SHRI
DALPATSINH UKABHAI VASAVA VS PCIT
HIGH COURT
OF GUJARAT AT AHMEDABAD
C A NO. 9825
OF 2019, DATED: 24 JUNE, 2019
Summarised
Judgement (Scroll for the Complete Judgement)
Introduction
Writ-application under
Article 226 of the Constitution of India, the writ-applicant has prayed for the
following reliefs:
"(a) Your
Lordships be pleased to issue a writ of mandamus or any other appropriate writ,
order and/or direction and be pleased to quash and set aside the impugned order
dated 26.3.2019 passed by the respondent no.1 rejecting the stay application
filed in Appeal as being illegal, invalid, null & void, unjust, unfair and
violative of Arts.14 & 19 of the Constitution of India.
(b) Your Lordships be
pleased to issue a writ of mandamus or any other appropriate writ, order and/or
direction and be pleased to quash and set aside the impugned order dated
11.2.2019 and 10.5.2019 passed by the respondent no.2 as being illegal,
invalid, null & void, unjust, unfair and violative of Arts.14 & 19 of
the Constitution of India.
(c) Your Lordships be
pleased to direct the respondent no.1 to forthwith decide the Appeal pending
before it without insisting for payment of 20% of demand amount.
Facts of the Case:
In the instant case,
the assessee has received the immovable property for Rs.3,79,92,500/- and there
is no liability on the assesee to payable the said consideration. The assessee
has received the said property without consideration as clear from the facts
mentioned above. Hence, the amount of Rs.3,79,92,500/- is hereby added to the
total income of the assessee under the head income from other sources as per
the provisions of S.56(2) of the Act.
A notice of demand
dated 29th December 2018 came to be served upon the writ-applicant under
Section 156 of the Act. Against the order of assessment dated 29th December
2018 passed by the respondent no.2, the writ-applicant preferred appeal before
the respondent no.1 in the prescribed form. The writ-applicant thereafter also
preferred an application dated 28th January 2019 addressed to the respondent
no.2 with a prayer to grant stay against the demand raised by the respondent
no.2 pursuant to the order passed under Section 143(3) of the Act.
In this regard, it is seen
that he outstanding demand of Rs 1,73,29,162/- is disputed before the learned
CIT (A)-2, Vadodara and a such after considering your stay application and in
view of the office memorandum issued by the CBDT vide F.No. 404/72/93-ITCC
dated 31.7.2017, you are requested to make payment of 20% of outstanding demand
of Rs.1,73,29,162/- i.e Rs.34,65,832/-subject to following conditions.
(a) you are requested
to submit an undertaking that you will co-operate in the early disposal of
appeal failing which the stay order will be cancelled.
(b) This office
reserves the right to review the order passed after expire of reasonable period
(i.e. 6 months) or if you have not co-operated in the early disposal of appeal
or where a subsequent pronouncement by a higher appellate authority or Court
after the above situations.
(c) This office
reserves the right to adjust refunds arising, if any, against the demand, to
the extent of t he amount required for granting stay and subject to the
provisions of section 245.
Besides, this, the
assessee has not placed anything on records, which could prove that the
assessee is genuine financial difficulties to pay the demand. Therefore, the
stay petition of the assessee is hereby rejected and the assesee is directed to
pay 20 % of the demand positively by 28.3.2019 in view of the amended
instruction no. 1914 issued by the CBDT."
It is submitted that
the assessee's financial position is C/SCA/9825/2019 JUDGMENT very bad and he
is not capable to liquidate the demand of Rs 34,65,832 at one go. We submit
that the business of assessee is passing through a very bad phase which has
resulted into financial crisis and it is not possible for the assessee to
discharge the demand of Rs 34,65,832 at one go. Hence, it is requested to your
kind office to grant the above installments towards payment of demand of
Rs.34,65,832/-"
Judgement of Court:
It is clarified that if the writ-applicant
does not file any such affidavit, or in such affidavit, declares that he does
not wish to be bound by such conditions, or having in such affidavit agreed to
fulfill the conditions, fails to do so by 31st July 2019, the relief granted
under this order would stand automatically withdrawn and the impugned order
would revive.
