2014 (12) TMI 979 - HC - Income Tax

Rejection of stay application on appeal pending before CIT(A) Appeal filed for assessment order passed u/s 143(3) r.w. section 263 by Vodafone India Limited - ₹ 320.44 crores to be stayed till disposal or not Held that - Taking note of the fact that the assessee has already paid approximately 40% of the total amount of the dues for AY 2006-07 and the assessee has acted in right earnest in having the appeal disposed of and the last hearing was held as far back as on 25 June 2014, the delay thereafter in disposing of the appeal is entirely due to CIT (A) as the remand report was called for on 12 November 2014 - It is only now that the petitioner has learnt for the first time that the remand report has been called for by the CIT (A) by virtue of the affidavit dated 16 December 2014 filed by the AO in reply to the present petition thus, it would only be fair that the balance demand of ₹ 320.45 crores is stayed till the disposal of the appeal by the CIT (A) Stay granted. Also in UTI Mutual Fund vs. ITO 2012 (3) TMI 333 - BOMBAY HIGH COURT it has been held that the orders passed by the Authorities under the Act would not be enforced till such time as the period to file an appeal before the Appellate Authority expires and where stay applications have been filed, the Revenue would not adopt coercive proceedings till the disposal of the stay application by the Appellate Authorities Decided in favour of assessee.

Summary

Issues:
Challenge to order under Section 220(6) of the Income Tax Act rejecting stay application pending appeal disposal by CIT (Appeals) and seeking to adjust refund against demand.

Analysis:

1. The petition challenges the order passed under Section 220(6) of the Income Tax Act by the Assessing Officer rejecting the stay application pending appeal disposal by the CIT (Appeals). The appeal was against the Assessment Order for the Assessment Year 2006-07. The Tribunal had stayed a portion of the demand, and the fresh Assessment Order was passed under Section 143(3) read with Section 263 of the Act, raising a demand. The Petitioner applied for stay of the balance demand, which was rejected, leading to the filing of the petition.

2. The Assessing Officer also sought to adjust a refund against the outstanding demand. The petition aimed to restrain the recovery of the demand until the appeal's disposal and prevent action on the adjustment letter. The CIT (Appeals) ordered a stay on the balance demand until the appeal's disposal or the petition's disposal by the Court, whichever is earlier, recognizing the Petitioner's efforts and the pending remand report.

3. The main issue revolved around the genuineness and creditworthiness of shareholders related to share capital received, requiring thorough consideration by the CIT (Appeals). The delay in appeal disposal was attributed to the CIT (Appeals) calling for a remand report. The court emphasized fairness in staying the balance demand until the appeal's disposal, citing precedents where authorities' orders are not enforced until appeal periods expire, and coercive actions are avoided during stay application pendency.

4. The challenge to the adjustment letter seeking to set off the refund was not addressed as the refund had already been adjusted. The court directed a stay on the recovery of the balance demand until the appeal's disposal, with the possibility of refund if the Petitioner succeeds in the appeal. The petition was disposed of with no costs, ensuring a fair resolution in favor of the Petitioner.

This detailed analysis of the judgment highlights the legal intricacies involved in challenging the order rejecting the stay application and the adjustment of refund against the demand under the Income Tax Act. The court's decision to provide a stay on the balance demand until the appeal's disposal reflects a fair approach considering the circumstances and legal precedents cited during the proceedings.