2012 (7) TMI 153 - HC - Income Tax

Guidelines for granting interim stay - disallowance made u/s 40(a)(ia) - the question of granting interim stay by the appellate authority, nothing has been considered on merits - Held that - As the merits have not been considered and what is considered is only that appellant has not been able to make out any case of financial stringency - the appellate authority is to discharge the function as a quasi judicial authority , who has to consider and decide whether or not any condition is to be imposed and if so, to what extent and why and in the absence of any such discussion, when such authority declares that 50% has to be satisfied, it cannot but be held as without proper application of mind - the condition imposed by the appellate authority upon the petitioner requires modification - petitioner to satisfy the second installment with in two weeks on which event he will continue to have the benefit of interim stay, throughout the pendency of the appeal.

Summary

Issues:
Challenge to assessment finalized under Section 143(3) of the Income Tax Act in different assessment years 2005-06 to 2007-08. Appeal against the condition imposed for availing interim stay by the appellate authority.

Analysis:

Issue 1: Challenge to Assessment
The petitioner challenged the assessment finalized by the first respondent under Section 143(3) of the Income Tax Act for the assessment years 2005-06 to 2007-08 through appeals. The petitioner also filed interim applications for stay, which led to a court direction for the appellate authority to consider and pass orders on the stay applications.

Issue 2: Condition for Interim Stay
The second respondent considered the petitioner's stay petitions and granted interim stay subject to the condition of satisfying 50% of the liability through installments. The petitioner challenged this condition as onerous and impossible to perform. The appellate authority did not discuss the merits of the case but only focused on the financial aspect, stating that there was no financial stringency. The respondents referred to a circular providing guidelines for granting interim stay.

Issue 3: Judicial Review of Condition
The petitioner's counsel argued that the appellate authority did not consider the merits of the case while imposing the condition for interim stay. The court noted that the main dispute was regarding the disallowance under Section 40(a)(ia) and observed that the financial stringency should not be the sole criterion for granting stay as per the circular guidelines. The court emphasized the quasi-judicial role of the appellate authority and the necessity for a speaking order considering all relevant facts.

Issue 4: Modification of Condition
After reviewing the arguments and materials on record, the court found that the condition imposed for interim stay required modification. The court directed the petitioner to satisfy the next installment within two weeks, considering that the petitioner had already paid a substantial amount. The court held that the petitioner would continue to have the benefit of interim stay throughout the appeal process upon satisfying the next installment.

In conclusion, the court disposed of the writ petition, emphasizing the importance of a proper application of mind by the appellate authority in imposing conditions for interim stay and ensuring a balanced approach considering both financial aspects and merits of the case.