TaxTMI 
TaxTMI 
2022 (2) TMI 1208
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....uarantee would meet the ends of justice. No Governmental business or for that matter no business of any kind can be run on mere bank guarantees. Liquid cash is necessary for the running of a Government as indeed any other enterprise. We consider that where matters of public revenue are concerned, it is of utmost importance to realize that interim orders are not to be granted merely because a prima facie case has been shown. More is required. The balance of convenience must be clearly in favour of the making of an interim order and there should not be the slightest indication of a likelihood of prejudice to the public interest". (Assistant Collector of Central Excise vs. Dunlop India Ltd. & Ors., 1985 (1) SCC 260) 3. The aforesaid are the observations of the Supreme Court relating to the tendency of the courts to grant interim orders with great potential for public mischief for the mere asking. Such tendency was deprecated by the Supreme Court almost four decades back. 4. Having regard to the subject matter of the captioned writ applications, the Revenue wants us to keep the aforesaid observations of the Supreme Court in mind. 5. For the sake of convenience, the Special Civ....
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....ng with the requirement of pre-deposit. (H) Any other further relief/s as may deem fit in the facts of the case may also be granted." 7. The facts, giving rise to this litigation, may be summarized as under; 7.1 The writ applicant is one of the directors of the entities following under the Avani Group of Companies. The said group of companies operates from Vadodara and is engaged in the business of land and properties. 7.2 A search was conducted under Section 132 of the Income Tax Act, 1961 (for short "the Act, 1961") on 23.01.2020 by the respondent No.4. The said search ultimately led to issue of a notice to the writ applicant herein under Section 153(A) of the Act, 1961 dated 09.12.2020 calling upon the writ applicant to furnish the return of income for the A.Y.2014-15 to 2019-2020. 7.3 The record reveals that separate notices were also issued under Section 153(A) of the Act by the respondent No.4 dated 09.12.2021 calling upon the writ applicant to furnish the return of income for the A.Y.2010-11 to 201314. For the A.Y.2020-21, notice came to be issued to the writ applicant by the respondent No.4 under Section 143(2) of the Act dated 17.06.2021. The responden....
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....raised for the assessment years under consideration. 7.7 The first order passed by the Principal Commissioner, IT (Central) Surat dated 08.12.2021 reads thus; To, Harsh Dipak Shah 11/12, Charotar Society, Old Padra Road Vadodara, Gujarat India PAN: ASGPS8965A Dated: 08.12.2021 DIN & Letter No: ITBA/COM/F/17/2021-22/1037618617(1) Sir / Madam/M/s, Subject: Online service of orders-Letter Sub:-Hearing on application of stay against recovery of demand raised u/s.153A r.w.s. 143(3) & 143(3) of the Act in your case for A.Y.2010-11 to A.Y.20202021 till the disposal of the 1st appeal-Reg. Ref: Assessee letter dated 08.11.2021 received in this office on 10.11.2021. Please refer to the above 2. In connection to above captioned subject, it is seen from the perusal of your letter dated 08.11.2021 that stay of demand has been sought on the ground that an appeal has been filed before CIT(A) against the Assessment Order passed in your case u/s. 153A r.w.s. 143(3) & 143(3) of the I.T.Act, 1961 (to be read as 'Act') pertaining to A.Y.2010-11 to A.Y.2020-2021 and a decision on t....
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....law in respect of which there exist conflicting decisions of one or more High Courts (not of the High Court under jurisdiction the Assessing Officer is working), or iii) If the high Court having jurisdiction has adopted a contrary interpretation but the Department has not accepted that judgment." 4. After studying the facts of your case, it is seen that your case does not fall in any of the above categories. Assessment order passed in your case by the Assessing Officer (A.O.) for the year under consideration was after granting sufficient opportunities during the assessment proceedings and the A.O. after duly perusing and verifying the submissions made by you with details available on record and proper appreciation of details provided as well in view of relevant provisions of the Act had passed the Assessment Order. Hence, demand cannot be stayed specially in view of the fact that this instruction has been issued in supersession of all instruction of the subject. Though the demand is disputed but mere filing of 1st appeal before the CIT (A) cannot be valid reason for granting stay. 5. However, following the principle of natural justice, I am directed to give you an op....