Petition is disposed of
accordingly.
===========================================
Complete
Judgement
Shri Dalpatsinh Ukabhai Vasava vs
PCIT
HIGH COURT OF GUJARAT AT AHMEDABAD
C A NO. 9825 of 2019, Dated: 24 June, 2019
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL
CIVIL APPLICATION NO. 9825 of 2019
FOR
APPROVAL AND SIGNATURE:
HONOURABLE
MR.JUSTICE J.B.PARDIWALA Sd/-
and
HONOURABLE
MR.JUSTICE A.C. RAO Sd/-
Whether Reporters of
Local Papers may be allowed NO
to see the judgment ?
To be referred to the
Reporter or not ?
NO
Whether their Lordships
wish to see the fair copy
NO
of the judgment ?
Whether this case
involves a substantial question NO
of law as to the
interpretation of the Constitution
of India or any order
made thereunder ?
Appearance:
MR H.R. PRAJAPATI for
the Petitioner(s) No. 1
MR VARUN K.PATEL for
the Respondent(s) No. 1
NOTICESERVEDBY DS(5)
for the Respondent(s) No. 2
SHRI
DALPATSINH UKABHAI VASAVA
Versus
THE
PRINCIPAL COMMISSIONER OF INCOME TAX - 2
CORAM:
HONOURABLE MR.JUSTICE J.B.PARDIWALA
and
HONOURABLE
MR.JUSTICE A.C. RAO
(PER: HONOURABLE MR.JUSTICE J.B.PARDIWALA)
C/SCA/9825/2019 JUDGMENT
1. By this
writ-application under Article 226 of the Constitution of India, the
writ-applicant has prayed for the following reliefs :
"(a) Your
Lordships be pleased to issue a writ of mandamus or any other appropriate writ,
order and/or direction and be pleased to quash and set aside the impugned order
dated 26.3.2019 passed by the respondent no.1 rejecting the stay application
filed in Appeal as being illegal, invalid, null & void, unjust, unfair and
violative of Arts.14 & 19 of the Constitution of India.
(b) Your Lordships be
pleased to issue a writ of mandamus or any other appropriate writ, order and/or
direction and be pleased to quash and set aside the impugned order dated
11.2.2019 and 10.5.2019 passed by the respondent no.2 as being illegal,
invalid, null & void, unjust, unfair and violative of Arts.14 & 19 of
the Constitution of India.
(d) Your Lordships may
be pleased to stay the impugned order dated 26.3.2019 passed by the respondent
no.1 and further be pleased to direct the respondent no.1 to decide the appeal
filed by the petitioner forthwith without insisting for payment of 20% of the
demand amount pending the admission, hearing and final disposal of this
petition.
(e) Your Lordships be pleased to grant such
other and further relief/s, as are deemed fit, in the interest of
justice."
2. The writ-applicant
had electronically filed his return of income for the Assessment Year 2016-17
on 16th October 2016 declaring the total income of Rs.9,09,240=00. The case was
selected for limited scrutiny through the Computer Aided Scrutiny Selection
(for short, 'the CASS') and a notice under Section 143(2) of the Income Tax
Act, 1961, was issued on 3rd July 2017 which was duly served upon the
writ-applicant. A notice under Section 142(1) of the Act was issued to the
writ- applicant on 18th September 2017 calling upon him to furnish the details
called for. The case of the writ-applicant was selected through the CASS under
the limited scrutiny to verify the following issues :
(1) whether the
unsecured loans were genuine and from disclosed sources, and (2) whether the
investment and income relating to the properties were duly disclosed.
