2014 (7) TMI 691 - HC - Income Tax

Stay application Addition made u/s 68 as unexplained credit High variation seen in income shown as return and assessment order Held that - The assessees are individual and since there was an escapement of income, for reasons recorded as provided u/s 147 of the Act, notice was caused to them u/s 148 of the Act and after affording them an opportunity, the assessment was finalised and those assessment orders were put to challenge by filing appeals before the third respondent - During pendency of the appeals, the petitioners invoked the jurisdiction of the first respondent praying for stay of the operation of the assessment orders, who has taken into consideration the latest Circular, negatived the relief - the assessees are not running commercial business and that they are only individual assessees and also taking into consideration the fact that the difference between the income shown in the returns and assessment orders was very high, the interim relief can be granted to the assessees subject certain conditions Stay granted.

Issues:
1. High pitched assessment without due application of mind.
2. Addition of transferred funds as 'unexplained credit'.
3. Legality of assessment orders and appeals.
4. Jurisdiction of the assessing officer and Circulars.
5. Guidelines for staying demand and discretionary power.
6. Precedents of blanket stay in high pitched assessments.
7. Interim relief and conditions for staying assessment orders.

Analysis:

1. The petitioners raised concerns regarding high pitched assessments completed hastily without proper application of mind. They argued that the assessing officer labeled funds transferred from their own bank accounts as 'unexplained credit' under Section 68 of the Income Tax Act, resulting in substantial tax demands for multiple assessment years.

2. The petitioners contended that the transfer of funds from their bank accounts should not be considered 'unexplained credit'. They challenged the legality of assessment orders and filed appeals, along with stay applications. The assessing officer rejected the stay petitions, citing lack of substantial explanation for financial hardships, leading the petitioners to approach higher authorities.

3. The petitioners invoked the jurisdiction of the second respondent, relying on Circulars to support their case for stay. However, the second respondent dismissed the petitions based on updated instructions superseding the Circulars previously referenced by the assessees, prompting the filing of writ petitions challenging the decisions.

4. The counsel for the petitioners argued for a blanket order of stay based on guidelines provided in instruction No.1914, emphasizing the need for cooperation in appeal proceedings. In contrast, the Revenue's counsel highlighted the necessity for depositing a portion of the demanded tax amount for stay consideration.

5. The Court considered the submissions from both sides and reviewed the available records. Acknowledging the high discrepancy between reported income and assessment orders, the Court deemed it appropriate to grant interim relief to the individual assessees subject to specific conditions.

6. Citing the non-commercial nature of the assessees and the significant differences in income multiples, the Court allowed the writ petitions, setting aside the impugned orders and staying the assessment orders with conditions. The conditions included depositing percentages of the tax demands in installments and a default clause for non-compliance.

7. The interim relief was contingent on timely payments and the expeditious disposal of appeals by the third respondent. The Court directed the assessing officer to prioritize the petitioners' appeals for swift resolution while emphasizing the consequences of defaulting on the payment schedule.

In conclusion, the Court granted interim relief to the petitioners, setting conditions for staying the assessment orders and ensuring timely payments to maintain the stay during the appeal process.

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