MADRAS HIGH COURT - JAYANTHI
SEEMAN VS. PR. CIT, W.P. NO. 30094 OF 2018, JUDGEMENT
DATED: 21.02.2019
Summarised
Judgement( Scroll for Complete Judgement)
In
the facts of above case also the substantial high demand was raised by the
Assessing Officer. In pursuant to stay application the Assessing Officer had
insisted for payment of 20% of demand. On application filed before Pr. Commissioner also he rejected the said
application by passing an order as under:-
“Petition
is rejected. AO to collect 20% as per Board’s Circular ASAP.”
The Hon’ble High Court following its earlier
judgement dated 13.02.2019 decided the writ petition observing as under:-
“13.
In the light the above, I am inclined to set aside the impugned order dated
11.10.2018, as being mechanical and passed without application of mind. Equally
mechanical is the stay petition filed by the assessee, which simply relies upon
the circulars issued without reference
to the existence of a prima facie case, financial stringency and balance of
convenience.”
=======================================================
Complete Judgement
MADRAS HIGH
COURT - JAYANTHI SEEMAN V. PR. CIT, W.P. NO. 30094 OF
2018, JUDGEMENT DATED 21.02.2019.
IN
THE HIGH COURT OF JUDICATURE AT MADRAS
DATED:
21.02.2019
CORAM
THE
HONOURABLE DR. JUSTICE ANITA SUMANTH
W.P.Nos.30094,
30098, 30104 & 30110 of 2018
and
WMP.Nos.
35104, 35110, 35114,
35120,
35121, 35126 and 35128 of 2018
Jayanthi
Seeman
...Petitioner
in above W.Ps.
Vs
1.
The Principal Commissioner of Income Tax-1
Chennai
2.
The Income Tax Officer
Non
Corp, Ward 1(2)
Chennai
600034
...
Respondents in above W.Ps.
Prayer in W.P.No.30094
of 2018: Writ Petition filed under Article 226 of the Constitution of India, to
issue a Writ of Certiorarified Mandamus or any other writ or order or direction
in the nature of a writ calling for the records relating to the order in
C.No.233 Pr.CIT-1/2018-19 dated 11.10.2018 and subsequent order in
PAN:AAUPB0222F/NCW-1(2)/2017-18 dated 15.10.2018 on the file of the respondents
and to quash the same with consequential direction to the respondents to
consider the stay petition filed by the petitioner under section 220(3) and
220(6) of the Income Tax Act, 1961 for the AY- 2010-11 in conformity with the
instructions of the Central Board of Direct Taxes by providing an opportunity
of being heard to the petitioner.
Prayer in
W.P.No. 30098 of 2018: Writ Petition filed under Article 226 of the
Constitution of India, to issue a Writ of Certiorarified Mandamus or any other
writ or order or direction in the nature of a writ calling for the records relating to the order in C.No.233 Pr.CIT-1/2018-19
dated 11.10.2018 and subsequent order in PAN:AAUPB0222F/NCW-1(2)/2017-18 dated
15.10.2018 on the file of the respondents and to quash the same with
consequential direction to the respondents to consider the stay petition filed
by the petitioner under section 220(3) and 220(6) of the Income Tax Act, 1961
for the AY- 2011-12 in conformity with the instructions of the Central Board of
Direct Taxes by providing an opportunity of being heard to the petitioner.
Prayer in W.P.No. 30104 of 2018: Writ Petition filed under Article 226 of the Constitution of India, to issue a Writ of Certiorarified Mandamus or any other writ or order or direction in the nature of a writ calling for the records relating to the order in C.No.233 Pr.CIT-1/2018-19 dated 11.10.2018 and subsequent order in PAN: AAUPB0222F/NCW-1(2)/2017-18 dated 15.10.2018 on the file of the respondents and to quash the same with consequential direction to the respondents to consider the stay petition filed by the petitioner under section 220(3) and 220(6) of the Income Tax Act, 1961 for the AY- 2012-13 in conformity with the instructions of the Central Board of Direct Taxes by providing an opportunity of being heard to the petitioner.
