Principal Commissioner of Income Tax will get the jurisdiction to exercise his power under Section 220(6) of the Act and not otherwise.'Core principles established: The judgment reinforces the procedural requirements for considering stay petitions under Section 220(6) and the jurisdictional limitations of the Principal Commissioner of Income Tax.Final determinations on each issue: The Court allowed the writ petition, set aside the impugned order, and remitted the matter for fresh consideration, ensuring that the petitioner is not subjected to coercive recovery measures pending the appeal.