TaxTMI 
TaxTMI 
2013 (11) TMI 1542
X X X X Extracts X X X X
X X X X Extracts X X X X
....red by the petitioner­ assessee­Gujarat State Energy Generation Limited to quash and set aside the impugned notice dated 19.08.2013, by which, against the outstanding demand of Rs. 322.35 lacs for the AY 2010­11, the petitioner is directed to pay 50% demand pending the decision of the First Appellate Authority, as per the instruction no.1914 dated 2.12.1993 of the CBDT, New Delhi. 2.2.Special Civil Application No.14748 of 2013 under Article 226 of the Constitution of India has been preferred by the petitionerassessee Gujarat State Petroleum Corporation Limited to quash and set aside the impugned communication / notice dated 07.08.2013 and 27.08.2013 by the Deputy Commissioner of Income Tax, Gandhinagar Circle, Gandhinagar, by which, the request made by the petitioner to stay the demand for AY 2010­11, during the pendency of the appeal before the CIT(A), has been rejected. 2.3.Special Civil Application No.14698 of 2013 under Article 226 of the Constitution of India has been preferred by the petitionerassessee Shukan Builders to quash and set aside the order passed by the Commissioner of Income Tax, Ahmedabad ­IV dated 23.08.2013 (Annexure A), by which, the dema....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Manish Shah, learned advocate has appeared on behalf of the petitioner of Special Civil Application No.15075 of 2013. 5.0. Shri S.N. Soparkar, learned Senior Advocate for the respective assessee has vehemently submitted that the impugned action of the respondent in treating the petitioner as assessee in default under Section 220(6) of the Act is bad, illegal and contrary to the law. It is further submitted by Shri S.N. Soparkar, learned Senior Advocate for the respective assessee that while exercising the discretion under Section 220(6) of the Act, the Assessing Officer (hereinafter referred to as the "AO") is obliged to take into consideration instruction and circulars issued by the CBDT issued in exercise of powers under Section 119 of the Act. It is submitted that accordingly while exercising the powers under Section 220(6) of the Act, the AO is obliged to follow instruction laid down in instruction nos. 96 of 1969 dated 21.08.1969, 530 of 1989 dated 06.03.1989 and 1914 of 1993 dated 02.12.1993. It is submitted that on conjoint reading of these circulars they lay down two broad principles i.e. (1) recovery of the outstanding tax demands shall be deferred if the issues from whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er of Income Tax reported in (2010) 323 ITR 305 and the decision of the Rajasthan High Court in the case of Urban Improvement Trust vs. Assistant Commissioner of Income Tax and Ors in Civil Writ Petition No.1169 of 2012. 5.3. It is further submitted that even if the view is taken that instruction no. 96 dated 21.08.1969 is not operative any more, for the purpose of deciding, as to which assessment would be regarded as high pitched, the criteria laid down under Instruction No. 96 of 1969 would be a valid criteria and therefore, in such an event the assessee would be entitled to the relief of being treated as not in default. 5.4. It is further submitted by Shri S.N. Soparkar, learned counsel for the respective assessee that even otherwise the order passed by the AO under Section 220(6) of the Act must be a reasoned and speaking order. In support of his above submission, he has relied upon the decision of the Hon'ble Supreme Court in the case reported in 199 ITR 530 @ 555. 5.5. Shri S.N. Soparkar, learned counsel for the respective assessee has submitted that in the present cases either the issue is covered in favour of the assessee in previous year and / or assessment is high pitch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n no.96 dated 21.08.1969 was issued in respect of the circumstances then prevailing. It is submitted that thereafter circular no.530 dated 6.3.1989 required the assesssee to be treated as not being in default in respect of circumstances (i) and (ii) as stated in para 2 of the said circular. It is submitted that in respect of non covered issues, the aspect of financial hardship was required to be considered, as clarified in circular No.589. It is submitted that thus even as per circular No.530 r/w circular no.589, though the assessee may be treated as not being in default in respect of "covered issues" but in so far as the other demands are concerned, discretion was given to the AO. It is submitted that thereafter in supersession of all earlier instructions on the subject, the CBDT has issued instruction no.1914 dated 2.12.1993. It is submitted that as per para 2 of the said instruction, demand could be kept in abeyance for valid reasons and "only in accordance with the guidelines .....". It is submitted that para 2 of the said instructions is divided in four parts i.e. A to D. It is submitted that as per para 2A(i), in the first instance, it is the responsibility of the AO to coll....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s only with regard to ascertaining as to whether the demand arises out of "covered issues" or otherwise. It is submitted that as the instruction no. 1914 has been issued in supersession of all earlier instructions, including instruction no.96 dated 21.08.1969, the aspect "high pitched assessment", i.e. twice the returned income is not required to be considered as one of the factors for granting stay. 7.3.It is further submitted by Shri Mansih R. Bhatt, learned counsel for the revenue that once the AO passes a speaking order and holds that either there are no covered issues or with regard to other additions discretion is not required to be exercised, on a petition being filed under Article 226 of the Constitution of India, the Court is required to apply well settled principle for invoking jurisdiction as to whether the principles of natural justice have been followed; whether the impugned order is arbitrary or oppressive. It is submitted that in these proceedings therefore, financial hardship faced by the assessee may not be considered, as equity is ruled out in taxation matters. In support of his above submission, Shri Manish R. Bhatt, learned counsel for the revenue has heavily r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he interest of the assessee, though contained in para 2B(iii), also in para 2C i.e. guidelines for staying demand though instructions did not stipulate so. It is submitted that therefore, only the prevailing instructions no.1914 are required to be looked into for the purpose of Section 220(6) of the Act and stay of demand in respect of covered issues as enumerated in para 2C(i)­(q) to (c) could be issued only on terms and conditions as stated in para 2C(ii). 