2023 (1) TMI 1317 - HC - Income Tax

Stay of demand - petitioner has been directed to pay 20% of the outstanding demand - HELD THAT - From a perusal of the impugned order it is seen that 1st respondent had followed instructions of the Central Board of Direct Taxes ( CBDT ) to the effect that where outstanding demand is disputed before the appellate authority, the assessee has to pay 20% of the disputed demand. Accordingly, petitioner has been directed to pay 20% of the outstanding demand. We are afraid 1st respondent did not apply his mind while passing the order dated 16.01.2023. It appears to be a mechanical exercise of power. When the Income Tax authority exercises jurisdiction u/s 220(6) he exercises quasi-judicial powers. While exercising quasi-judicial powers, the authority is not bound or confined by departmental instructions. This position has been well settled in Principal Commissioner of Income Tax v. LG Electronics India Pvt. Ltd 2018 (7) TMI 1905 - SC ORDER That being the position, we set aside the order and remand the matter back to the 1st respondent for passing a fresh order in accordance with law after giving due opportunity of hearing to the petitioner. This shall be done within a period of six (06) weeks from the date of receipt of a copy of this order. Till the aforesaid period of six (06) weeks, respondents are directed not to take coercive steps for realizing the outstanding demand for the assessment year 2017-18.

Summary

Issues Involved:
Assessment order reopening, Stay of demand application rejection, Application of CBDT instructions, Quasi-judicial powers exercise, Setting aside the order, Remand for fresh order, Coercive steps prohibition.

Analysis:
1. The petitioner, an individual assessee under the Income Tax Act, 1961, had his assessment for the year 2017-18 reopened due to the belief of escaped taxable income. The assessment resulted in a significant increase in the total income, leading to a demand notice issued by the 2nd respondent. The petitioner sought a stay of demand under Section 220(6) of the Act, but the 1st respondent directed payment of 20% of the demand without granting the stay, prompting the filing of the writ petition.

2. The petitioner appealed the assessment order to the first appellate authority, challenging the substantial increase in the assessed income. The order directing the petitioner to pay 20% of the disputed demand was based on CBDT instructions from 1996, which the court found to be a mechanical exercise of power by the 1st respondent. The court emphasized that while exercising quasi-judicial powers, the authority is not bound by departmental instructions, citing the Supreme Court's ruling in Principal Commissioner of Income Tax v. LG Electronics India Pvt. Ltd. (2018).

3. The court, led by the Chief Justice, concluded that the 1st respondent did not apply proper discretion in passing the order and set it aside. The matter was remanded back to the 1st respondent for a fresh order in accordance with the law, with a directive to provide the petitioner with a fair hearing opportunity. The respondents were prohibited from taking coercive steps to recover the outstanding demand for the assessment year 2017-18 during the six-week period allowed for the fresh order. The writ petition was allowed, with no costs imposed, and any pending miscellaneous applications in the matter were closed.