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.... Majura Gate, Surat, Respected Sir, Sub: Submission in connection with compliance to application for stay against recovery of demand raised u/s. 153A r.w.s. 143(3) & 143(3) of the Act for A.Y.2010-11 to A.Y.2020-2021. Ref: ITBA/COM/F/17/2021-22/1037618617(1) dt. 08.12.2021. PAN:ASGPS8965A High pitch assessment was framed u/s. 153A r.w.s.143(3) of the Act on 30.09.2021 by the Deputy Commissioner of Income Tax, Central Circle-2, Vadodara in case of the assessee raising an astronomical demand of Rs. 373,20,42,319/- in various years (A.Y.2010-11 to A.Y. 2020-21) In order to get stay of recovery of demand, the assessee has filed a petition before assessing officer on 11.10.2021, however, without considering the facts and circumstances , he has rejected the request of the assessee to grant stay against recovery of demand vide his letter dated 02.11.2021 and has directed the assessee to pay 20% of demand, i.e, Rs. 74,64,08,464/- immediately. The assessee has further requested your honour to grant stay of demand until disposal of an appeal vide letter dt. 08.11.2021, however, your honour also has directed to the assessee to d....
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....d countless barriers during last 2 years. The assessee is trying to come out from it, however, recovery proceedings may again affect the assessee very badly. Sir, in brief, it is practically very difficult for the assessee to pay huge demand as directed by your honour vide letter dated 08.12.2021. Even the installments granted by your honour are huge in quantum. In view of the above, the assessee requests your to grant stay against recovery of outstanding demand considering the high pitched assessment made in case of the assessee. Further, the assessee also requests your honour to direct the AO not to take any coercive actions against the assessee for recovery of demand, till the disposal of the appeal. Once the appeal is disposed off, the assessee would discharge his obligations, if any, arising on account of disposal, in favour of the department. We shall be grateful if the stay against the demand is granted. Thanking You, Yours Faithfully," 7.9 Thus, the writ applicant prayed for waiver of 20% of the pre-deposit essentially on four grounds (i) high pitched assessment (ii) only source of income through Avani Petrochem Pvt. Ltd. (iii) stereo typ....
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....xplanation and justification of the assessee. (ii) Only source of income of M/s. Avani Petrochem Pvt. Ltd.- Assessee has taken the contention that the assessee is the Director of M/s. Avani Petrochem Pvt. Ltd which is the only source of income. The turnover of the company for F.Y.2020-21 was Rs. 125 Crore and therefore, it is apparent that income assessed for A.Y.2010-11 to A.Y.2020-21 to the tune of Rs. 408 Crore which is 4 times higher than the aggregate turnover seems to be unrealistic and unreasonable. (iii) Stereo-type Order:- Assessee has taken the contention that the AO has passed stero-type orders without outright rejection of the stand of the assessee which is absolutely illegitimate. (iv) Adverse impact on financial affairs on account of COVID-19:- Assessee has taken the contention that due to Covid-19 pandemic, the financial affairs of the business are adversely affected across the globe and recovery proceedings may again affect the assessee adversely. 3. in respect of reasons quoted in above para 2(i), 2(ii) & 2(iii), it is stated that same are not applicable as they are merely pertaining to the matter discussed during the assessment ....
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....your case for the relevant years under consideration is not found to be valid in nature. 6. In view of above reasons, your stay petition dated 08.11.2021 cannot be accepted, further you are requested to pay 20% of the outstanding demand in order to avail stay on the remaining amount as per the instruction No.1914 F. No.404/72/93-ITCC dated 31.07.2017. However, you are still with the option to pay the 20% of the outstanding demand in your case as detailed below:- Sr. No Order under section of I.T.Act, 1961 A.Y. Dt. of order Demand Raised (in Rs.) Demand amount to be paid for each relevant assessment years being 20% of the raised demand scheduled below. 1. 153A r.w.s.143(3) 2010-11 30.09.2021 26424810 10% by 31.12.2021 and remaining 10% in 3 monthly equal installments starting from 15.01.2022, 15.02.2022 and 15.03.2022 2. 153A r.w.s. 143(3) 2011-12 30.09.2021 139387164 3. 153A r.w.s.143(3) 2012-13 30.09.2021 25290654 4. 153A r.w.s.143(3) 2013-14 30.09.2021 186990485 5. 153A r.w.s.143(3) 2014-15 30.09.2021 133940038 6. 153A r.w.s.143(3) 2015-16 30.09.2....