3. During the course of
the assessment proceedings it was noticed that the writ-applicant had purchased
agricultural land situated at Tavra, Taluka and District Bharuch, bearing
Block/ Survey No.97 for Rs.3,79,92,500=00. The writ-applicant purchased the
said property from one Shri Melabhai Naglabhai. Upon verification of the
details of the bank account of Shri Melabhai Naglabhai as well as of one
M/s.Reva Enterprise from whom the writ-applicant claims to have obtained the
unsecured C/SCA/9825/2019 JUDGMENT loan and also from one Narendrabhai Parmar
from whom he claims to have obtained the unsecured loan of Rs.2,50,00,000=00,
the transactions were found to be sham and bogus. Ultimately, the Assessing
Officer added the amount of Rs.3,79,92,500=00 to the total income of the
writ-applicant under the head 'Income from other sources' in accordance with
the provisions of Section 56(2) of the Act. The last part of the order of
assessment reads thus :
"In view of the
above, it is clear that in actual there is no liability is in existence payable
by the assessee to Shri Melabhai Vasava i.e. seller and Shri Narendrasinh
Parmar and assessee has received the said property without any consideration.
This clearly shows that the assessee has not incurred any cost for the purchase
of land but by way of adopting the colourable device to acquire the property
and obtained the property without any consideration. Therefore, as per the
provisions of S.56(2) of the Act, if any persons received the immovable
property without consideration stamp duty value of which exceeds Rs.50,000/-
than the stamp duty value of the said property will be treated as income of the
assessee under the head income from other sources. The provisions of
S.56(2)(vii)(b)(i) of the Act is reproduced as under :
"(2) In
particular, and without prejudice to the generality of the provisions of
sub-section (1), the following income shall be chargeable to income- tax under
the head" Income from other sources", namely:-
(vii) where an individual or a Hindu undivided
family
Receives, in any
previous year, from any person or persons on or after the 1st day of October,
2009 -
1. any immovable
property,
2. without
consideration, the stamp duty value of which exceeds fifty thousand rupees, the
stamp duty value of such property."
In the instant case,
the assessee has received the immovable property for Rs.3,79,92,500/- and there
is no liability on the assesee to payable the said consideration. The assessee
has received the said property without consideration as clear from the facts
mentioned above. Hence, the amount of Rs.3,79,92,500/- is hereby added to the
total income of the assessee under the head income from other sources as per
the provisions of S.56(2) of the Act.
Penalty proceedings
u/s.271(1)(c) of the Act are initiated separately for concealing particulars of
income.
Subject to the above
remarks and on the basis of details available on record, total income of the
assessee is computed as under :
Returned Income as
per Rs.9,09,240/-
return dated 16.10.2016
Add : Income from other
sources Rs.3,79,92,500/-
S.56(2)
Assessed Income
u/s.143(3) of Act Rs.3,89,01,740/-
Agricultural Income Rs.6,97,176/-
Assessed u/s.143(3) of
the I.T.Act, 1961. Charged interest u/s.234A, 234B, 234C of the Act as
applicable. Give credit for prepaid taxes and issue demand
notice/challan/refund order, as the case may be. Entered in D&CR for
statistical purpose. Issue penalty notice u/s.271(1)(c) of the Act for
concealing the particulars of income."
4. A notice of demand
dated 29th December 2018 came to be served upon the writ-applicant under
Section 156 of the Act. Against the order of assessment dated 29th December
2018 passed by the respondent no.2, the writ-applicant preferred appeal before
the respondent no.1 in the prescribed form. The writ-applicant thereafter also
preferred an application dated 28th January 2019 addressed to the respondent
no.2 with a prayer to grant stay against the demand raised by the respondent
no.2 pursuant to the order passed under Section 143(3) of the Act. While
praying for stay of demand raised pursuant to the order under Section 143(3) of
the Act, the writ-applicant contended that the case was one of high pitched
assessment. The writ- applicant also pointed out his poor financial condition.
The writ- applicant submitted before the Income Tax Officer that even the
deposit of 20% of the total amount was beyond his financial capacity.
5. On 11th February
2019, the application preferred by the writ-applicant seeking stay came to be
disposed of in the following terms :
"Please refer to your
application dated 18.1.2019 received in this office on 28.1.2019 vide which you
have stated that you C/SCA/9825/2019 JUDGMENT have preferred an appeal before
the learned CIT(A)-2, Vadodara on 25.1.2019 against the order passed under
section 143(3) of the Act on 29.12.2018. Further you have requested to keep the
demand of Rs.1,73,29,162 in abeyance till the disposal of first appeal.
