2017 (9) TMI 838 - HC - Income Tax

Pre-deposit - Limit the requirement of predeposit pending petitioner s appeal against the order of assessment to 15% of the demand came to be rejected - rejecting the request of the petitioner was that he could not demonstrate any financial hardship - Held that - Financial hardship need not be the sole ground on which increase in predeposit of 15% can be opposed. Further if the petitioner was not interested in personal hearing his written submissions could and should have been taken into consideration before deciding his request. As noted the Assessing Officer in the present case proposed collection of amount pending appeal at the rate of 50% of the disputed demand. He also obtained approval of the Commissioner in terms of the said circular which must have been by citing his reasons. The Principal Commissioner or any other authority without disclosing such reasons which had weighed with the Assessing Officer and which had persuaded the Commissioner to authorize the Assessing Officer to increase the demand from the petitioner confirmed the demand rejecting the petitioner s objections. This was in breach of principles of natural justice. When the petitioner had no idea on what grounds the authorities primafacie thought that the standard formula of granting stay on depositing 15% of the disputed tax demand would not be appropriate it was incumbent upon the Revenue to put such reasons to the petitioner enabling the petitioner to meet with such grounds and oppose higher collection by raising suitable defense. In the result impugned order dated 30.06.2017 is set aside. The Principal Commissioner shall pass a fresh order after first providing the reasons which had weighed with the Assessing Officer in proposing and the Principal Commissioner in approving collection of 50% of the demand pending appeal to the petitioner giving him reasonable time to respond.

Issues involved:
Challenge to order requiring predeposit pending appeal

Detailed Analysis:

1. Background and Facts:
The petitioner, an individual government contractor, challenged an order requiring a 50% predeposit of the tax demand pending appeal against the assessment order for the year 2014-15. The Assessing Officer had determined a substantial tax demand, of which the petitioner had already paid 15%. The Principal Commissioner rejected the petitioner's request to limit the predeposit to 15%, citing the CBDT circular dated 29.02.2016.

2. CBDT Circular and Guidelines:
The CBDT circular aimed to streamline the process of granting stay on disputed demands and standardize the predeposit amount required for stay pending appeal before the Commissioner of Income Tax (Appeals). The circular prescribed a general rule of 15% predeposit, subject to deviations based on specific circumstances outlined in the guidelines.

3. Discretionary Powers of Authorities:
The circular allowed for deviations from the 15% predeposit rule in exceptional cases where the nature of the addition in the demand warranted a higher or lower predeposit amount. The Assessing Officer had the authority to refer such cases to the Principal Commissioner for a decision on the predeposit amount based on relevant facts.

4. Flaws in the Principal Commissioner's Order:
The Principal Commissioner's rejection of the petitioner's request was based on the petitioner's nonappearance during personal hearings and the lack of demonstrated financial hardship. However, financial hardship was not the sole criterion for opposing a reduction in predeposit. The Principal Commissioner failed to adequately consider the petitioner's written submissions and reasons for the requested reduction.

5. Breach of Natural Justice:
The Principal Commissioner's confirmation of the 50% predeposit without disclosing the reasons behind the Assessing Officer's proposal and the Commissioner's approval amounted to a breach of natural justice. The petitioner was not given the opportunity to respond to the grounds justifying the higher predeposit amount.

6. Judgment and Directions:
The High Court set aside the impugned order and directed the Principal Commissioner to pass a fresh order after providing the reasons for the 50% predeposit decision. The petitioner was given the opportunity to respond in writing, and the Principal Commissioner was instructed to consider the petitioner's objections before making a new decision. No further recovery was allowed until the fresh order was passed.

7. Conclusion:
The petition challenging the order requiring a 50% predeposit pending appeal was disposed of, emphasizing the importance of following principles of natural justice and considering all relevant factors before determining the predeposit amount in tax dispute cases.

This detailed analysis highlights the key aspects of the legal judgment, including the background, CBDT guidelines, discretionary powers of authorities, flaws in the Principal Commissioner's order, breach of natural justice, the judgment, and the directions given for a fresh decision.

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