2007 (3) TMI 239 - HC - Income Tax

Petitioner filed return declaring loss - AO passed a high pitch assessment raising a huge demand of Rs. 1, 40, 25, 762 - petitioner applied u/s 220(6) for stay of the demand AO is not giving sufficient reason while rejecting application since order is not giving any factual finding same is invalid - in view of CBDT Instruction No. 96 dated 21.8.69 it is held that the petitioner is entitled to stay of the collection till orders are passed in the appeal subject to making certain payment

Summary

Issues:
1. Relief sought through the writ petition for issuance of a writ of certiorarified mandamus.
2. Rejection of stay petition under section 220(6) of the Income-tax Act, 1961.
3. Application for stay of demand relating to the assessment order for the assessment year 2004-05.
4. Interpretation of Central Board of Direct Taxes' instructions regarding stay in cases of harsh assessments.
5. Dispute over the petitioner's cooperation in completing the assessment.

Analysis:

1. The petitioner, a private limited company, filed a writ petition seeking relief through the issuance of a writ of certiorarified mandamus to challenge the order rejecting the stay petition under section 220(6) of the Income-tax Act, 1961. The petitioner appealed against the high pitch assessment for the assessment year 2004-05 and requested a stay of demand pending appeal before the Commissioner of Income-tax (Appeals).

2. The Assessing Officer passed a high pitch assessment, resulting in a significant demand. The petitioner applied for a stay of demand under section 220(6) of the Income-tax Act, which was rejected on the grounds of lacking a valid reason. The petitioner contested this rejection, leading to the current legal proceedings.

3. The petitioner relied heavily on the instructions issued by the Central Board of Direct Taxes, emphasizing the need for stay in cases of harsh assessments where the income determined substantially exceeds the returned income. The petitioner cited relevant judgments to support their argument for a stay of demand pending the appeal process.

4. The respondents argued that the petitioner's lack of cooperation in completing the assessment precluded them from now objecting to the assessment order. However, the court noted that the issue at hand was not the correctness of the assessment order but the petitioner's entitlement to a stay of demand based on the Central Board of Direct Taxes' instructions.

5. After reviewing the arguments from both sides and examining the materials on record, the court found that the petitioner was entitled to a stay of collection of demand for the assessment year 2004-05 until the appeal decision, subject to the petitioner making a specified payment. The court disposed of the writ petition in favor of the petitioner, granting the stay of collection contingent upon the payment condition.