However, as prevailing rules, you have not paid 20% of demand Rs.34,65,832/- of
Rs.1,73,29,162/-
2. In this regard, it
is seen that he outstanding demand of Rs 1,73,29,162/- is disputed before the
learned CIT (A)-2, Vadodara and a such after considering your stay application
and in view of the office memorandum issued by the CBDT vide F.No.
404/72/93-ITCC dated 31.7.2017, you are requested to make payment of 20% of
outstanding demand of Rs.1,73,29,162/- i.e Rs.34,65,832/-subject to following
conditions.
(a) you are requested
to submit an undertaking that you will co-operate in the early disposal of
appeal failing which the stay order will be cancelled.
(b) This office
reserves the right to review the order passed after expire of reasonable period
(i.e. 6 months) or if you have not co-operated in the early disposal of appeal
or where a subsequent pronouncement by a higher appellate authority or Court
after the above situations.
(c) This office
reserves the right to adjust refunds arising, if any, against the demand, to
the extent of t he amount required for granting stay and subject to the
provisions of section 245.
(d) In case of failure in making the payment
within seven days (07) of
receipt of this letter, then this office reserves right to vacate the stay and
appropriate recovery measures as per I.T Act. Act, 1961 and I.T rules, 1962
shall be taken, which may kindly be noted."
6. The writ-applicant
thereafter preferred an application praying for stay of demand before the
Principal Commissioner of Income Tax - 2, Vadodara. The Principal Commissioner
of Income Tax - 2, Vadodara, directed the writ-applicant to pay 20% of the
demand by 28th March 2019. The order reads thus :
"3. I have
carefully considered the stay application of the assessee, argument of the A.R.
and report of the A.O. On perusal of the assessment order, it is observed that
the assessment in this case was finalised after marshalling all relevant facts,
providing ample opportunities of being heard and the addition was made on sound
grounds. As seen from the assessment order, the transactions entered into by
the assessee for acquisition of property is not a normal transaction and the
consideration paid by the assessee for the same has been transferred back to
the lending parties by way of circular movement of funds, which is not a normal
phenomenon. In this case, what appears to be apparent is not found to be real
by the AO. In fact, the assesee has received the land without paying any actual
consideration. The view taken by the AO is therefore found to be not devoid of
merits. Further, as the far a the contentions of he assessee regarding
applicability C/SCA/9825/2019 JUDGMENT of section 56(2) of the Act is
concerned, it is quite evident from the facts of the case that the registered
sale deed was executed during FY 2015-16 relevant to AY 2016-17 and hence the
provisions of sections 56(2) have been rightly invoked by the AO. Therefore,
the contentions raised by the assessee in his submission dated 19.2.2019 is not
tenable.
4. Besides, this, the
assessee has not placed anything on records, which could prove that the
assessee is genuine financial difficulties to pay the demand. Therefore, the
stay petition of the assessee is hereby rejected and the assesee is directed to
pay 20 % of the demand positively by 28.3.2019 in view of the amended
instruction no. 1914 issued by the CBDT."
7. The writ-applicant
thereafter put forward a proposal for payment of 20% of the demand as under :
"1. The Assessee
agrees to pay 20% of the outstanding demand of Rs.1,73,29,16 i.e. Rs.34,65,832.
Further, your kind office may oblige the assessee by granting installment to
pay the demand of Rs.34,65,832 as under :
a. The Assessee would
pay Rs.5,00,000 as first installment.
b. For liquidating the
balance demand of Rs.29,65,832, the assessee agrees to pay monthly installment
of Rs.1,00,000 each.