7.7.It is submitted that assuming without admitting that the existing circular, namely circular no.530 is also required to be read in Instruction no.1914, in that case also, in respect of the issues which are not covered, no blanket stay has been provided. It is submitted that even in respect of the demands arising out of uncovered issues, it is open for the AO to impose conditions as enumerated in para 2C(ii). 7.8.Now, on the issue whether CIT / Additional CIT can interfere with orders passed by AO under Section 220(6) of the Act , Shri Manish Bhatt, learned counsel for the revenue has submitted that as per Section 119(2)(a) of the Act, the Board may...... for the purpose of ....... collection of revenue, issue, from tim....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt entity may have higher standing vis­a­vis private parties. However, if the PSU goes into losses, further recovery becomes difficult. 7.11.It is submitted that even past conduct of the assessee in payment of demand is also important. It is submitted that security offered by the assessee and its financial standing are also vital. It is submitted that therefore, para 2C(ii) of CBDT circular envisaging laying down of conditions is very crucial and is no mechanical formality. 7.12.Now, so far as submission on behalf of the assessee that speaking order is required to be passed by the AO while exercising power under Section 220(6) of the Act is concerned, it is submitted by Shri Bhatt, learned counsel for the revenue that as such AO cannot be compelled by assessee during stay proceedings to give comments on each and every issue of disallowance or addition. It is submitted that such demand would tantamount to review of his own order, which is not permissible in law. It is submitted that the onus of showing that an issue is squarely covered would rest on the assessee. It is submitted that even otherwise in case where the Court is of the view that AO has not exercised the power ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... order will be cancelled ? 8.4.While considering the aforesaid issues / questions few provisions of the Income Tax Act are required to be referred to and considered. On conclusion of the assessment proceedings after giving adequate opportunity to the assessee, order of assessment is passed by the AO under Section 143(3) of the Act; At the stage of assessment adequate opportunity would be provided to the assessee with regard to the additions made. That upon quantification of the taxes, demand under Section 156 of the Act would be issued. As per Section 220(6) of the Act the amount specified in the notice of demand under Section 156 is required to be paid within 30 days of the service of notice. However, sub­section (6) of Section 220 of the Act provides that where an assessee has preferred an appeal under Section 246, AO may in his discretion and subject to such conditions as he may deem think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment (as provided under Section 220(2) of the Act) has expired, as long as such appeal remained undisposed of. As such ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....truction No. 96 dated 21.08.1969: Income determined on assessment was substantially higher than returned income whether collection of tax in dispute is to be held in abeyance till decision on appeal. 1.One of the points that came up for consideration in the 8th meeting of the Informal Consultative Committee was that income tax assessments were arbitrarily pitched at high figures and that the collection of disputed demands as a result thereof was also not stayed in spite of the specific provision in the matter in Section 220(6). 2.The then Deputy Prime Minister had observed as under: ".... where the income determined on assessment was substantially higher than the returned income, say, twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appeals, provided there were no lapse on the part of the assessee." 3.The Board desire that the above observations may be brought to the notice of all the Income Tax Officers working under you and the powers of stay of recovery in such cases up to the stage of first appeal may be exercised by the Inspecting Assistant Commissioner / Commissioner of Income Tax. 10.1.That thereaft....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as under: Instruction No.1914 dated 2.12.1993 The Board has felt the need for a comprehensive instruction on the subject of recovery of tax demand in order to streamline recovery procedures. This instruction is accordingly being issued in supersession of all earlier instructions on the subject and reiterates the existing Circulars on the subject. 2. The Board is of the view that, as a matter of principle, every demand should be recovered as soon as it becomes due. Demand may be kept in abeyance for valid reasons only in accordance with the guidelines given below : A. Responsibility: (i)It shall be the responsibility of the Assessing Officer and the TRO to collect every demand that has been raised, except the following : (a) Demand which has not fallen due; (b) Demand which has been stayed by a Court or ITAT or Settlement Commission; (c) Demand for which a proper proposal for write­off has been submitted; (d) Demand stayed in accordance with paras B & C below. (ii).Where demand in respect of which a recovery certificate has been issued or a statement has been drawn, the primary responsibility for the collection of tax shall rest with the TRO. (iii). It woul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uch disputed points. Further where it is subsequently found that the assessee has not co­operated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or court alters the above situation, the stay order may be reviewed and modified. The above illustrations are, of course, not exhaustive. (ii)In granting stay, the Assessing Officer may impose such conditions as he may think fit. Thus he may a.require the assessee to offer suitable