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.... entitled to a stay of the notices towards recovery. 10. Mr. Hemani would submit that the tendency of making high pitched assessments by the Assessing Officers is not something unknown and quite often it has caused serious prejudice to the assessee leading to a serious miscarriage of justice. At times, such high pitched assessments by the Assessing Officers may even result into insolvency or closure of the business if such power was to be exercised only in a pro-revenue manner. 11. Mr. Hemani would submit that the parameters which should be kept in mind while considering the grant of stay of disputed demand are (i) the existence of a prima facie case (ii) financial stringency and (iii) balance of convenience. He would submit that the financial stringency would include within its ambit the question of "irreparable injury" and "undue hardship" as well. It is only upon an application of the three factors as aforesaid that the Assessing Officer can exercise discretion for the grant or rejection, wholly or in part of a request for stay of the disputed demand. 12. Mr. Hemani submitted that the respondent No.2 is guided by the CBDT circulars/instruction....
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....s that assessment has been framed merely on the basis of assumptions, conjecture and surmises. (iii) The respondent No.4 has issued show-cause notice to the petitioner on 23.09.2021, i.e, merely one week before 30.09.2021 (time barring date for completion of assessment) which shows that the petitioner was deliberately not given any time or sufficient/reasonable time or opportunity to justify the transactions or furnish requisite explanation. (iv) On perusal of the notices issued u/s. 142(1), it is evident that the Respondent No.4 has not called for the details in respect of various transactions, however, all of those transactions were covered in show cause notice and the petitioner was asked to furnish explanation which again clearly shows breach of principles of natural justice. (v) On perusal of the assessment orders, it can be verified that the Respondent No.12 has added several transactions are such which were added at one place and the addition for the same transaction was made at other. This has caused duplication of additions and ultimately the respondent No.4 has conducted high pitched assessment. (vi) The assessment for all the assessmen....
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....2/2009 5. Bhupendra Murji Shah vs. Deputy Commissioner of Income Tax MANU/TN/3920/2018 6. Kalaignar Tv Pvt. Ltd. vs. Assistant Commissioner of Income Tax MANU/TN/3920/2018 7. Vodafone M-Pesa Ltd. vs. Principal Commi. Of Income Tax MANU/MH/2302/2018 8. Aarti Sponge and Power Ltd. vs. Assistant Commi. Of Income Tax (Chhattisgarh High Court) Writ Petition No.59/2018 (judgment dt. 10.04.2018) 9. Vimalkumar Agarwal & Ors. vs. Principal Commi. Of Income Tax MANU/CG/0119/2018 10. KEC International Ltd. vs. B.R. Balkrishnan & Ors. MANU/MH/0496/2001 11. J.R. Tantia Charitable Trust vs. Deputy Commi. of Income Tax (2011) 245 CTR (Raj.) 162 12. Valvoline Cummins Ltd. vs. Deputy Commi. Of Income Tax (2008) 217 CTR (Del.) 292 13. N. Jegatheesan vs. Deputy Commi. Of Income Tax (2015) 64 Taxmann.com339 (Madras) 16. In such circumstances, referred to above, Mr. Hemani prays that there being merit in his writ application, the same may be allowed and the precondition of deposit of 20% of the total demand may be waived or stayed till the final disposal of the appeal which has been filed by the writ applicant before th....
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.... CIT (Appeals) and pray for an appropriate relief so far as the recovery of the demand is concerned pending the final disposal of the appeal filed by the writ applicant. 20. Mr. Bhatt, in support of his aforesaid submissions, has placed reliance on the following case laws; (i) Karmvir Builders vs. Principal Commissioner of Income Tax (Central), (2020) 113 taxmann.com 139 (SC); (ii) Sporting Pastime India Ltd. vs. Assistant Registrar, Chennai, (2020) 122 taxmann.com 44 (Madras); (iii) Gorlas Infrastructure (P.) Ltd. vs. Principal Commissioner of Income Tax, (2021) 130 taxmann.com 378 (Telangana); 21. In such circumstances, referred to above, Mr. Bhatt prays that there being no merit in the present writ application, the same may be rejected. ANALYSIS 22. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the writ applicant is entitled to any relief as prayed for in the present writ application. 23. Section 220 lays down the procedure for collection and recovery of the tax. Section 220 falls in Chapter-XVII. 24. Sub-section....
