2014 (4) TMI 402 - HC - Income Tax

Validity of AO s action - Demand to submit 100% tax by the AO Appeal pending before the CIT(A) Held that - Part of the addition made by the AO is not agreed to by the CIT (A) in the earlier years - only to keep the issue alive, the AO has made the additions - Rest of the additions are disputed by the assessee and similar issues for earlier years are pending before the Tribunal - the discretion lies with the AO to impose such conditions, as found justified in the facts of the case the discretion was not governed by the fact whether the assessee agreed to deposit a certain percentage of the tax demand or not - The AO had to decide independently whether and to what extent relief was justified thus, the assessee shall deposit 50% of the tax demand before the authorities also, the Tribunal decides the tax appeals concerning the assessee for the earlier years decided partly in favour of Assessee.

Summary

Issues:
Challenge to action of Income-tax authorities insisting on depositing 100% tax demand pending appeal before CIT [A].

Analysis:

The judgment revolves around the challenge made by a Government company against the action of Income-tax authorities, which demanded the deposit of 100% tax demand raised by the Assessing Officer pending the company's appeal before the CIT [A]. The Assessing Officer had passed an order of assessment for the A.Y 2011-12, making various disallowances resulting in an additional tax demand of Rs. 60.80 Crores. The company sought protection against tax recovery and filed an application before the Assessing Officer, followed by an appeal. However, the Assessing Officer insisted on the deposit of the entire amount pending the appeal, citing the decision of the Supreme Court in the case of Dunlop India Limited.

The company's counsel argued that the major additions made by the Assessing Officer had been subject matters in earlier assessment years, with some decisions favoring the company. Particularly, the counsel highlighted a significant chunk of addition towards unaccounted purchases, emphasizing that as a Government company, it was improbable for gas worth crores to be purchased in cash. The counsel pointed out discrepancies in the conversion ratio adopted by the Assessing Officer. On the other hand, the Department's representative supported the Assessing Officer's decision, stating that cogent reasons existed for the additions made.

The High Court, after considering the arguments and perusing the documents, noted the peculiar nature of the case. While part of the additions made by the Assessing Officer was not agreed upon by the CIT [A] in earlier years, the rest were disputed by the company, with similar issues pending before the Tribunal. The Court emphasized that the Assessing Officer had the discretion to impose conditions based on the case's facts, independent of the company's agreement to deposit a certain percentage of the tax demand. Consequently, the Court directed the company to deposit 50% of the tax demand by a specified date, allowing for further relief if the Tribunal decided in favor of the company in the pending tax appeals concerning earlier years.

In conclusion, the High Court disposed of the petition with directions for the company to deposit a specified percentage of the tax demand, subject to the decision of the CIT [A] in the pending appeal. The judgment highlighted the Assessing Officer's discretion in imposing conditions based on the case's circumstances, emphasizing the need for independent assessment of relief justification.