Prayer in W.P.No. 30110
of 2018: Writ Petition filed under Article 226 of the Constitution of India, to
issue a Writ of Certiorarified Mandamus or any other writ or order or direction
in the nature of a writ calling for the records relating to the order in
C.No.233 Pr.CIT-1/2018-19 dated 11.10.2018 and subsequent order in
PAN: AAUPB0222F/NCW-1(2)/2017-18 dated 15.10.2018 on the file of the respondents
and to quash the same with consequential direction to the respondents to
consider the stay petition filed by the petitioner under section 220(3) and
220(6) of the Income Tax Act, 1961 for the AY- 2012-13 in conformity with the
instructions of the Central Board of Direct Taxes by providing an opportunity
of being heard to the petitioner.
For Petitioner : Mr.
Y. Prakash
For Respondents : Ms. Hema Muralikrishnan,
Senior
Standing counsel
-----------
COMMONORDER
The petitioner in these
Writ Petitions an assessee, on the file of the Income Tax Officer, Non
Corporate Ward I(2), Chennai, has preferred appeals challenging orders of
assessment dated 29.12.2017 in respect of assessment years 2010-11, 2011-12,
2012-13 and 2013-14 before the Commissioner of Income Tax (Appeals) (in short
'CIT(A)') on 30.01.2018.
2. Mr.Y.Prakash,
learned counsel appearing for the petitioner states that the appeals have been
heard in part and are pending disposal. The petitioner is stated to be
appearing before the Authority and co-operating in the disposal of the appeals.
3. It appears that
petitions for stay of recovery of the disputed demands in respect of the four
(4) assessment years as aforesaid were filed before the Commissioner of Income
Tax I, arrayed as first respondent in these Writ Petitions, on 04.10.2018.
4. Inter alia, the
petitioner has sought a stay on the sole ground that the addition made is sixty
(60) times of the returned income and the assessment order passed is 'high
pitched and biased to the interest of the revenue'.
5. Reliance has been
placed on the decisions of the Madurai Bench of this Court in the case of N.
Jegatheesan vs DCIT (W.P.(MD).No.10171 of 2015 and M.P.Nos. 1 & 2 of 2015
dated 18.11.2015) and Karnataka High Court in the case of Flipkart India Private
Limited Vs ACIT (WP. No. 1339- 1342/2017 (T-IT). Reliance is also placed on
various circulars in support of the request for stay.
6. The Assessing
Authority, arrayed as second respondent in these Writ Petitions, has, vide
impugned order dated 11.10.2018 conveyed the order of the Principal
Commissioner of Income Tax-1, Chennai rejecting the request for stay as
follows:
'Petition is rejected.
AO to collect 20 % as per Board's Circular ASAP'
7. The petitioner lays
stress on the position that CBDT Instruction No.95 of 1969 dated 21.08.1969,
specifically deals with a situation where the income determined on assessment
was substantially higher than the returned income, say, twice the amount or
more, in which case, the collection of the tax in dispute should be held in
abeyance till a decision was arrived at on the appeals.
8. According to him,
this circular makes it clear that where an assessment is made on a 'high
pitched basis', there could be a stay of collection till the disposal of the
appeals.
9. Mrs.Hema
Muralikrishnan, learned Senior Standing Counsel appearing for the respondents
has filed a counter affidavit denying the http://www.judis.nic.in averments
made in the Writ Petitions. She points put that the petitioner did not co-operate
with the Department in the completion of the assessments.
Ample opportunities had
been granted to the petitioner to prove the source of the substantial cash
deposits in the bank account and it was only after providing sufficient
opportunity that the additions were made under section 68 of the Act for want
of proof of genuineness and source of the deposits made. She would state that,
though notices calling for the records were issued much earlier in time, the
assessee took a plea before the Assessing Officer that all records to
substantiate the bank deposits has been washed away in the floods that hit the
city of Chennai in 2015.
10. She points out the
contradiction in the submission made by the petitioner now before this Court to
the effect that all supporting evidences have been provided before the CIT(A)
now to prove the cash deposits.