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.... if the assessee prefers an appeal challenging the assessment order before the Commissioner of Appeals as the First Appellate Authority, he would still be treated as an assessee deemed to be in default because mere filing of an appeal would not automatically lead to stay of the demand as raised in the assessment order. It is in such circumstances that the assessee has to make a request before the authority concerned for appropriate relief for grant of stay against such demand pending the final disposal of the appeal. This relief which the assessee seeks is within the discretion of the authority. In other words, the authority may grant such stay conditionally or unconditionally or may even decline to grant any stay. However, the exercise of such discretion has to be in a judicious manner. Such exercise of discretion cannot be in a arbitrary or mechanical manner. 29. The aforesaid leads us to consider what parameters should be kept in mind by the authority concerned while considering the request of the assessee for stay of the demand. For the time being, we put aside all the instructions and circulars issued by the CBDT over a period of time. Undoubtedly, all such instructions and....
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....er cannot decline to exercise that power on the ground that it was left to his discretion. In such a case, the Legislature is presumed to have intended not to grant an absolute, uncontrolled or arbitrary discretion to the Officer but to impose upon him the duty of considering the facts and circumstances of the particular case and then coming to an honest judgment as to whether the case calls for the exercise of that power." 31. Being a matter of discretion, it is not possible to strait-jacket or lay down the principles on which the discretion is to be exercised. The question as to what are the matters relevant and what should go into the making of the decision by the Income-tax Officer in such circumstances has been explained by D. N, Sinha J. (in the context of the corresponding provisions of the Wealth-tax Act) in Aluminium Corporation of India Ltd. v. C. Balakrishnan [1959] 37 ITR 267 (Cal). The learned Judge states (at pages 269 and 270): "A judicial exercise of discretion involves a consideration of the facts and circumstances of the case in all its aspects. The difficulties involved in the issues raised in the case and the prospects of the appeal being successful ....
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....igher than the returned income. For example, twice the returned income or more. 33. In the aforesaid context, we may look into the decision of the Madras High Court in the case of N. Jegatheesan vs. Deputy Commissioner of Income Tax, Non Corporate Circule-2, reported in (2016) 388 ITR 410 (Mad.), wherein the Court observed in Para-14 as under; "High Pitched Assessment? means where the income determined and assessment was substantially higher than the returned income, say twice the later amount or more, the collection of the tax in dispute should be kept in abeyance till the decision on the appeal provided there were no lapses on the part of the assessee. In the instant case, the assessment in question in the pending appeal before the Commissioner of Income Tax (Appeals) is a High Pitched Assessment, because the petitioner has submitted his return for the accounting period, that is 01.04.2011 to 31.03.2012 for the assessment year 2012-2013 as Rs. 4,91,680/- including agricultural income of Rs. 45,00,000/-. But, the respondent having formed adverse opinion, as set out in the assessment order dated 31.3.2015, negativing agricultural income, made additions to the tune of Rs....
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....t case, the assessed income is approximately 74 times the returned income and obviously, this would fall within the expression "unreasonably high pitched". 35. We may also look into a Division Bench decision of the Delhi High Court in the case of Valvoline Cummins Limited vs. Deputy Commissioner of Income Tax & Ors., reported in (2008) 307 ITR 103 (Delhi), wherein Justice Madan B. Lokur, as His Lordship than was, in identical set of facts, observed as under; "39. Learned Counsel for the assessed also took us to the merits of the assessment order with a view to show that prima facie the demand was unreasonable in as much as the assessed was not given a proper hearing before the assessment order was framed. We are not inclined to delve into this issue because that is a matter which has to be decided by the CIT (A) but we may note (for the purposes of only deciding this writ petition) that there is substance in the contention of the assessed that the assessment order is extremely harsh. 40. It may be recalled that the returned income of the assessed was Rs. 7.25 crores, but the assessed income is Rs. 58.68 crores, which is almost 8 times the returned income. In th....
