2022 (2) TMI 1395 - HC - Income Tax

Stay of demand - condition imposed that unless the petitioner/assessee makes a payment of 20% of the demand, the petitioner/assessee is not entitled for stay - HELD THAT - The judgment of the Hon'ble Supreme Court LG Electronics India Private Limited 2018 (7) TMI 1905 - SC ORDER has been relied upon by the learned Judge in the said order in Queen Agencies case 2021 (4) TMI 609 - MADRAS HIGH COURT as stated that definite 20% need not be imposed in each and every case, even a lesser percentage can be imposed while passing an order under Section 220(6) of the Act. If we take the said proposition this Court feels that, if at all the petitioner is having any grievance, that may be only to a limited extent to state that, 20% as has been sought for through the impugned order may be reduced to a lesser one. If it is a lesser one, we cannot once again remand the matter back to the respondent i.e., the assessing authority to use his discretion to fix a lesser percentage of the demanded amount to be paid by the petitioner/assessee. In this context, since the demand under the assessment which is in question before the appellate authority is Rs. 12,86,72,780/-, which is comparatively a huge sum, instead of 20% demand by citing the Department Instruction No.1914 dated 29.02.2016, the assessing authority could have passed an order by making a demand of some lesser percentage. Considering all this Court feels that, instead of remanding the matter back to the respondent for re-consideration, a direction can be given to the petitioner/assessee to make a payment of at least 15% of the demand and on that condition, the petitioner would be entitled to get a stay of the assessment order which is under appeal before the appellate authority. If such a direction is given as an interim arrangement, this Court feels that, the ends of justice would be met. Thus dispose of this writ petition with the following order. a. That the impugned order is modified to the effect that, instead of 20%, the petitioner/assessee shall pay 15% of the demand within a period of four weeks from the date of receipt of a copy of this order. b. On this condition, there shall be an order of stay of the assessment order till the disposal of the appeal filed before the second respondent. c. It is made clear that, within four weeks time if the payment of 15% of the demand as directed above has not been paid or complied with by the petitioner/assessee, the order of stay shall stand automatically vacated without any further reference to this Court.

Issues Involved:
1. Legality of the impugned order demanding 20% of the assessed tax before granting a stay.
2. Application of Section 220(6) of the Income Tax Act, 1961.
3. Consideration of grounds raised by the petitioner for stay without pre-deposit.
4. Discretionary power of the assessing officer in granting stay.
5. Reference to judicial precedents and departmental instructions.

Issue-wise Detailed Analysis:

1. Legality of the Impugned Order:
The petitioner challenged the impugned order dated 20.12.2021, which mandated the payment of 20% of the demand as a condition for stay during the pendency of the appeal. The petitioner argued that this condition was "illegal, arbitrary, against the principles of natural justice and devoid of merits."

2. Application of Section 220(6) of the Income Tax Act, 1961:
The petitioner invoked Section 220(6) of the Act, which allows the assessing officer to treat the assessee as not being in default pending appeal, subject to conditions. The petitioner contended that the assessing officer should have considered the grounds raised in the stay application and granted a stay without the pre-condition of paying 20% of the demand.

3. Consideration of Grounds Raised by the Petitioner:
The petitioner argued that the assessing officer did not properly consider the grounds raised in the application for stay. The petitioner cited judicial precedents, including the cases of "Queen Agencies" and "Mrs. Kannammal," to support the argument that the assessing officer should have exercised discretion more judiciously and considered a lesser amount than 20%.

4. Discretionary Power of the Assessing Officer:
The respondent's counsel argued that the assessing officer's discretion under Section 220(6) is guided by departmental instructions, which currently require a minimum payment of 20% of the demand. The court noted that the discretion must be exercised based on the circumstances of each case and is not bound by a hard and fast rule.

5. Reference to Judicial Precedents and Departmental Instructions:
The court referred to the Supreme Court judgment in "Principal Commissioner of Income Tax -Vs- LG Electronics India Private Limited," which clarified that the assessing officer could grant a stay with a lesser deposit than 20%. The court also considered departmental Instruction No.1914, which initially required a 50% deposit but was later reduced to 20%.

Judgment:
The court concluded that the assessing officer should have considered a lesser percentage than 20% given the circumstances and the quantum of demand (Rs. 12,86,72,780/-). Instead of remanding the matter for reconsideration, the court modified the impugned order, directing the petitioner to pay 15% of the demand within four weeks. On compliance, the stay of the assessment order would be granted until the disposal of the appeal. If the payment was not made within the stipulated time, the stay would be automatically vacated.

Conclusion:
The writ petition was disposed of with the modification that the petitioner/assessee shall pay 15% of the demand to obtain a stay of the assessment order pending the appeal. The court emphasized the need for the assessing officer to exercise discretion judiciously and consider the specific circumstances of each case.

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