2. It is submitted that
the assessee's financial position is C/SCA/9825/2019 JUDGMENT very bad and he
is not capable to liquidate the demand of Rs 34,65,832 at one go. We submit
that the business of assessee is passing through a very bad phase which has
resulted into financial crisis and it is not possible for the assessee to
discharge the demand of Rs 34,65,832 at one go. Hence, it is requested to your
kind office to grant the above installments towards payment of demand of
Rs.34,65,832/-"
8. The Income Tax
Officer, Ward-3, Nadiad, vide communication dated 10th May 2019, informed the
writ- applicant as under :
"As discussed with
you, installment of Rs.5,00,000/- instead of Rs.1,00,000/- vide your above
letter is granted till the demand of 20% Rs.34,65,832/- which commence from May
2019 to November 2019 for Rs.5,00,000/- each month. Please note that if you
failed to do so stay of above demand will be rejected and further action for
recovery of demand as per provisions of Income Tax Act, 1961 will be taken.
Further, you are requested to pay first installment of Rs 5,00,000/- today then
bank account will be revoke. Please note the above."
9. Being dissatisfied
with the order dated 26th March 2019 referred to above, the writ-applicant has
come up with this petition.
10. The principal
argument of Mr.Prajapati, the learned counsel appearing for the writ-applicant
is that this being a case of high pitched assessment, the writ-applicant should
not be C/SCA/9825/2019 JUDGMENT asked to deposit 20% of the total amount as it
is beyond his financial capacity and there is no such statutory provision in
the Act empowering the authority to ask the writ-applicant to deposit 20% of
the total amount for the purpose of entertaining the appeal. Mr.Prajapati
submitted that the appeal against the order of assessment merits consideration
on various legal grounds. If the writ-applicant is unable to deposit the amount
of 20%, then his appeal would not be entertained and coercive steps may be
taken for the recovery of the requisite amount. In such circumstances referred
to above, Mr.Prajapati prays that there being merit in this petition the same
may be allowed and the writ-applicant may be exempted from depositing 20% of
the total amount and his appeal may be ordered to be heard on merits.
11. Mr.Prajapati places
reliance on one order passed by a Division Bench of the Bombay High Court in
the similar set of facts and circumstances. Mr.Prajapati seeks to rely on the
order passed in the case of Bhupendra Murji Shah v. Deputy Commissioner of
Income Tax-15(1)(1) and others (Writ Petition No.2157 of 2018 and Writ Petition
No.2160 of 2018, decided on 11th September 2018. The order reads thus :
"2. It is
undisputed that the petitioner has challenged the demand raised in the first
petition No.2157 of 2018 in the sum of Rs.11,15,99,897/- for Assessment Year
2015-2016 by approaching the Commissioner of Income Tax (Appeals). Thus, an
Appeal against the Assessment Order raising this demand is filed and is
pending.
3. In the meanwhile,
the petitioner approached the Assessing Officer/Deputy Commissioner of Income
Tax, Circle 15(1)(1), Aayakar Bhavan, Mumbai. He may have made an application
and termed it as a request for stay, but what essentially he was worried and
concerned about was that since the Appeal is pending and yet to be decided, nor
was there any consideration of application for stay by Appellate Authority,
this Deputy Commissioner will treat the petitioner/assessee as 'assessee in default'.
Thereupon, he will
recover the amount by coercive means. It is in these circumstances, this letter
was addressed and we have carefully perused that letter. That records that the
subject matter of tax is in dispute. The Assessment Order is challenged. The
Appeal under Section 246-A of the Income Tax Act 1961 challenging the
Assessment Order dated 30th December 2017, received on 1st August 2018 is
pending. The request of the petitioner/assessee is that the demand be kept in
abeyance till the disposal of this Appeal.
4. With marginal
difference in the figures, the issue raised in the second petition No.2160 of
2018 is also identical. Both petitions are taken up together. It is not
disputed before us that in terms of Chapter XX styled as Appeals and Revision,
the order of the Assessment Officer is appealable under section 246 subsection
(1). Once it is an appealable order and the Appeal has been filed, it is
pending, then, the petitioner/appellant should have been given either an
opportunity to seek a stay during the pendency of the appeal, which power is
also conferred C/SCA/9825/2019 JUDGMENT admittedly in the Commissioner or this
Deputy Commissioner should have held the demand in abeyance as prayed by the
petitioner/assessee. He does neither, but proceeds to communicate to the
petitioner/ assessee that his application for stay is dismissed. The
petitioner/ assessee should pay 20% of the outstanding amount as prescribed in
some Circulars of the Revenue and particularly, dated 29th February 2016 and
produce the challan and seek stay of demand again, failing which collection and
recovery will continue.
