2014 (2) TMI 518 - HC - Income Tax

Recovery of dues - stay - attention was drawn to the Circular No.530 dated 6 March 1989 issued by the Central Boards for Direct Tax (CBDT) wherein it has been specifically provided that when the demand in dispute relates to an issue that had been decided in favour of the assessee in an earlier order by an Appellate Authority, then in such a situation, the assessee should not be treated as an assessee in default and stay should be granted. Held that - The Assessment Order dated 17 December 2013 ignores it on the ground that the view of the Tribunal is not tenable - In hierarchical system of jurisprudence, it is not open to the Lower Authority to ignore the binding decision of a Superior Authority unless the order of the Superior Authority has been stayed the decision in Union of India v/s Kamlakshi Finance Corporation Ltd. 1991 (9) TMI 72 - SUPREME COURT OF INDIA followed - The principles of judicial discipline require that the order of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not acceptable to the department in itself an objectionable phrase and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court - If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws - the revenue is keen in not giving petitioner its refund and are acting contrary to and in defiance of orders passed by the Appellate Authority - The CIT (A) to give a priority to the petitioner s appeal for the Assessment Year 2012-13 and hear the same as expeditiously as possible. - stay granted.

Summary

Issues:
Challenge to order under Section 220(6) of the Income Tax Act, 1961 regarding tax demand determination and stay application.

Analysis:
The petitioner challenged an order passed by the Deputy Commissioner of Income Tax under Section 220(6) of the Income Tax Act, 1961, granting a stay against coercive recovery of tax. The order required the petitioner to pay 50% of the total demand of Rs.493,19,16,310. The petitioner, engaged in life insurance business, maintained separate accounts for shareholders and policyholders. The Assessing Officer determined the taxable income by considering internal fund transfers as income, contrary to previous Tribunal and CIT(A) decisions. The petitioner filed an appeal against the assessment order, seeking early hearing due to the substantial tax demand.

The Assessing Officer's order was challenged for ignoring previous Tribunal and CIT(A) decisions favoring the petitioner. The petitioner argued that the Assessing Officer delayed implementing the CIT(A) order, adjusting a refund against the demand for the current assessment year. The petitioner contended that the demand was not sustainable due to favorable appellate decisions and cited Circular No.530, emphasizing that an assessee should not be treated as in default if the issue was decided in their favor by an appellate authority. The petitioner also criticized the non-speaking nature of the impugned order and its failure to consider their submissions.

The High Court found the Assessing Officer's actions unjustifiable, as they disregarded binding appellate decisions and delayed implementing favorable orders. The Court emphasized the importance of following higher appellate authorities' decisions and stayed the demand until the CIT(A) decided the appeal. The impugned order was set aside, except for the refund already adjusted. The Court directed the CIT(A) to prioritize and expedite the appeal process, ensuring no coercive action was taken until the appeal was finalized. The writ petition was disposed of accordingly, with no costs awarded.