2022 (2) TMI 1334 - HC - Income Tax

Stay of demand - entitlement to waiver/stay of the recovery proceedings in terms of Section 220 (6) - HELD THAT - We are inclined to dispose the writ petition with the observation that the third respondent before whom an application was filed u/s 220 (6) by the petitioner on 17.08.2021 shall dispose the same within a period thirty days from the date of receipt of copy of this order. It is needless to state that before passing such order, the petitioner shall be heard. In case, the petitioner has indeed paid income tax on the demonetized currency received by the petitioner, as it was allowed to sell petroleum products by receiving the consideration in demonetised currency during the period between 09.11.2016 and 30.12.2016 and tax was paid the second respondent may exercise the discretion in terms of the observation rendered LG Electronics India Private Limited 2018 (7) TMI 1905 - SC ORDER . All further recovery proceedings pending disposal of appeal are subject to order to be passed by the third respondent on the petition filed by the petitioner u/s 220 (6).

Summary

Issues:
1. Stay of recovery proceedings pending appeal under Section 220 (6) of the Income Tax Act, 1961.
2. Refund of transferred amount pending appeal.
3. Compliance with the Trinity Test for waiver/stay of recovery proceedings.
4. Disposal of application under Section 220 (6) of the Income Tax Act by the third respondent.

Analysis:
1. The petitioner had received an assessment order for the assessment year 2017-2018 and filed a statutory appeal under Section 246 A of the Income Tax Act, 1961, along with an application to stay the recovery of the amount under Section 220 (6) of the Act. However, both the appeal and application were pending without disposal by the Appellate Commissioner or the jurisdictional Assessing Officer. The petitioner sought a refund of the transferred amount of Rs.74,66,660.44 pending appeal, which was transferred to the Income Tax Department under Section 226 (3) of the Act. The court noted that the petitioner was entitled to waiver/stay of the recovery proceedings as per Section 220 (6) of the Act.

2. Referring to the judgment in Principal Commissioner of Income Tax Vs LG Electronics India Private Limited, the court emphasized the need for reasoned orders in such matters. The court set aside the previous order and directed that the petitioner's application be heard by the Principal CIT on merits without any curtailment of discretion. The court highlighted the importance of addressing the central issues in the pending appeal and ensuring that orders are reasoned and sustainable in law.

3. The court also referenced the Trinity Test established in Kannammal Vs Income Tax Officer, emphasizing the need to follow this test in assessing waiver/stay requests. Additionally, the court mentioned a previous order in Queen Agencies Vs The Assistant Commissioner of Income Tax, which reiterated the importance of adhering to established legal principles in such cases.

4. Finally, the court directed the third respondent to dispose of the application filed under Section 220 (6) of the Income Tax Act within thirty days, ensuring that the petitioner is heard before any decision is made. The court specified that any recovery proceedings pending the disposal of the appeal would be subject to the orders passed by the third respondent. Additionally, the court highlighted the discretion of the second respondent to consider the petitioner's tax payments on demonetized currency and make appropriate decisions in line with legal precedents.