5. We are not concerned
here with the Circular of the Central Board of Direct Taxes. We are not
concerned here also with the power conferred in the Assessing Officer of
collection and recovery by coercive means. All that we are worried about is the
understanding of this Deputy Commissioner of a demand, which is pending or an
amount, which is due and payable as tax. If that demand is under dispute and is
subject to the appellate proceedings, then, the right of appeal vested in the
petitioner/assessee by virtue of the Statute should not be rendered illusory
and nugatory. That right can very well be defeated by such communication from
the Revenue/Department as is impugned before us. That would mean that if the
amount as directed by the impugned communication being not brought in, the
petitioner may not have an opportunity to even argue his Appeal on merits or
that Appeal will become infructuous, if the demand is enforced and executed
during its pendency. In that event, the right to seek protection against
collection and recovery pending Appeal by C/SCA/9825/2019 JUDGMENT making an
application for stay would also be defeated and frustrated. Such can never be
the mandate of law.
6. In the
circumstances, we dispose both these petitions with directions that the
Appellate Authority shall conclude the hearing of the Appeals as expeditiously
as possible and during pendency of these Appeals, the petitioner/appellant
shall not be called upon to make payment of any sum, much less to the extent of
20% under the Assessment Order/Confirmed Demand or claim to be outstanding by
the Revenue."
12. On the other hand,
this petition has been vehemently opposed by Mr.Varun Patel, the learned
counsel appearing for the Revenue. Mr.Patel submitted that no error, not to
speak of any error of law, could be said to have been committed by the
authority in asking the writ-applicant to deposit 20% of the assessed amount.
The impugned order is discretionary in nature and, therefore, this Court may
not disturb the same in exercise of its extraordinary jurisdiction under
Article 226 of the Constitution of India.
13. Mr.Patel laid much
emphasis on the following averments made in the affidavit-in-reply :
"3. It is further
submitted that the petitioner-assessee is engaged in the trading of Petrol,
Diesel and oil through its firm called M/s. Kilraj Petroleum. In the present
case, the petitioner-assessee had filed his Income Tax Return for the A.Y. 2016-17
declaring total income of Rs.9,09,240/-. Thereafter, the case of the
petitioner-assessee was selected C/SCA/9825/2019 JUDGMENT for limited scrutiny
though computer Aid scrutiny Selection (CASS). During the assessment
proceedings under section 143(3) of the Income Tax Act (hereinafter referred to
as "the Act), the assessing Officer noticed that the assessee had
purchased agriculture land in District Bharuch for Rs.3,97,92,500/-. After
scrutinizing the said transaction of purchase of land by the petitioner-assessee
in detail, the assessing officer int he assessment order had observed that the
said transaction is a sham transaction done by the assessee in connivance with
Shri Melabhai Vasava, the seller and Shri Narendrasinh Parmar. The assessing
officer also found that there are series of transactions of unsecured loan
between the aforesaid parties including the seller and the assessee, which are
not genuine and sham transaction. The assessing officer then, concluded that
the assessee has received the said property without paying any consideration to
the seller by adopting the colorable device. The assessing officer after
recording aforesaid findings in detail, made addition under section
56(2)(vii)(b)(i) of the Act of Rs.3,87,92,500/- in the assessment order dated
29.12.2018 (Annexure A, page 15). The assessing officer then, issue demand
notice under section 156 of the Act dated 29.12.2018 (Annexure-B, page 23)
against the assessee for a sum of Rs.1,73,29,162/- pursuant to the said
assessment order. The petitioner-assessee
has thereafter preferred an appeal (Annexure-D, page 29) before the
Commissioner of Income Tax II (Appeals), Baroda against the said assessment
order.
