2016 (4) TMI 89 - HC - Income Tax

Pre deposit - stay of demand - Held that - We direct that till 7 April 2016 by which date the petitioner has been directed to deposit 30% of the balance amount, no coercive steps shall be taken by the Department. However, if the petitioner fails to deposit the balance 30% of the disputed tax by 7 April 2016, the protection granted by the Court shall stand automatically withdrawn and it will be open to the Department to pursue the matter in accordance with law. It is made clear that the Court has not adjudicated on the merits of the First Appeal filed by the petitioner and it will be for the Appellate Authority to examine the same without being influenced by any of the observations made by the High Court in this order or the Principal Commissioner of Income Tax, Muzaffarnagar on the application filed by the petitioner for stay of the demand.

Summary

Issues:
Petition to quash order for stay of demand by Principal Commissioner of Income Tax.

Analysis:
The petitioner filed a petition to quash the order dated 11 March 2016 passed by the Principal Commissioner of Income Tax, Muzaffarnagar, regarding a tax demand for the Assessment Year 2012-13. The original tax demand was significantly higher than the returned income, resulting in a substantial amount due.

Initially, the Additional Commissioner of Income Tax granted a stay of demand subject to a partial payment deadline. The petitioner then filed a First Appeal and a petition for further stay of the balance demand. The Principal Commissioner of Income Tax, Muzaffarnagar, found the demand based on credible evidence and directed the petitioner to deposit 50% of the disputed tax, considering that 20% had already been paid.

The petitioner argued that it was unjust to require the remaining 30% deposit while the First Appeal was pending without a hearing date. The respondent's counsel contended that the Principal Commissioner's order was legal but agreed that efforts would be made to expedite the First Appeal hearing.

The High Court opined that the Principal Commissioner's order did not warrant interference under Article 226, as 50% deposit was justified based on prima facie evidence. However, considering the delay in the First Appeal process, the Court directed the petitioner to deposit the remaining 30% by a revised deadline and mandated the Commissioner of Income Tax to decide the First Appeal promptly thereafter.

The Court also restrained coercive measures until the revised deadline but warned of withdrawal of protection if the deposit was not made. It clarified that the judgment did not assess the merits of the First Appeal, leaving it to the Appellate Authority's discretion.

In conclusion, the writ petition was disposed of with the specified directions, emphasizing the need for timely deposit and cooperation in the appeal process.