2016 (12) TMI 1199 - HC - Income Tax

Stay of demand - Held that - Considering the fact that with respect to earlier assessment years, on the very issue, when the assessee had succeeded at the first appellate stage and according to the petitioner assessee upto the High Court , we are of the opinion that the office memorandum dated 29th February 2016 shall not be applicable to the facts of the present case. Considering the aforesaid facts and circumstances, the learned Principal Commissioner of Income-tax ought to have granted unconditional stay of the demand during pendency and final disposal of the appeal before CIT A . In view of the above and for the reasons aforestated, the present petition succeeds. The impugned order passed by the learned Principal Commissioner of Income-tax directing the petitionerassessee to deposit 15% of the demand and on such deposit, to stay further demand during the pendency of the appeal before the learned CIT A , is hereby quashed and set-aside.

Summary

Issues:
1. Stay of demand during pendency of appeal before CIT [A]
2. Applicability of office memorandum dated 29th February 2016
3. Granting unconditional stay of demand

Analysis:
1. The petitioner-assessee sought a writ to quash an order by the Principal Commissioner of Income-tax staying the demand of a sum during the pendency of an appeal. The petitioner argued that a similar issue had been decided in their favor in previous assessment years. The Court noted the previous decisions in favor of the assessee and held that the Principal Commissioner was not justified in directing a deposit of 15% of the disputed tax amount while staying the demand.

2. The respondent relied on a Circular/Office Memorandum dated 29th February 2016 from the CBDT, Ministry of Finance, providing guidelines for stay of demand at the first appellate stage. However, the Court found that the office memorandum should not be applicable to the present case due to the success of the assessee in earlier years on the same issue. The Court concluded that the Principal Commissioner should have granted unconditional stay of the demand during the appeal.

3. Ultimately, the Court allowed the petition, quashing the order directing the petitioner to deposit 15% of the demand. The Court directed the CIT [A] to decide the appeal in accordance with the law and on merits, with a stay on the total demand as per the original assessment orders during the pendency and final disposal of the appeals. The rule nisi was made absolute to this extent, with no costs imposed.