2016 (8) TMI 212 - HC - Income Tax

Grant of an interim order of stay - petitioner being a Society registered under the Co-Operative Societies Act - Held that - The cardinal principles which have to be taken note of while granting interim order are three fold viz. (i) prima facie case (ii) balance of convenience and (iii) irreparable hardship. The facts of the present case have been set out in the preceding paragraphs, which clearly show that all the aforesaid three parameters have been fulfilled by the petitioner as they have established a prima facie case, as the Commissioner of Income Tax (Appeals), for the assessment year 2009-10, has passed an order in their favour on 31.12.2015. The balance of convenience is also in favour of the petitioner, since they have got a prima facie case before the Appellate Commissioner. The third aspect viz. irreparable hardship is also in their favour, as the petitioner is a Co-operative Society and in the earlier proceedings the petitioner have succeeded in their Appeal before the Commissioner (Appeals) for the assessment year 2009-10. For all the above reasons, the Writ Petition is allowed, the impugned order is set aside and there will be a stay of demand pursuant to the orders of assessment dated 31.03.2016 for the assessment years 2008-09, 2010-11, 2013-14, till the Appeals filed by the petitioner for those three years are heard and disposed of by the second respondent in accordance with law. No costs. Consequently, connected Miscellaneous Petition is close.

Summary

Issues involved:
Challenge to order imposing condition for payment of disputed tax as a condition for stay of collection, authority's power to direct payment, relevance of earlier favorable order, interpretation of circular on grant of stay, principles for granting interim order.

Analysis:
The petitioner, a Primary Agricultural Co-operative Credit Society Ltd., challenged an order by the first respondent imposing a condition to pay 15% of disputed tax for stay of collection for assessment years 2008-09, 2010-11, 2013-14. The court noted that the petitioner, being a Co-operative Society, cannot be bound by a concession made by an authorized representative during a personal hearing. The court decided to examine if the authority could direct such payment as a condition for stay.

In a previous assessment year 2009-10, the Assessing Officer ruled against the petitioner regarding the definition of Agricultural Credit Society under Section 80P(4) of the Income Tax Act. However, the Commissioner of Income Tax (Appeals) later accepted the petitioner's case, allowing the appeal and granting them the benefit under the Act. The court highlighted the relevance of this earlier favorable order in determining the current stay application.

The court referred to Circulars and instructions regarding the grant of stay and noted a modification in the instructions in 2016, giving discretionary power to the Assessing Officer. It emphasized that this discretionary power should be exercised judiciously and for valid reasons. The court discussed the cardinal principles for granting an interim order, including establishing a prima facie case, balance of convenience, and irreparable hardship.

Considering the petitioner's success in the earlier appeal, the court found that all three parameters for granting a stay were fulfilled in the petitioner's favor. Consequently, the court allowed the writ petition, set aside the impugned order, and granted a stay of demand for the assessment years 2008-09, 2010-11, 2013-14 until the appeals filed by the petitioner are heard and disposed of by the second respondent. No costs were awarded, and the connected Miscellaneous Petition was closed.