11. Heard learned
counsel on both sides. The circulars issued by the CBDT only set out a series
of guidelines to the Assessing Officers in the matter of grant of stay. I have
had occasion to consider the impact of the Circulars on the powers of the
Assessing Officer/Authorities under the Act to grant a stay, in the case of
Mrs.Kannammal V. Income Tax Officer (W.P.No.3849 of 2019 dated 13.02.2019) and
have held as follows:
'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 in-
http://www.judis.nic.in
jury' and ‘undue hardship’ as well. It is only upon an application of the three
factors as aforesaid that the assessing officer can exercise discre- tion 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
guidance of the Departmental authorities. The one oft-quoted by the assessee is
Office Memorandum F.No.1/6/69/-ITCC, dated 21.08.1969 that states as follows:
'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 often arbitrarily pitched at
higher figures and that the collection of disputed demand as a result thereof
was also not stayed in spite of the specific provision in the matter in s.
220(6) of the IT Act, 1961.
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 appeal provided there were no lapses
on the part of the assessees."
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.'
9. Thereafter, Instruction
No.1914 was issued by the CBDT on 21.03.1996 and states as follows:
1. Recovery of
outstanding tax demands [Instruction No. 1914 F. No. 404/72/93 ITCC dated
2-12-1993 from CBDT] The Board has felt the need for a comprehensive
instruction on the subject of recovery of tax demand in order to streamline
http://www.judis.nic.in 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 write-off 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 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 matter of stay of demand should normally http://www.judis.nic.in be taken
by Assessing Officer/TRO and his immediate superior. A higher superior
authority should interfere with the decision of the AO/TRO only in exceptional
circumstances; e.g., where the assessment order appears to be unreasonably
high-pitched or where genuine hardship is likely to be caused to the assessee.
The higher authorities should discourage the assessee from filing review
petitions before them as a matter of routine or in a frivolous manner to gain
time for withholding payment of taxes. C. Guidelines for staying demand:
i. A demand will be
stayed only if there are valid reasons for doing so. Mere filing an appeal
against the assessment order will not be a sufficient reason to stay the
recovery of demand. A few illustrative situations where stay could be granted
are: It is clarified that in these situations also, stay may be granted only in
respect of the amount attributable to such disputed points. Further where it is
subsequently found that the assessee has not co-operated 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 instalments; c. require an
undertaking from the assessee that he will co-operate 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 co-operated 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 liberally allowed
so as to collect the entire demand within a reasonable
period not exceeding 18 months.
iv. Since the phrase
“stay of demand” does not occur in section 220(6) of the 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 section 220(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 given within 2 weeks from the receipt of the appellate
order. Similarly, rectification application should be decided within 2 weeks of
the receipt t hereof. Instances where there is undue delay in giving effect to
appellate orders, or in deciding rectification applications, should be dealt
with very strictly by the CCITs/CITs.
3. The Board desires
that appropriate action is taken in the matter of recovery in accordance with
the above procedure. The Assessing Officer or the TRO, as the case may be, and
his immediate superior officer shall be held responsible for ensuring
compliance with these instructions.
4. This procedure would
apply mutatis mutandis to demands created under other Direct Taxes enactments
also.'
10. Instruction 1914
was partially modified by Office Memorandum dated 29.02.2016 taking into
account the fact that Assessing Officers insisted on payment of significant
portions of the disputed demand prior to grant of stay resulting in extreme
hardship for tax payers. Thus, in order to streamline the grant of stay and
standardize the procedure, modified guidelines were issued which are as
follows:
'.......
(A) 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 demand, unless the case falls in the category discussed in pars (B)
hereunder.