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.... 43. Under the circumstances, we are of the view that the assessed would, in normal course, be entitled to an absolute stay of the demand on the basis of the above Instruction." 36. The Madras High Court, in the case of Mrs. Kannammal vs. Income-tax Officer-Ward-1(1), Tripura, reported in (2019) 103 taxmann.com 364 (Madras) had the occasion to look into all the instructions/ circulars issued by the CBDT over a period of time and considering those, held as under; "7. The parameters to be taken into account in considering the grant of stay of disputed demand are well settled - the existence of a prima facie case, financial stringency and the balance of convenience. 'Financial stringency' would include within its ambit the question of 'irreparable injury' and 'undue hardship' as well. It is only upon an application of the three factors as aforesaid that the assessing officer can exercise discretion for the grant or rejection, wholly or in part, of a request for stay of disputed demand. 8. In addition, periodic Instructions/Circulars in regard to the manner of adjudication of stay petitions are issued by the Central Board of Direct Taxes (CBDT) for the gu....
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....ayed 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 would be the responsibility of the supervisory authorities to ensure that the Assessing Officers and the TROs take all such measures as are necessary to collect the demand. It must be understood that mere issue of a show cause notice with no follow- up is not to be regarded as adequate effort to recover taxes. B. Stay Petitions: i. Stay petitions filed with the Assessing Officers must be disposed of within two weeks of the filing of petition by the tax- payer. The assessee must be intimated of the decision without delay. ii. Where stay petitions are made to the authorities higher than the Assessing Officer (DC/CIT/CC), it is the responsibility of the higher authorities to dispose of the petitions without any delay, and in any event within two weeks of the receipt of the petition. Such a decision should be communicated to the assessee and the Assessing Officer immediately. iii. The decision in the ....
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.... Income-tax Act, the Assessing Officer should always use in any order passed under section 220(6) [or under section 220(3) or section 220(7)], the expression that occurs in the section viz., that he agrees to treat the assessee as not being default in respect of the amount specified, subject to such conditions as he deems fit to impose. v. While considering an application under section220(6), the Assessing Officer should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order. D. Miscellaneous: i. Even where recovery of demand has been stayed, the Assessing Officer will continue to review the situation to ensure that the conditions imposed are fulfilled by the assessee failing which the stay order would need to be withdrawn. ii. Where the assessee seeks stay of demand from the Tribunal, it should be strongly opposed. If the assessee presses his application, the CIT should direct the departmental representative to request that the appeal be posted within a month so that Tribunal's order on the appeal can be known within two months. iii. Appeal effects will have to be....
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....to the administrative Pr. CIT/ CIT, who after considering all relevant facts shall decide the quantum/ proportion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand.' 11. Instruction 1914 was further modified by Office Memorandum bearing number F.No.404/72/93 - ITCC dated 31.07 2017 as follows: 'OFFICE MEMORANDUM F. No. 404/72/93-ITCC dated 31.07.2017 Subject: Partial modification of Instruction No. 1914 dated 21.3.1996 to provide for guidelines for stay of demand at the first appeal stage. Reference: Board's O.M. of even number dated 29.2.2016 Instruction No. 1914 dated 21.3.1996 contains guidelines issued by the Board regarding procedure to be followed for recovery of outstanding demand, including procedure for grant of stay of demand. Vide O.M. N0.404/72/93-ITCC dated 29.2.2016 revised guidelines were issued in partial modification of instruction No 1914, wherein, inter alia, vide para 4(A) it had been laid down that in a case where the outstanding demand is disputed before CIT(A), the Assessing Officer shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed dema....
