AI Drafter 
TaxTMI 
TaxTMI 
2023 (5) TMI 369
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....fice Memorandum dated 31.07.2017 issued by Central Board of Direct Taxes (CBDT) and, further, it has been stated that recovery letter dated 25.01.2023 has been issued for compliance of payment on or before 31.01.2023. (ii) For issuance of an appropriate writ/order/direction, including Writ of Mandamus, directing Respondent No. 2 not to enforce and realize the outstanding demand pursuant to assessment order dated 30.09.2022 [Annexure-2] passed in respect of Assessment Year 2020-21 during the pendency and adjudication of the Appeal filed by Petitioner before Respondent No. 4. (iii) For issuance of an appropriate writ/order/direction, including Writ of Mandamus, directing the Respondent No. 4 to hear and expeditiously dispose of the Appeal filed by the Petitioner vide Acknowledgment No. 194608230081122 dated 08.11.2022 [Annexure-3] pertaining to Assessment Year 2020-21. (iv) For issuance of any other appropriate writ(s)/order(s)/ direction(s) as Your Lordships may deem fit and proper in the facts and circumstances of the case. 2. Petitioner, in the writ application, has specifically pleaded that against the order passed by the Assessing Officer directing ....
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....ness of Mining and Quarrying and is having two merchant mines of iron ore, namely (i) Ghatkuri Iron Ore Mines and (ii) Bihar Iron Ore Mines. Both the mines are situated in the District of West Singhbhum, at Chaibasa. 7. Pursuant to the order passed by the Hon'ble Apex Court in the case of Common Cause Vs. Union of India, reported in (2017) 9 SCC 499, the District Mining Officer directed the Petitioner to make payment of compensation towards damage to environment to the tune of Rs. 182,63,48,630/- with respect to Ghatkuri Mines, and, an amount of compensation of Rs. 19,55,12,041 pertaining to Bihar Iron Ore Mines. Since Petitioner maintained its books of account under the Mercantile System of accounting and, therefore, in its books of account for the Financial Year 2019-20 pertaining to Assessment Year 2020-21, the Petitioner claimed the aforesaid compensation amount of Rs. 202,18,60,671/- as allowable expenses under Section 37(1) of the Income Tax Act, 1961 and, accordingly, reflected a net loss of Rs. 129,26,59,785/- in its Return under Section 139(1) of the Act for the Assessment Year 2020-21. 8. The case of the Petitioner was selected for scrutiny under Section 143(3) of t....
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....t of 20%, Stay Petition of the Petitioner was rejected vide order dated 31.01.2023. The Petitioner even filed a Review application before Respondent No. 1-Principal Commissioner of Income Tax and, in the Review application, Petitioner raised several grounds for assailing the order of conditional stay passed by the Assessing Officer. Reliance was also placed by the Petitioner in its Review application to several judicial pronouncements. 10. The Reviewing Authority, vide order dated 24.02.2023, passed an order directing the Petitioner to pay Rs. 5.00 crores by 15.03.2023 and further issued direction for payment of Rs. 10.00 lakh from April, 2023 till disposal of the Appeal and it was further ordered that if the said amount is paid by the Petitioner, no coercive action shall be taken for recovery by the Assessing Officer. It is in the backdrop of the said fact that present writ application has been filed challenging the order dated 31.01.2023 passed by the Assessing Officer under Section 220(6) of the Act and the order dated 24.02.2023 passed by Respondent No. 1-PCIT. 11. Mr. Sumeet Gadodia, Advocate, assisted by Mr. Ranjeet Kushwaha, Advocate has assailed the impugned order and....
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....deposit of 20% of the disputed demand, but Reviewing Authority, by cryptic and unreasoned order, has directed the Petitioner to make payment of an amount of Rs. 5.00 Crores by 15.03.2023 and Rs. 10.00 Lakhs per month from April, 2023 till disposal of the Appeal. 13. The Petitioner, during the course of argument, also invited our attention to the prima facie merit of the case of the Petitioner by placing reliance upon the provisions of Section 37(1) of the Act and the Judgment of the Hon'ble Apex Court in the case of Common Cause (supra). The Petitioner, while referring to the provisions of Section 37(1) of the Act, including Explanation-1 thereof, has contended inter alia that expenditure towards compensation amount claimed by the Petitioner in its Return for the Assessment Year 2020-21 has been wrongly denied by the Assessing Officer by placing reliance upon Explanation-1 of Section-37. It has been submitted that Explanation-1 of Section 37 disallows the deduction or allowance towards expenditure if the said expenditure is incurred by the assessee for any purpose which is an offence or which is prohibited by law. Section 37(1) of the Act, for ready reference, is quoted herein-u....
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....ity by contending, inter alia, that they are bound by the Office Memorandum issued by CBDT and rightly the Assessing Authority has passed order stipulating, inter alia, that 20% of the amount is required to be paid as a pre-condition for stay. It has been further submitted by learned counsel for revenue that the Petitioner has already preferred an Appeal before the Appellate Court and the issue raised by the Petitioner in the instant writ application touching the merits of the Assessment Order may not be looked into by this Court in view of pendency of the Appeal of the Petitioner. However, he fairly submitted before the Court that the order passed by Reviewing Authority dated 24.02.2023 is not a defendable order as no reason has been assigned in the said order. 16. We have heard the learned Counsels for the parties and have carefully gone through the materials on record. For the purpose of determination of the instant writ application, provision of Section 220 of the Income Tax Act is relevant which is quoted hereinafter for ready reference:- 220. When tax payable and when assessee deemed in default. (1) Any amount, otherwise than by way of advance tax, specif....