Pending the aforesaid
appeal before the CIT(A), the petitioner- assessee as per the provisions of
Section 220 of the Act has made application to the assessing officer for
granting stay of the said demand of Rs.1,73,29,162/- vide his letter dated
28.1.2019 (Annexure-E, page 34). The said application for stay of demand was
decided by the assessing officer by order dated 11.2.2019 (Annexure-H, page 41)
and the assessee was requested to pay 20% of total outstanding demand of
Rs.1,73,29,162/- (i.e Rs.34,65,832/-) as per CBDT's Circular dated 31.7.2017.
Annexed hereto and marked as Annexure-R1 are the copies of the CBDT's circular
dated 31.7.2017 and 29.2.2016.
It is submitted that
the petitioner-assessee being aggrieved by the said order of assessing officer
dated 11.2.2019 has preferred stay/review application before the Principal
Commissioner of Income Tax-II (PCIT), Baroda by letter/application dated
18.2.2019 (page 43). The PCIT had, thereafter, passed the order dated 26.3.2019
(Annexure J page 48) rejecting the said application of the petitioner- assessee
and directing the assessee to pay 20% of the demand. The PCIT in the said order
discussed and rejected the contentions of the assessee on merits. The PCIT had
also observed that the assessee had not placed anything on the record to prove
the gaminess of his alleged financial difficulties to pay the demand. The
petitioner-assessee had thereafter preferred another application to the
assessing officer seeking complete stay of demand by his letter dated 3.5.2019.
It is submitted that in view of the aforesaid orders of the assessing officer
and PCIT with respect to stay of demand, another application for stay of demand
made by C/SCA/9825/2019 JUDGMENT the assessee to the assessing officer is not
maintainable in law. The assessing officer has then, issued the orders under
section 226(3) of the Act upon the bankers of the petitioner (Annexure M, pages
55 and 57) for payments towards the aforesaid outstanding demand against the
assessee from his bank accounts. The petitioner assessee had then, made another
application dated 10.5.2019 whereby the petitioner has agreed to pay 20% of the
outstanding demand i.e Rs.34,65,832/- of Rs.5,00,000/- as first monthly
installments and thereafter each installment of Rs.1,00,000/-. The assessing
officer by his letter dated 10.5.2019 had partially accepted the said proposal
of he petitioner by directing him to pay all the monthly installment of
Rs.5,00,000/- each instead of Rs.1,00,000/-. The petitioner-assessee had
thereafter, paid first installment of Rs.5,00,000/- each instead of
Rs.1,00,000/-. The petitioner-assessee had thereafter, paid first installment
of Rs.5,00,000/-. However, before the second installment of Rs.5,00,000/- was
due and payable, the petitioner- assessee has filed present petition
challenging the said order of the PCIT dated 26.3.2019 as also the orders of
assessing officer dated 11.2.019 and 10.5.2019.
It is submitted that
the petitioner-assessee having agreed to pay 20% of the total demand in
installments has accepted the aforesaid orders in principle. It is, therefore,
not open for the petitioner-assessee to file the present petition challenging
the aforesaid orders of the respondent. It is further submitted that in the
present petition, the assessee has alleged the case of financial difficulty in
paying the C/SCA/9825/2019 JUDGMENT outstanding demand against him. It is
however, submitted that the assessee has completely failed to prove his case of
financial difficulties with supporting evidence either before the assessing
officer or the PCIT or before this Hon'ble Court in the present petition. Rather,
the last income-tax return of the assessee for the A.Y. 2018-19 along with the
balance- sheet clearly establishes that the case of financial difficulty
pleaded by the petitioner assessee is baseless and without any merits. Annexed
hereto and marked as Annexure-R2 are the copies of the income tax return along
with the balance-sheet and P & L of the petitioner-assessee for the A.Y.
2018-2019. It is submitted that the petitioner had not uploaded the annexures
to balance-sheet and P& L account along with his return.
In any case, having
regard to the facts of the present case as also in view of the observations of
assessing officer in the assessment order, the petitioner-assessee has no prima
facie in an appeal before the CIT(A) and the balance of convenience is also not
favour of the assessee. It is therefore, submitted that in view of what is
stated hereinabove, the present petition does not deserve to be entertained by
this Hon'ble Court and the petitioner is not entitled to get any relief
including the interim relief as prayed for in the present petition."
