2015 (2) TMI 209 - HC - Income Tax

Waiver of pre-deposit - whether could be passed by respondent no.2 without recording any reasons or not? - stay application has been initially granted on the condition to furnish the bank guarantee, but subsequently, as the bank guarantee was not furnished, the application is dismissed - Typographical error for claiming the benefit under section 10A, though wrongly typed as 10B - Held that - The perusal of the order dated 28.07.2014 as well as order dated 25.08.2014 shows that when the application for stay came to be decided for the first time, vide order dated 28.07.2014, the reasons are not mentioned for prima facie consideration of the merit or even on the aspect of balance of convenience. Nothing is recorded in the order as to why the ground of bank guarantee for grant of stay is taken into consideration. In our considered view, the order can be said to be nonspeaking order since no reasons are mentioned. When the matter is to be considered for grant of stay against any demand made of tax, it may be required for the authority to prima facie consider the merits and balance of convenience and also irreparable injury. None has been examined nor considered. In any event, as the appeal is pending, we leave it at that. Suffice it to observe that when the application is to be considered and decided, it would be required for the concerned authority to record the reasons and then to reach to the ultimate conclusion as to whether the stay should be granted or not and if yes on what condition. In absence of any reasons, the order cannot be sustained. The impugned order dated 28.07.2014 (AnnexureC) and the subsequent order dated 25.08.2014 (AnnexureD) based on the earlier order, are quashed and set aside with the further direction that the stay application shall stand restored to the CIT (Administration) and the stay application shall be considered on merits and appropriate decision after recording the reasons shall be passed. Petition allowed.

Summary

Issues:
1. Whether the order below the stay application could be passed without recording reasons?

Analysis:
The judgment revolves around the consideration of whether an order below a stay application could be validly passed without recording any reasons. The petitioner appealed before the CIT(A) contending a typographical error in claiming benefit under section 10A instead of 10B of the Income Tax Act. The petitioner also filed a stay application which was initially granted on the condition to furnish a bank guarantee, but later dismissed due to non-furnishing of the guarantee. The High Court observed that the order lacked reasons for prima facie consideration of merit or balance of convenience, making it a nonspeaking order. The court emphasized the importance of recording reasons while considering a stay application against a tax demand. The judgment highlighted the necessity for the authority to examine the merits, balance of convenience, and irreparable injury before reaching a decision on granting stay. As no reasons were recorded, the court quashed the impugned orders and directed the stay application to be reconsidered by the CIT (Administration) with proper reasoning. The petitioner was also allowed to request early hearing of the appeal, with the ad interim relief against coercive action remaining in effect until a fresh order is passed.

This judgment underscores the significance of providing detailed reasons while deciding on stay applications related to tax demands. It emphasizes the need for authorities to consider the merits, balance of convenience, and potential irreparable harm before reaching a decision. The court's decision to quash the orders and direct a reconsideration with proper reasoning serves as a reminder of the procedural requirements in such cases. Additionally, the allowance for early hearing of the appeal and the continuation of the ad interim relief demonstrate the court's commitment to ensuring a fair and reasoned decision-making process in tax matters.