MADRAS HIGH COURT - MRS.
KANNAMMAL V. ITO, W.P. NO. 3849 OF 2019, DATED 13.02.2019
Summarised Judgement(Scroll for the
Complete Judgement)
In the facts of above case,
the returned income was of Rs.6,23,770/-. The Assessing Officer made the assessment at the income of Rs.10,26,01,710/-. The assessee filed appeal before CIT(A) and also filed application for stay of demand
before the Assessing Officer.
The Assessing Officer without
considering and discussing the merits of the case rejected the application by way
of a non speaking order stating as under:-
“’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 demand. 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.”
The assessee filed Writ
Petition before the Hon’ble High Court. The High Court after referring to the Circulars
/ Instructions of the Board observed as under:-
“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 followed 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 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
discretion to the authority to either increase or decrease the quantum demanded
based on the three vital factors to be taken into consideration.”
=======================================================
Complete Judgement
Madras
High Court
Mrs.Kannammal
vs I T O on 13-02-2019
CORAM
THE
HON'BLE Dr. JUSTICE ANITA SUMANTH
W.P.No.3849
of 2019
and
W.M.P.No.4278
of 2019
Mrs.Kannammal
....Petitioner
--Vs--
Income
Tax Officer
O/o
The Income Tax Officer
Ward
1(1)
Tirupur
...Respondent
PRAYER in WPs: Writ
Petitions filed under Article 226 of the Constitution of India praying for a
writ of Certiorarified Mandamus to call for the records of the respondent in
his proceedings leading to the passing of the order vide
AHXPK7701Q/AY2016-17/W1(1)TRP/2018-19 dated 25.01.2019 and quash the same and
direct the respondent to stay the recovery of tax demand until the disposal of
the appeal by the Commissioner of Income Tax(Appeals).
For
Petitioner: Mr.S.Sathiyanarayanan
For
Respondent: Mr.Jayapratap
ORDER
Mr.Jayapratap, learned
counsel for the respondent takes notice on behalf of the respondent. By consent
of both learned counsels, the writ petition is taken up for final disposal at
the stage of admission.
2. The challenge in the
present writ petition is to an order dated 25.01.2019 passed by the respondent
dismissing the application for stay filed by the petitioner on 19.01.2019 and
calling upon her to pay the disputed demand immediately.
3. The petitioner is an
assessee who has suffered an order of income tax assessment dated 24.12.2018 in
relation to assessment year 2016-17 under the provisions of the Income Tax Act,
1961 (in short 'Act'). A statutory appeal has been filed before the
Commissioner of Income Tax (Appeals) on 22.01.2019 which is still to be taken
up for hearing.
4. Parallelly, the
petitioner had filed an application for stay of recovery of demand under
Section 220(6) of the Act on 19.01.2019 before the respondent.
The application for
grant of stay was filed on the sole ground that the assessee had preferred an
appeal against the order of assessment which is pending before the first
Appellate Authority. The petition for stay came to be disposed of by the
Respondent by order dated 25.01.2019.
5.
Mr.S.Sathiyanarayanan, learned counsel for the petitioner would submit that the
petitioner is a housewife and has challenged the assessment before the
Appellate Authority on various grounds. According to him, Instruction
No.96[F.No.1/6/69/-ITCC] dated 21.08.1969 issued by the Central Board of Direct
Taxes states that no recovery should be effected of a disputed demand where the
determination of tax in an assessment is substantially higher than the returned
income. The Instruction is binding on all Income Tax Authorities under section
119 of the Act. The aforesaid circular has been consistently followed in
several decisions by High Courts including the jurisdictional High Court viz.,
i) N.Jegatheesan V.
Deputy Commissioner of Income-tax, Madurai [[2015] 64 taxmann.com 339 (Madras)
and ii) Taneja Developers & Infrastructure Ltd. V.
Assistant Commissioner
of Income-tax [[2009] 222 CTR 521 (Delhi).
6. In the present case,
the return of income admitted taxable income of Rs.6,23,770/- claiming an
exemption in respect of an amount of http://www.judis.nic.in Rs.10,19,74,341/-.
The exemption had been denied by the Assessing Officer, who brings the same to
tax. Thus the income has been computed at a sum of Rs.10,26,01,710/-, which is
several times in excess of the income returned. Since this assessment
is a 'high pitched assessment' he would state that a complete stay of recovery
ought to have been granted in such a case.
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
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 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
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 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 http://www.judis.nic.in
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 http://www.judis.nic.in to request that the appeal be posted
within a month so that Tribunal’s order on the appeal can be known within two
months.
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
authorities in earlier years or the decision of the Supreme Court or
jurisdictional High http://www.judis.nic.in Court is in favour of the assessee,
etc.), the assessing officer shall refer the matter 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 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 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 followed 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
http://www.judis.nic.in 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 discretion to the authority to
either increase or decrease the quantum demanded based on the three vital
factors to be taken into consideration.
13. In the present
case, the assessing officer has merely rejected the petition 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 demand. 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 (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
http://www.judis.nic.in 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.
15. I thus set aside
impugned order dated 25.01.2019. The Assessing Officer is directed to pass
orders de novo on the stay application filed by the petitioner in the light of
the discussion as aforesaid, after hearing the petitioner, within a period of
four weeks from date of receipt of a copy of this Order. I have, for the
aforesaid reason, consciously and deliberately refrained from referring to or
making any observation on the merits of the assessment.
16. With these
directions, the writ petition stands disposed of and consequently, the
connected miscellaneous petition is closed. There shall be no order as to
costs.
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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