ANALYSIS :
14. The issue of
granting stay pending appeal is governed principally by the two circulars
issued by the CBDT. The first circular was issued way back on 2nd February 1993
being instructions no.1914. The circular contained guidelines for staying the
demand pending appeal. It was stated that the demand would be stayed if there
are valid reasons for doing so and mere filing of appeal against the order of
assessment would not be sufficient reason to stay the recovery of demand. The
instructions issued under the office memorandum dated 29th February 2016 are
not in super-session of the instructions no.1914 dated 2nd February 1993 but
are in partial modification thereof. The preamble of these instructions provide
that in order to streamline the process of grant of stay of standardization of
quantum of lump-sum payment to be made as a pre-condition for stay of demand of
dispute before the Commissioner of Income Tax (Appeals), such modified
guidelines were being issued. The relevant portion of these instructions read
as under:
"4. In order to
streamline the process of grant of stay and standardize the quantum of lump sum
payment required to be made by the assessee as a pre-condition for stay of
demand disputed before CIT(A), the following modified guidelines are being
issued in partial modification of Instruction No.1914:
(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 para (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 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.
(C) In a case where
stay of demand is granted C/SCA/9825/2019 JUDGMENT by the assessing officer on
payment of 15% of the disputed demand and the assessee is still aggrieved, he
may approach the jurisdictional administrative Pr. CIT/CIT for a review of the
decision of the assessing officer.
(D) The assessing
officer shall dispose of a stay petition within 2 weeks of filing of the
petition. If a reference has been made to Pr. CIT/CIT under para 4 (B) above or
a review petition has been filed by the assessee under para 4 © above, the same
shall also be disposed of by the Pr. CIT/CIT within 2 weeks of the assessing
officer making such reference or the assessee filing such review, as the case
may be.
(E) In granting stay,
the Assessing Officer may impose such conditions as he may think fit. He may,
inter alia -
(i) require an
undertaking from the assessee that he will cooperate in the early disposal of
appeal failing which the stay order will be cancelled;
(ii) reserve the right
to review the order passed after expiry of reasonable period (say 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;
(iii) reserve the right to adjust refunds arising, if any, against the demand,
to the extent of the amount required for granting stay and subject to the
provisions of section 245."
15. This circular thus
lays down 15% of the disputed demand to be deposited for stay, by way of a
general condition. The circular does not prohibit or envisage that there can be
no deviation from this standard formula. In other words, it is inbuilt in the
circular itself to either decrease or even increase the percentage of the
disputed tax demand to be deposited for an assessee to enjoy stay pending
appeal. The circular provides the guidelines to enable the Assessing Officers
and Commissioners to exercise such discretionary powers more uniformly.
16. Ordinarily, the
court would be slow in interfering with such discretionary exercise of powers
by the authority concerned. However, in the present case, the total tax demand
is quite high. The issues are at the first appeal stage. Even 20% of the
disputed tax dues would run into few lakhs of rupees. To be precise,
approximately 34 lakh.
17. In the overall view
of the matter, we reduce the requirement of depositing the disputed tax dues to
enable the writ-applicant to enjoy stay pending the appeal before the appellate
authority to 10%. We are informed that the writ- applicant has so far deposited
Rs.5 lakh. We clarify that this would, however, be on a further condition that
the writ-applicant shall offer immovable security for the remaining 10% to the
satisfaction of the assessing authority. The order passed by the authority
concerned stands modified accordingly.
18. Both these
conditions shall be satisfied latest by 31st July 2019.
19. The writ-applicant
is directed to file an affidavit before the registry whether he would abide by
these conditions and undertake to fulfill them within the time permitted. Such
affidavit shall be filed latest by 5th July 2019.
20. It is clarified
that if the writ-applicant does not file any such affidavit, or in such
affidavit, declares that he does not wish to be bound by such conditions, or
having in such affidavit agreed to fulfill the conditions, fails to do so by
31st July 2019, the relief granted under this order would stand automatically withdrawn
and the impugned order would revive.
21. Petition is disposed of accordingly.
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