2013 (7) TMI 199 - HC - Income Tax

Stay of recovery - Addition in total income - Increase in G.P. rate - Held that - unlike the cases under Section 35F of the Central Excise Act, a strong prima facie case is not the indicator nor would be a motivating factor or consideration in exercising the discretion under Section 220 (6) of the Act. - It is a different matter where the assessing officer ignores the settled principle of law or a binding decision of the Court, the guiding principles for excercising discretion for holding that the assessee is not in default, if he deposits part of the amount is, where the assessment order appears to be unreasonably high-pitched or where genuine hardship is likely to be caused to the assessee. Assessment is only two and half times higher than the returned income, we find that the exercise of discretion in favour of petitioner in directing him to deposit only 50% of the demand and that too in instalments is reasonable. The Assessing Officer has also found that as regards financial status the assessee has shown surplus of Rs.76,63,51,112/-, Sundry Creditors at Rs.14,30,40,673/- and cash and Bank balance at Rs.1,52,07,130/- in the return of income which shows that the financial health of the assessee is very much sound. The Assessing Officer has granted substantial relief to the petitioner - Following decision of Taneja Developers and Infrastructure Ltd vs. Assistant Commissioner of Income Tax 2009 (2) TMI 410 - DELHI HIGH COURT , B.M. Malani v. Commissioner of Income Tax and another 2008 (10) TMI 2 - SUPREME COURT - Decided in favour of Revenue.

Summary

Issues:
1. Stay of demand under Section 220 (6) of the Income Tax Act, 1960.
2. Guidelines for staying demand in income tax cases.
3. Exercise of discretion by the Assessing Authority.
4. Interpretation of relevant instructions and judgments.
5. Consideration of genuine hardship and unreasonably high-pitched assessments.

Analysis:

Stay of Demand under Section 220 (6) of the Income Tax Act, 1960:
The judgment revolves around the Assessing Officer's decision to grant a stay of demand to the petitioner for the assessment year 2010-2011 under Section 220 (6) of the Income Tax Act. The petitioner had approached the Assessing Authority for a stay of demand after filing an appeal against the assessment order. The Assessing Officer, exercising discretion, directed the petitioner to pay 50% of the demand in 5 installments and stayed the balance demand till the disposal of the appeal.

Guidelines for Staying Demand in Income Tax Cases:
The petitioner argued that there were no specific guidelines under Section 220 (6) of the Income Tax Act. Reference was made to various instructions issued by the CBDT over the years, emphasizing that the discretion of the Assessing Officer should be guided by these instructions. The petitioner cited judgments from the Delhi High Court to support the contention that the Assessing Officer's discretion should be in line with the department's intentions as reflected in the instructions.

Exercise of Discretion by the Assessing Authority:
The Assessing Officer considered the facts and circumstances of the case, finding that the assessment order was not unreasonable or high-pitched. Despite the substantial additions to the assessed income, the Assessing Officer noted the financial health of the company and the hardship that payment of the outstanding amount might cause. Therefore, the decision to allow payment in installments and stay the balance demand was deemed reasonable.

Interpretation of Relevant Instructions and Judgments:
The judgment discussed the evolution of instructions issued by the CBDT regarding the stay of demand in income tax cases. The court analyzed previous judgments from the Delhi High Court and the Bombay High Court to interpret the scope and application of these instructions in determining whether an assessment order was unreasonably high-pitched or if genuine hardship was likely to be caused to the assessee.

Consideration of Genuine Hardship and Unreasonably High-Pitched Assessments:
The court examined the concept of genuine hardship and unreasonably high-pitched assessments in the context of staying demands under Section 220 (6) of the Income Tax Act. It was emphasized that the Assessing Officer's discretion should be exercised judiciously, taking into account factors such as the financial health of the assessee and the proportionality of the assessed income to the returned income. The judgment highlighted the need for a balanced approach in granting relief to the petitioner based on the specific circumstances of the case.

In conclusion, the judgment provides a detailed analysis of the issues surrounding the stay of demand in income tax cases, the interpretation of relevant guidelines and instructions, and the exercise of discretion by the Assessing Authority. It underscores the importance of considering genuine hardship and the reasonableness of assessment orders in determining the appropriate relief to be granted to the assessee.