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....h.' 14. The disposal of the request for stay by the petitioner leaves much to be desired. I am of the categoric view that the Assessing Officer ought to have taken note of the conditions precedent for the grant of stay as well as the Circulars issued by the CBDT and passed a speaking order. Of course the petition seeking stay filed by the petitioner is itself cryptic. However, as noted by the Supreme Court in the case of Commissioner of Income tax vs Mahindra Mills, ((2008) 296 ITR 85 (Mad)) in the context of grant of depreciation, the Circular of the Central Board of Revenue (No. 14 (SL- 35) of 1955 dated April 11, 1955) requires the officers of the department 'to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs. .... Although, therefore, the responsibility for claiming refunds and reliefs rests with the assessees on whom it is imposed by law, officers should draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other......'. Thus, notwithstanding that the assessee may not have specifically invoked the three parameters for ....
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....0. Discretion, in general, is the discernment of what is right and proper. It denotes knowledge and prudence, that discernment which enables a person to judge critically of what is correct and proper united with caution; nice discernment, and judgment directed by circumspection: deliberate judgment; soundness of judgment; a science or understanding to discern between falsity and truth, between wrong and right, between shadow and substance, between equity and colourable glosses and pretences, and not to do according to the will and private affections of persons." 41. In the case of U.P. State Road Transport Corporation and Anr. v. Mohd. Ismail and Ors.: (1991) 3 SCC 239, while dealing with the case of non-exercise of discretion by the authority, the Supreme Court expounded on the contours of discretion as also on limitations on the powers of the Courts when the matter is of the discretion of the competent authority, in the following terms: - "12. The High Court was equally in error in directing the Corporation to offer alternative job to drivers who are found to be medically unfit before dispensing with their services. The court cannot dictate the decision of the statuto....
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....wers of the High Court under Article 226 of the Constitution are wide, but certainly not wider than the plenary powers bestowed on this Court under Article 142 of the Constitution. Article 142 is a conglomeration and repository of the entire judicial powers under the Constitution, to do complete justice to the parties. Even while exercising that power, this Court is required to bear in mind the legislative intent and not to render the statutory provision otiose." 43. Thus, when it comes to discretion, the exercise thereof has to be guided by law; has to be according to the rules of reason and justice; and has to be based on the relevant considerations. The exercise of discretion is essentially the discernment of what is right and proper; and such discernment is the critical and cautious judgment of what is correct and proper by differentiating between shadow and substance as also between equity and pretence. A holder of public office, when exercising discretion conferred by the statute, has to ensure that such exercise is in furtherance of accomplishment of the purpose underlying conferment of such power. The requirements of reasonableness, rationality, impartiality, fa....
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....indicate whether the assessee is financially sound and viable to deposit the amount if the authority wants the assessee to so deposit. (d) The authority concerned will also examine whether the time to prefer an appeal has expired. Generally, coercive measures may not be adopted during the period provided by the statute to go in appeal. However, if the authority concerned comes to the conclusion that the assessee is likely to defeat the demand, it may take recourse to coercive action for which brief reasons may be indicated in the order. 47. Before we close this matter, we deem fit to draw the attention of one and all to the following observations made by the Supreme Court in the case of The Income Tax Officer, III Mangalore vs. M. Damodar Bhat, reported in AIR 1969 SC 408. "We proceed to consider the next question arising in this appeal, viz., whether the High Court was right in taking the view that the Income Tax Officer did not properly exercise the statutory discretion in issuing the impugned notice with regard to the first item, viz., tax for the assessment year 1960-61 amounting to Rs. 7,056.15. It was argued on behalf of the respondent that there was an a....
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.....2 are set aside and the respondent No.2 is directed to consider the application filed by the writ applicant under Sections 220(3) and 220(6) respectively of the I.T. Act afresh in conformity with all the CBDT instructions and the parameters laid as above by providing an opportunity of being heard to the writ applicant and pass orders in accordance with law preferably within a period of two weeks from the date of the receipt of the writ of this order. 50. So far as the other two connected writ applications are concerned, we decline to interfere having regard to the quantum of the amount involved in both the matters. However, we leave it open for the writ applicants of both the said writ applications to file an appropriate application seeking appropriate relief before the First Appellate Authority, i.e, the CIT (Appeals). We are saying so because such powers to grant stay can be implied as inherent power of the First Appellate Authority. The powers of the Appellate Authorities are indisputably concurrent and coextensive with that of the Assessing Authority but wider and superior in nature. Section 251 of the Act clearly stipulates that in disposing of an appeal, the CIT (Appeals)....