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....terest under sub-section 2 from the day immediately following the end of the period mentioned in the first notice of demand, referred to in sub-section (1) and ending with the day on which the amount is paid. Provided also that in respect of any period commencing on or before the 31st day of March, 1989 , and ending after that date, such interest shall, in respect of so much of such period as falls after that date, be calculated at the rate of one and one-half per cent for every month or part of a month.] (2A) Notwithstanding anything contained in sub- section (2), the Chief Commissioner or Commissioner] may] reduce or waive the amount of interest paid or payable by an assessee under the said sub- section if he is satisfied that- (i) payment of such amount has caused or would cause genuine hardship to the assessee; (ii) default in the payment of the amount on which interest has been paid or was payable under the said sub-section was due to circumstances beyond the control of the assessee; and (iii) the assessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him. ....
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....h conditions as he may 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 has expired, as long as such appeal remains undisposed of. (7) Where an assessee has been assessed in respect of income arising outside India in a country the laws of which prohibit or restrict the remittance of money to India, the Assessing Officer shall not treat the assessee as in default in respect of that part of the tax which is due in respect of that amount of his income which, by reason of such prohibition or restriction, cannot be brought into India, and shall continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed. Explanation.- For the purposes of this section, income shall be deemed to have been brought into India if it has been utilised or could have been utilised for the purposes of any expenditure actually incurred by the assessee outside India or if the income, whether capitalised or not, has been brought into India in any form. 17. A plain reading of the provisions of s....
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....ch cannot be compensated in terms of money and (iv) whether the assessee has come before the authority with clean hands. 20. The power under Clause (6) of Section 220 is indeed a discretionary power. However, it is one coupled with a duty to be exercised judiciously and reasonably (as every power should be), based on relevant grounds. It should not be exercised arbitrarily or capriciously or based on matters extraneous or irrelevant. The Income-tax Officer should apply his mind to the facts and circumstances of the case relevant to the exercise of the discretion, in all its aspects. He has also to remember that he is not the final arbiter of the disputes involved but only the first amongst the statutory authorities. Questions of fact and of law are open for decision before the two appellate authorities, both of whom possess plenary powers. Thus, in exercising his power, the Income-tax Officer should not act as a mere tax-gatherer but as a quasi-judicial authority vested with the power of mitigating hardship to the assessee. The Income-tax Officer should divorce himself from his position as the authority who made the assessment and consider the matter in all its facet....
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....the case of Reliance Airport Developers (P) Ltd. v. Airports Authority of India. (2006) 10 SCC 1, Hon'ble the Supreme Court, with reference to various pronouncements pertaining to the legal connotations of 'discretion' and governing principles for exercise of discretion observed, inter alia, as under:- "30. 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." 24. In the case of U.P. State Road Transport Corporation v. Mohd. Ismail : (1991) 3 SCC 239, while dealing with the case of non-exercise of discretion by the authority, Hon'ble Apex Court expounded on the contours of discretion as also on limitations on the powers of the Courts when the matter is of the discret....
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....s 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 pretense. 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, fairness and equity are inherent in any exercise of discretion; such an exercise can never be according to the private opinion. 26. We are of the view that the authorities should keep in mind the following parameters while deciding a stay application preferred by an assessee pending appeal to the First Appellate Authority which has been elaborately laid down by the Bombay High Court in the case of Kec International Ltd. v. B.R. Balakrishnan, (2001) 251 ITR 158/119 Taxman 974; (a) While considering the stay application, the authority concerned will at ....
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....thority, by placing reliance upon the Office Memorandum, merely directed the assesse to pay 20% of the disputed demand. The Hon'ble Delhi High Court, in its order, has held as under:- "7. The impugned order clearly makes no reference to the central issue in the pending appeal or the grievance of the Petitioner regarding the order passed by the A.O. The impugned order in short is without reasons and is therefore unsustainable in law. 8. For the above reasons, the impugned order is set aside and a direction is issued that the Petitioner's application will once again be heard by the PCIT on merits and without reference to the O.M dated 31st July, 2017, which, on the face of it, appears to curtail his discretion. The PCIT will dispose of the application with a reasoned order not later than two weeks from the date of receipt of this order. 9. The CIT (A) shall also consider the request of the Petitioner for an expeditious disposal of the appeal." The aforesaid order was challenged before the Hon'ble Apex Court in Civil Appeal No. 6850 of 2018 (Principal Commissioner of Income Tax v. M/s. LG Electronics India Pvt. Ltd.) and the Hon'ble Apex Court vide order ....
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....s and suffers from incorrect interpretation of the judgments by the Assessing Officer. 4. Having considered all the submissions in writing and by the Learned AR of the applicant, assesse is directed to pay Rs. 5.00 crores by 15.03.2023 and Rs. 10.00 lakhs from April, 2023 (payable by 7th of each month) till disposal of appeal. The Assessing Officer shall not initiate any coercive action of recovery if the taxes are paid as above." 31. A bare reading of the said order would clearly reveal that there is no independent application of mind and no discussions whatsoever on the prima facie case of the petitioner, balance of convenience and undue hardships including the fact as to whether Petitioner has come with clean hands. In fact, learned Counsel for Revenue Mr. R.N. Sahay has conceded during arguments that the order passed by PCIT is not defendable. 32. We are of the opinion that the discretion to be exercised under Section 220(6) of the Act is to be exercised in a fair and judicious manner and in accordance with the principles laid down by us in preceding paragraphs. Admittedly, in the present case, neither the Assessing Authority nor the Reviewing Authority has exerc....