2016 (6) TMI 851 - HC - Income Tax

Grant of absolute stay on the recovery proceedings pending disposal - whether the exercise of discretion on the part of the first respondent is proper and does the impugned order call for interference? - whether the petitioner is entitled for the grant of exemption under Section 10(21) of the Income Tax Act? - Held that - It is true that this Court is not considering the correctness of the Assessment Order dated 31.03.2015. Therefore, this Court refrains from making any observation touching upon the merits of the Assessment order. Nevertheless, this Court is convinced that the petitioner has made out a good prima facie case supported by three orders passed by the Income Tax Appellate Tribunal for the earlier years and as of now, there is nothing on record to show that the decision of the Income Tax Appellate Tribunal has been either reversed or modified or stayed by this Court in an appeal filed by the Department before this Court. That apart, when this Court entertained the writ petition, has passed a speaking order on 23.06.2015, granting an order of interim stay. This Court is of the view that the recovery proceedings shall remain stayed till the appeals are heard and disposed of by the second respondent.

Summary

Issues:
Challenge to order denying absolute stay on recovery proceedings pending appeal before Commissioner of Income Tax (Appeals). Consideration of discretion exercised by the first respondent and entitlement to exemption under Section 10(21) of the Income Tax Act.

Analysis:
The petitioner contested the order denying absolute stay on recovery proceedings pending the appeal before the Commissioner of Income Tax (Appeals). The core issue revolved around the exercise of discretion by the first respondent and the entitlement to exemption under Section 10(21) of the Income Tax Act. The petitioner argued that based on previous assessment orders, specifically for Assessment Years 1997-98, 1998-99, and 2000-01, the Income Tax Appellate Tribunal had granted exemption under Section 10(21) of the Act. The petitioner highlighted that the Assessing Officer, in the current assessment order, disregarded the Tribunal's decisions for the earlier years and mentioned appeals filed by the Department without providing details. The petitioner requested a prima facie case for the grant of absolute stay under Section 220(2) of the Act.

The court acknowledged the first respondent's discretion but emphasized that it should be exercised properly and with reasons. The petitioner successfully demonstrated that the core issue of exemption under Section 10(21) was consistent with previous years' assessments. Additionally, the petitioner raised concerns about the rejection of depreciation claims on fixed assets and charitable status under Section 2(15) of the Act. The petitioner argued that a favorable decision on the exemption issue would impact the other two issues. However, the respondent's counsel contested this, asserting that the court was only assessing the first respondent's order on the stay petition, not the assessment order itself.

While refraining from evaluating the correctness of the assessment order, the court noted the petitioner's strong prima facie case supported by previous Tribunal orders. The court highlighted that there was no evidence of the Tribunal's decisions being altered or stayed by the Court in Department appeals. Considering these factors, the court granted a stay on recovery proceedings until the appeals were heard and resolved by the second respondent. The court's decision was based on the petitioner's established case and the lack of evidence indicating changes to the Tribunal's decisions.