2015 (3) TMI 276 - HC - Income Tax

Penalty under Section 271(1)(c) - Stay of disputed outstanding entire demand of ₹ 10,00,00,000/- in lieu of penalty levied seeked - Penalty proceedings initiated in respect of adjustments made by the Transfer Pricing Officer under Section 92CA(4) - first respondent granted partial stay in respect of total outstanding demand - Held that - As petitioner has not challenged the order of the first respondent, dated 28.1.2015, who granted partial stay in respect of total outstanding demand, but only sought for mandamus, to direct the respondents to stay the entire disputed outstanding demand of ₹ 10,00,00,000/- pending disposal of the appeal. As the said order has not been challenged, it could be presumed that the petitioner has accepted the said order, of-course, partially. However, while the said order was in force, the petitioner cannot seek stay for entire outstanding by way of a direction to the respondents from this Court and even assuming that the relief as sought for by this Court is entertained, the authority cannot be expected to comply with the direction unless and until the earlier order is set aside. Admittedly, the petitioner has not filed the present writ petition for grant of Writ of Certiorarified Mandamus. Therefore, on this ground, this Court is of the view that the relief sought for by the petitioner cannot be granted. - Decided against assessee.

Issues Involved:
1. Issuance of a writ of Mandamus to stay the entire disputed outstanding demand of Rs. 10,00,00,000.
2. Grant of interim injunction restraining respondents from taking coercive action in recovering the demand pending disposal of the appeal by the CIT (A).

Detailed Analysis:

1. Issuance of a Writ of Mandamus to Stay the Entire Disputed Outstanding Demand of Rs. 10,00,00,000:

The petitioner company, an assessee, filed its Return of Income for the assessment year 2010-11, declaring a total income of Rs.NIL and showing a loss of Rs. 26,12,03,142/-. During the assessment proceedings under Section 143 of the Income-tax Act, 1961, the case was referred to the Transfer Pricing Officer (TPO) for determining the arm's length price of the international transactions. The TPO proposed an adjustment of Rs. 11,32,55,061/- and other disallowances, leading to a total assessed income of Rs. 19,51,92,486/- after adjustments. Penalty proceedings were initiated under Section 271(1)(c) of the Act, and a penalty of Rs. 10,00,00,000/- was imposed for furnishing inaccurate particulars and concealing income.

The petitioner appealed under Section 246A of the Act and sought a stay of the outstanding demand under Section 220(6) of the Act. The first respondent granted a partial stay of Rs. 5,00,00,000/- but refused to stay the entire demand. The petitioner then filed the present writ petition seeking a mandamus to stay the entire disputed demand.

The court noted that the petitioner did not challenge the order dated 28.1.2015, which granted partial stay, indicating partial acceptance of the order. The court held that the petitioner could not seek a stay for the entire outstanding amount without challenging the earlier order. The court emphasized that the discretionary power under Section 220(6) is to be exercised judiciously and reasonably, based on relevant grounds. The first respondent had exercised discretion by granting partial stay, and the court found no reason to interfere with this decision.

2. Grant of Interim Injunction Restraining Respondents from Taking Coercive Action in Recovering the Demand Pending Disposal of the Appeal by the CIT (A):

The petitioner contended that the first respondent erred in levying the penalty without properly appreciating the claims made towards adjustments on arm's length price, disallowances of loss on sale of assets, and other issues. The petitioner argued that the penalty was unjustified as there was no deliberate concealment of income or furnishing of inaccurate particulars. The petitioner sought a stay of the entire disputed demand, arguing that the appeal had a fair chance of success and that the company, already in financial crisis, would be unable to comply with the partial stay conditions.

The court noted that the first respondent had exercised discretion under Section 220(6) of the Act by granting partial stay and imposing conditions. The court referred to the Supreme Court's decision in ITO vs. M.K. Mohammed, which held that the power to grant stay is inherent and should be exercised judiciously. The court emphasized that the discretionary power must be exercised based on relevant grounds and not arbitrarily or capriciously.

The court found that the first respondent had exercised discretion reasonably by granting partial stay and imposing conditions. The court held that the writ court is not an appellate forum to review every order passed by statutory authorities and will interfere only if the decision-making process is flawed. The court concluded that the first respondent had not acted arbitrarily or capriciously and had exercised discretion in a justifiable manner.

Conclusion:

The court dismissed the writ petition, holding that the first respondent had exercised discretion judiciously and reasonably by granting partial stay and imposing conditions. The court found no grounds to direct the respondents to grant stay for the entire disputed demand or to restrain them from taking coercive action. The court emphasized that the discretionary power under Section 220(6) should be exercised based on relevant grounds and not arbitrarily.

← Previous Next →