2017 (3) TMI 802 - HC - Income Tax

Refusal to stay the collection of demand - Asst. CIT directed the petitioner to deposit 15% of the disputed demand - Prl. CIT confirmed the order - Held that - Assessing Officer has relied upon Instruction No.4(B)(b) of the Circular dated 29.2.2016, and has concluded that since the petitioner s case does not fall within the two illustrations given therein, therefore, it is not entitled to seek the relief that less than 15% should be demanded to be deposited by it. Moreover, the Assessing Officer has jumped to the conclusion that the petitioner s finances do not indicate any hardship in this case. However, the Assessing Officer has not given a single reason for drawing the said conclusion. Since the petitioner has been constantly claiming that it has suffered loss from the very inception of its business, from 2011 to 2016, the least that the Assessing Officer was required to do was to elaborately discuss as to whether genuine hardship would be caused to the petitioner in case the petitioner were directed to pay 15% of the disputed demand amount or not? Yet the Assessing Officer has failed to do so. Therefore, this part of the order, naturally, suffers from being a non-speaking order. Hence, the said orders are legally unsustainable. A bare perusal of the order dated 25.1.2017 also reveals that the Prl. CIT has failed to appreciate the co-relation between Circular No.1914, and Circular dated 29.2.2016. The Prl. CIT has failed to notice the fact that the latter Circular has only partially modified the former Circular, and has not totally superceded it. The Prl. CIT has also ignored the fact that Instruction No.2-B(iii) contained in Circular No.1914 continues to exist independently of and in spite of the Circular dated 29.2.2016. Therefore, it has failed to consider the issue whether the assessment orders suffers from being unreasonably highpitched , or whether any genuine hardship would be caused to the assessee in case the assessee were required to deposit 15% of the disputed demand amount or not? Thus, the Prl. CIT has failed to apply the two important factors mentioned in Circular No.1914. This Writ Petition is, hereby, allowed. The twin orders dated 23.11.2016, and the order dated 25.1.2017, are set aside. The case is remanded back to the Prl. CIT to again decide the Review Petitions filed by the petitioner. The Prl. CIT is further directed to decide the Review Petition within a period of two weeks from the date of receipt of the certified copy of this order.

Summary

Issues Involved:
1. Legality of the orders dated 23.11.2016 and 25.1.2017 directing the petitioner to deposit 15% of the disputed demand.
2. Inter-relationship between Circular No.1914 and the Circular dated 29.2.2016.
3. Whether the assessment orders were "unreasonably highpitched" or caused "genuine hardship" to the petitioner.
4. Request for expedited resolution of pending appeals for Assessment Years 2012-13 and 2013-14.

Detailed Analysis:

1. Legality of the Orders Dated 23.11.2016 and 25.1.2017:
The petitioner challenged the orders dated 23.11.2016, whereby the Assistant Commissioner of Income Tax directed the petitioner to deposit 15% of the disputed demand for the Assessment Years 2014-15 and 2015-16. The petitioner also contested the order dated 25.1.2017 by the Principal Commissioner of Income Tax (Prl. CIT), which confirmed the earlier orders. The court found that the Assessing Officer's orders were non-speaking, as they concluded that "no case of hardship exists" without providing any reasons. The Prl. CIT also failed to appreciate the inter-relationship between the two Circulars and did not consider whether the assessment orders were "unreasonably highpitched" or caused "genuine hardship" to the petitioner. Consequently, the court deemed these orders legally unsustainable.

2. Inter-relationship Between Circular No.1914 and Circular Dated 29.2.2016:
The petitioner argued that Circular No.1914, which deals with "Collection and Recovery of the Income Tax," was partially modified but not superseded by the Circular dated 29.2.2016. The latter Circular aimed to streamline the process of granting stay and standardize the quantum of lumpsum payment required from the assessee. The court agreed that Circular dated 29.2.2016 partially modified Instruction No.1914 and did not override it completely. Both Circulars must be read together, and the guidelines in Circular No.1914 regarding "unreasonably highpitched" assessments and "genuine hardship" still apply.

3. Assessment Orders Being "Unreasonably Highpitched" or Causing "Genuine Hardship":
The court emphasized that both the Assessing Officer and the Prl. CIT must evaluate whether the assessment orders were "unreasonably highpitched" or caused "genuine hardship" to the assessee, as per Instruction No.2-B(iii) of Circular No.1914. The Assessing Officer's failure to provide reasons for concluding that no hardship existed rendered the orders non-speaking. The Prl. CIT also failed to consider these factors, thereby making the orders legally unsustainable.

4. Request for Expedited Resolution of Pending Appeals:
The petitioner requested the court to direct the resolution of pending appeals for Assessment Years 2012-13 and 2013-14, arguing that the issues in these appeals were similar to those in the current case. The court acknowledged the importance of timely resolution of appeals, noting that prolonged pendency adversely affects both the assessee and the Revenue. Therefore, the court directed the respondent to decide these pending appeals as expeditiously as possible.

Conclusion:
The court allowed the writ petition, setting aside the orders dated 23.11.2016 and 25.1.2017, and remanded the case back to the Prl. CIT to reconsider the Review Petitions. The Prl. CIT was directed to decide the Review Petitions within two weeks from the receipt of the certified copy of the order. The Revenue was also instructed not to take any coercive action against the petitioner while the matter was pending before the Prl. CIT.