security to safeguard the interest of revenue; b. require the assessee to pay towards the disputed taxes a reasonable amount in lump sum or in installments; c. require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled. d. reserve the right to review the order passed after expiry of a reasonable period, say up to 6 months, or if the assessee has not co­operated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations; e. reserve a right to adjust refunds arising, if any, against the demand. (iii) Payment by instalments may be liberall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther words, earlier instruction no.96 dated 21.08.1969 and circular no.530 dated 6.3.1989 cannot be made applicable while exercising the powers by the AO under Section 220(6) of the Act. 11.0.In backdrop of the above statutory provisions and instructions issued by the CBDT, more particularly, instruction no. 1914 dated 2.12.1993 issued under Section 119 of the Act, question / issue raised in the present petitions referred herein above are required to be considered. 12.0.At the outset, it is required to be noted that as such "stay of demand" does not occur in Section 220(6) of the Act. What is provided in Section 220(6) of the Act is that AO may in its discretion and where the assessee has presented an appeal, treat the assessee as not being in default in respect of amount in dispute in appeal on such conditions as he may deem think fit to impose in the circumstances of the case. Therefore, as such the parameters which are required to be applied while granting "stay of demand" during the pendency of the appeal such as prima faice case, balance of convenience etc. which are required to be considered by the Appellate Authority while considering the stay application may not ipso fact....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t accepted that judgment, the assessee is not to be treated as being in default in respect of that amount in dispute in appeal. While laying down guideline it has been further clarified that in such situation the assessee will be treated as not being in default only in respect of amount attributable to such disputed point. The guidelines further provides that in granting stay AO may impose such condition as he may think fit as mentioned in clause 2C(ii) i.e. require the assessee (a) to offer suitable security to safeguard the interest of revenue; (b)require the assessee to pay towards the disputed taxes a reasonable amount in lump sum or in installments; (c) require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled; (d) reserve the right to review the order passed after expiry of reasonable period, say upto 6 months, or if the assessee has not cooperated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations; (e) reserve a right to adjust refunds arising, if any against the demand. The aforesaid guidelines also furth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e appropriate conditions as he may deem fit, the AO may reserve the right to review the order passed after expiry of reasonable period, say upto 6 months and if the assessee has not cooperated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations he may review the earlier order passed under Section 220(6) of the Act. 15.0.Now, so far as the contention on behalf of the assessee that when Income determined on assessment is substantially higher than the returned income and / or high pitched i.e. twice the returned income, the collection of the tax in dispute shall be held in abeyance till the decision of the appeal and / or while passing order under Section 220(6) of the Act the AO is bound to pass an order to treat the assessee not being in default is concerned, the same cannot be accepted as a rule. In a given case, it may happen that the assessee has shown the return of income of Rs. 1 or "NIL" or "Loss" in the return. In such situation, in every case with respect to any amount determined by the AO, during the pendency of the appeal the assessee is required to be treated as not being in default. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch, as observed herein above, we are not in agreement with the view taken by the Delhi High Court. Now, so far as reliance placed upon the decision of this Court in the case of Madhu Silica Pvt. Ltd (supra) by the learned counsel for the assessee is concerned, as such we are in complete agreement with the view taken by this Court. It is required to be noted that in the said case issue was not with respect to "high pitched assessment". In the case before the Division Bench the issue was with respect to the demand in dispute relating to issues that have been decided in favour of the assessee in earlier order of appellate authority or the Court in the assessee's own case and to that the Division Bench has held that the assessee is not to be treated being in default in respect of that amount in dispute in appeal. We are also taking the same view as observed and held herein above. To the aforesaid, we are in complete agreement with the view taken by the Division Bench of this Court in Special Civil Application No.3179 of 2012. 18.0.Now, so far as next question which is posed for consideration of this Court is what type of speaking order is required to be passed by the AO while passing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o offer suitable security to safeguard the interest of revenue; b. require the assessee to pay towards the disputed taxes a reasonable amount in lump sum or in installments; c. require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled. d. reserve the right to review the order passed after expiry of a reasonable period, say up to 6 months, or if the assessee has not co­operated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations; e. reserve a right to adjust refunds arising, if any, against the demand. 19.2.In a given case, the AO may exercise discretion in favour of assessee by granting reasonable installments. Even the AO may reserve the right to review the order passed after expiry of reasonable period, say upto six months and if the assessee has not cooperated in the early disposal of the appeal, or where a subsequent pronouncement by a higher appellate authority or Court alters the situation considered while passing under order under Section 220(6) of the Act, the AO may is a given case review the ear....