2021 (4) TMI 1296 - HC - Income Tax

Stay of recovery - absolute stay - assessee-in-default u/s 220(3) - HELD THAT - Firstly, the CBDT instructions No.95 dated 21.08.1969 on which reliance is placed to contend that absolute stay should be granted, is no more in force and stands superseded by instruction no. 1914 dated 28.07.2020. Secondly, by the CBDT instruction No.1914 dated 28.07.2020, the authorities under the Act are conferred power to grant stay pending appeal before the appellate forum under the Act; and it is stated therein that the authority in order to protect the interests of revenue can grant stay by directing payment of 20% of the demand. Authority can direct payment of even lesser amount. As contended before us that even a direction to pay the 1% of the demand raised by the assessing officer would cause undue hardship and irreparable loss to the petitioner, and that the authorities have not been able to recover any part of the demand raised on the petitioner, because of it s financial stringency, the said submission does not appeal to this Court, as mere failure of the authorities to recover any amount cannot be considered as financial stringency of the petitioner. The 1st respondent, having regard to the facts of the case and the material placed on record, granted conditional stay, which the petitioner failed to comply with at the first instance; and even thereafter the 1 st respondent, by considering the request of the petitioner, granted further time for making the conditional payment to commence from 10th February, 2021. Thus, the petitioner failed to comply either order dt. 01.03.2020 or order dt. 03.02.2021. 1st respondent, having considered the request of the petitioner, granted time to make conditional payment in installments commencing from 10.02.2021, beyond the period indicated by the petitioner. Even this the petitioner failed to comply with and only as an after thought filed the present Writ Petition on 15.02.2021, after having committed default in payment of the revised 1st installment due on 10.02.2021. Since, the 1st respondent has passed the impugned order dated 03.02.2021 by taking all the facts into consideration, including the request of the petitioner as noted above by way of reconsideration of its earlier order of March, 2020, and the said order passed by the 1st respondent is in exercise of discretionary powers, this court is of the view that no valid ground has been made out for interference with it. Writ Petition is dismissed at admission stage.

Summary

Issues:
Assailing correctness of order for stay of tax demand under Income Tax Act, 1961 for Asst. year 2014-15; Reopening of income admitted in return; Appeal to 1st appellate authority pending; Petitioner's request for stay of tax demand; Disposal of request by 1st respondent; Financial difficulty due to COVID-19; Consideration of CBDT instructions; Grant of absolute stay; Compliance with conditional stay orders; Filing of writ petition challenging order; Dismissal of writ petition; Directions to dispose of appeal expeditiously.

Issue 1: Assailing correctness of order for stay of tax demand under Income Tax Act, 1961 for Asst. year 2014-15
The petitioner challenged the order passed by the 1st respondent regarding the demand of tax for the assessment year 2014-15. The petitioner contended that the assessing authority proposed a significant revision to the income declared by the petitioner, resulting in a high assessment compared to the income admitted. The petitioner sought a stay of the tax demand pending appeal to the 2nd respondent, citing financial difficulty and lack of reasons for the reassessment.

Issue 2: Reopening of income admitted in return
The assessing authority issued a notice under Section 148 of the Income Tax Act, proposing a substantial addition to the income admitted by the petitioner in the return for the Asst. year 2014-15. The petitioner raised concerns about the lack of reasons provided for the reopening of the assessment and the disproportionate nature of the revised income amount.

Issue 3: Petitioner's request for stay of tax demand
The petitioner approached the 1st respondent seeking a stay of the tax demand pending the appeal process. The petitioner argued that the 1st respondent's decision to direct payment of 20% of the outstanding balance demand in installments was arbitrary and failed to consider the financial difficulty faced by the petitioner, especially in light of the COVID-19 pandemic.

Issue 4: Consideration of CBDT instructions and grant of absolute stay
The petitioner contended that the 1st respondent should have granted an absolute stay based on CBDT instructions. However, the court noted that the CBDT instructions provided for the authorities to grant stay pending appeal by directing payment of 20% of the demand. The court emphasized the need to consider prima facie case, financial stringency, and balance of convenience while deciding on the grant of stay.

Issue 5: Compliance with conditional stay orders
The court observed that the petitioner failed to comply with the conditional stay orders issued by the 1st respondent, despite being granted additional time for payment. The petitioner's subsequent failure to make the conditional payment as directed raised questions about the petitioner's intentions and compliance with the orders.

Issue 6: Filing of writ petition challenging order
The petitioner filed a writ petition challenging the order of the 1st respondent regarding the stay of tax demand. The petitioner sought relief from the court, arguing that the 1st respondent's decision was arbitrary, erroneous, and illegal, especially in light of the financial difficulties faced by the petitioner.

Issue 7: Dismissal of writ petition
The court dismissed the writ petition at the admission stage, finding no valid ground for interference with the order passed by the 1st respondent. The court noted that the 1st respondent had considered all relevant facts, including the petitioner's requests for reconsideration, in exercising discretionary powers to grant conditional stay.

Issue 8: Directions to dispose of appeal expeditiously
In response to the petitioner's contention regarding the pending appeal before the 2nd respondent, the court directed the 2nd respondent to dispose of the appeal expeditiously, preferably within four weeks from the date of receipt of the court's order. The court aimed to ensure a timely resolution of the appeal process for the petitioner.