(B) In a situation
where,
(a) the assessing
officer is of the view that the nature of addition resulting in the disputed
demand is such that payment of a lump sum amount higher than 15% is warranted
(e.g. in a case where addition on the same issue has been confirmed by
appellate authorities in earlier years or the decision of the Supreme Court /or
jurisdictional High Court is in favour of Revenue or addition is based on
credible evidence collected in a search or survey operation, etc.) or,
(b) the assessing
officer is of the view that the nature of addition resulting in the disputed
demand is such that payment of a lump sum amount lower than 15% is warranted
(e.g. in a case where addition on the same issue has been deleted by appellate
authori- ties in earlier years or the decision of the Supreme Court or juris-
dictional High Court is in favour of the assessee, etc.), the assessing officer shall refer
the matter to the administrative Pr. CIT/ http://www.judis.nic.in CIT, who
after considering all relevant facts shall decide the quan- tum/ 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 bear- ing 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 demand unless the case falls in the
category discussed in para (B) thereunder. Similar references to the standard
rate of 15% have also been made in succeeding paragraphs therein.
2. The matter has been
reviewed by the Board in the light of feedback received from field authorities.
In view of the Board’s efforts to contain over pitched assessments through
several measures resulting in fairer and more reasonable assessment orders, the
standard rate of 15% of the disputed demand is found to be on the lower side.
Accordingly. it has been decided that the standard rate prescribed in O.M.
dated 29.2.2016 be revised to 20% of the disputed demand, where the demand is
contested before CIT(A). Thus all references to 15% of the disputed demand in
the aforesaid O.M dated 29.2.2016 hereby stand modified to
http://www.judis.nic.in 20% of the disputed demand. Other guidelines contained
in the O.M. dated 29.2.2016 shall remain unchanged.
These modifications may
be immediately brought to the notice of all officers working in your
jurisdiction for proper compliance.'
12. The Circulars and
Instructions as extracted above are in the nature of guidelines issued to
assist the assessing authorities in the matter of grant of stay and cannot
substitute or override the basic tenets to be fol- lowed in the consideration
and disposal of stay petitions. The existence of a prima facie case for which
some illustrations have been provided in the Circulars themselves, the
financial stringency faced by an assessee and the balance of convenience in the
matter constitute the ‘trinity’, so to say, and are indispensable in
consideration of a stay petition by the authority. The Board has, while stating
generally that the assessee shall be called upon to remit 20% of the disputed
demand, granted ample dis- cretion to the authority to either increase or
decrease the quantum de- manded based on the three vital factors to be taken
into consideration.
13. In the present
case, the assessing officer has merely rejected the pe- tition by way of a
non-speaking order reading as follows:
'Kindly refer to the
above. This is to inform you that mere filing of appeal against the said order
is not a ground for stay of the de- mand. Hence your request for stay of demand
is rejected and you are requested to pay the demand immediately. Notice
u/s.221(1) of the Income Tax Act, 1961 is enclosed herewith.'
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 http://www.judis.nic.in (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 the grant of stay, it is incumbent upon the
assessing officer to examine the existence of a prima facie case as well as
call upon the assessee to demonstrate financial stringency, if any and arrive
at the balance of convenience in the matter. '
12. My observations and
conclusions in the above order would apply equally to the facts and
circumstances of the present case and may be read as part and parcel of this
order.
13. In the light the
above, I am inclined to set aside the impugned order dated 11.10.2018, as being
mechanical and passed without application of mind. Equally mechanical is the
stay petition filed by the assessee, which simply relies upon the circulars
issued without reference to the existence of a prima facie case, financial
stringency and balance of convenience.
14. In the light of the
above, the Writ Petitions are disposed in the following terms:
i) The petitioner will
appear before the Principal Commissioner of Income Tax, the first respondent
herein, on 05.03.2019 at 10:30 am along with a stay petition covering three (3)
aspects as referred to aforesaid.
ii) After hearing the
petitioner, the Principal Commissioner of Income Tax shall pass appropriate
orders in accordance with law within a period of two (2) weeks from the date of
conclusion of the personal hearing.
iii) Till the disposal
of stay petitions, status quo, as of today, shall be maintained with regard to
recovery.
Consequently,
Miscellaneous Petitions are closed. No costs.
21.02.2019 Index :
Yes/No Internet : Yes/No Speaking Order/Non speaking Order sl Note: Issue order
copy on 26.02.2019 To
1. The Principal
Commissioner of Income Tax-1 Chennai
2. The Income Tax
Officer Non Corp, Ward 1(2) Chennai 600034.
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