2012 (4) TMI 490 - HC - Income Tax

Interim stay of demand assessee engaged in real estate business following completed contract method addition of Rs 1.94 crores made under scrutiny assessment stay petition filed before CIT got rejected during hearing of writ petition, petitioner submitted to pay Rs 40 lacs for disposal of the appeal Held that - Petitioner is directed to deposit said sum within a period of 4 weeks from the date of receipt of a copy of this order. Thereon, third respondent shall hear and dispose of the appeal on merits within a period of four months.

Summary

Issues:
Assessment under Income Tax Act, 1961 for the petitioner firm's real estate business for the assessment year 2009-2010, dispute over the method of completion of construction, addition of 7% of total sales amount and interest received, challenge to the assessment order, rejection of stay application under Section 220(6) of the Income Tax Act, 1961, writ petition under Article 226 of the Constitution of India challenging the rejection of stay petition.

Analysis:
The petitioner, a partnership firm engaged in real estate business, filed its return of income for the assessment year 2009-2010, admitting a total income of Rs.1,17,11,560. The firm followed the completed contract method for its construction business, claiming 84% completion for that year. However, the first respondent disagreed, adding 7% of total sales amounting to Rs.4,28,34,813 and interest received of Rs.75,900, resulting in an assessment of the petitioner's income at Rs.5,46,22,270 with a demand of Rs.1,94,19,150, including interest. The petitioner appealed the assessment order, challenging its arbitrary and illegal nature.

The first respondent's assessment was contested by the petitioner through an appeal filed before the third respondent. The petitioner also sought a stay of the demand under Section 220(6) of the Income Tax Act, 1961, which was initially rejected by the first respondent and subsequently by the second respondent. Dissatisfied with the rejection, the petitioner approached the High Court through a writ petition under Article 226 of the Constitution of India, seeking to quash the order denying the stay application.

During the hearing of the writ petition, the petitioner expressed willingness to pay Rs.40,00,000 to the first respondent within a specified period. The respondents suggested an interim stay of the income tax demand on the condition that the petitioner pays 50% of the amount due. The Court directed the petitioner to pay Rs.40,00,000 within four weeks to the first respondent. Upon payment, the third respondent was instructed to hear and decide the appeal on its merits and in accordance with the law within four months. The writ petition was disposed of with no costs, and the connected miscellaneous petition was closed.

In conclusion, the High Court's judgment provided relief to the petitioner by allowing the payment of a specified amount within a set timeframe to proceed with the appeal process, ensuring a fair hearing and resolution of the dispute regarding the assessment order for the assessment year 2009-2010 under the Income Tax Act, 1961.