2017 (2) TMI 512 - HC - Income Tax

Application for stay - Section 10B exemption denied as return filed beyond the due date specified in Section 139 (1) - Held that - As in the earlier round, the exemption claimed under Section 10 B of the Act had been allowed by CIT (A) against which no appeal was preferred by the Revenue, would demonstrate that the petitioner has a good prima facie case, thus the operation of the order dated 23.09.2016 is stayed, subject to deposit of 15% of the disputed tax, within a period of four weeks from the date of receipt of a copy of this order.

Summary

Issues involved:
Challenging order rejecting stay application against disallowed exemption under Section 10 B of the Income Tax Act, 1961 for assessment year 2009-10.

Analysis:
The Writ Petition challenges the rejection of a stay application against an order disallowing exemption under Section 10 B of the Income Tax Act, 1961 for the assessment year 2009-10. The petitioner had filed an appeal against the initial order disallowing the exemption, which was allowed by the CIT(A). However, the Revenue filed an appeal only regarding a deduction claimed under a different section of the Act. Subsequently, respondent no.2 issued a notice for reopening the assessment under Section 148 of the Act, claiming that the exemption under Section 10 B was disallowed due to the late filing of the return. The petitioner moved an application for stay, which was rejected, leading to the current Writ Petition.

The petitioner argued that since the exemption under Section 10 B had been allowed in the earlier round and no appeal was filed by the Revenue, a prima facie case existed in their favor. The petitioner contended that as per a Circular dated 29.02.2016, a stay should have been granted or at least a minimum amount of disputed tax should have been directed to be deposited. The respondent did not dispute the facts and acknowledged the binding nature of the Circular dated 29.02.2016.

Considering the facts and the previous allowance of the exemption under Section 10 B of the Act, the Court agreed with the petitioner's counsel that a conditional stay order should have been passed at the very least. The denial of the exemption was solely based on the late filing of the return under Section 139(1) of the Act. Therefore, the operation of the order disallowing the exemption was stayed, subject to the deposit of 15% of the disputed tax within four weeks. Importantly, the Court clarified that its observations and decision on the stay application would not impact the pending appeal before respondent No.1. Consequently, the Writ Petition was disposed of with the mentioned direction, and the connected miscellaneous petition was closed without any costs.