2020 (3) TMI 1289 - HC - Income Tax

Stay petition Rejected - petitioner s grievance is that the Principal Commissioner of Income-tax has rejected the petitioner s application for stay without the minimum deposit of 20% ignoring Instruction No. 1914 and the subsequent Official Memorandum/Circular dated February 29 2016 - HELD THAT - It is incumbent on the Principal Commissioner of Income-tax to decide on the application for stay considering two questions viz. whether the assessment is unreasonably high-pitched and whether the petitioner would be put to genuine hardship because of such assessment. However in the present case the Principal Commissioner s order is a non-speaking order without considering either the question of high-pitched assessment or the genuine hardship to the petitioner. Therefore the impugned order will have to be quashed on this limited ground and the petitioner s application restored/ remanded for reconsideration. As the respondents submits that if the petitioner were to appear before the Principal Commissioner of Income-tax Hubbali on March 19 2020 the petitioner will be heard afresh on the merits of its application for stay and exemption from deposit of the minimum of 20 per cent. of the demand. Writ petition is partly allowed quashing the order dated February 26 2020 restoring the petitioner s application for stay for reconsideration in accordance with the decision of this court in Flipkart India s case 2017 (3) TMI 802 - KARNATAKA HIGH COURT requiring the petitioner to appear before the Principal Commissioner of Income-tax Hubballi on March 19 2020 without further notice.

Summary

Issues:
1. Rejection of application for stay without minimum deposit of 20% of demand.
2. Interpretation of Instruction No. 1914 and subsequent Official Memorandum/Circular dated February 29, 2016.
3. Compliance with principles laid down in Flipkart India (P.) Ltd. v. Asst. CIT [2017] judgment.
4. Validity of non-speaking order by Principal Commissioner of Income-tax.
5. Quashing of impugned order and remand for reconsideration.

Issue 1: Rejection of application for stay without minimum deposit of 20% of demand
The petitioner challenged the order of the Principal Commissioner of Income-tax rejecting their application for stay without the minimum deposit of 20% of the demand. The Principal Commissioner allowed the petitioner to deposit 20% of the demand in two installments. The petitioner contended that the rejection was contrary to Instruction No. 1914 and subsequent Circular dated February 29, 2016. The petitioner relied on the decision in Flipkart India (P.) Ltd. case, emphasizing the need for the assessment to not be unreasonably high-pitched and to consider genuine hardship to the petitioner due to the assessment.

Issue 2: Interpretation of Instruction No. 1914 and subsequent Official Memorandum/Circular
The court analyzed the applicability of Instruction No. 1914 and the subsequent Official Memorandum/Circular dated February 29, 2016. Referring to the Flipkart India (P.) Ltd. case, the court highlighted the requirement for the Assessing Officer and Principal Commissioner to assess if the assessment is unreasonably high-pitched and if the demand for depositing a percentage of the disputed amount would cause genuine hardship to the assessee. The court emphasized the necessity for the Principal Commissioner to consider these aspects while deciding on a stay application.

Issue 3: Compliance with principles in Flipkart India (P.) Ltd. case
The court reiterated the principles laid down in the Flipkart India (P.) Ltd. case, emphasizing the obligation on the Principal Commissioner to evaluate if the assessment is unreasonably high-pitched and if the petitioner would face genuine hardship due to the assessment. The court noted that the impugned order was a non-speaking order, failing to address these crucial aspects, leading to the decision to quash the order and remand the application for reconsideration.

Issue 4: Validity of non-speaking order
The court highlighted the deficiency in the Principal Commissioner's order, which was a non-speaking order, as it did not consider whether the assessment was unreasonably high-pitched or if the petitioner would suffer genuine hardship due to the assessment. Due to this deficiency, the court deemed it necessary to quash the order and remand the application for a fresh consideration in line with the legal principles established in previous judgments.

Issue 5: Quashing of impugned order and remand for reconsideration
Ultimately, the court partially allowed the writ petition, quashing the order dated February 26, 2020, and restoring the petitioner's application for stay for reconsideration. The petitioner was directed to appear before the Principal Commissioner of Income-tax for a fresh hearing on March 19, 2020, without further notice, allowing the petitioner to present all grounds supporting the application. The writ petition was granted accordingly, providing relief to the petitioner for a fair reconsideration of their stay application.