2017 (10) TMI 1217 - HC - Income Tax

Interim Stay seeked - Held that - The instant case is one of search and seizure and pertains to valuation of the property and certain records were relied on by the Assessing Officer to make the subject assessment. Therefore, this Court is of the view that the petitioners should be put on condition for being entitled to grant of stay. It is submitted by the learned counsel that total tax liability in respect of the four petitioners is ₹ 3,03,28,295/- and interest of revenue would be safeguarded if 15% of the tax demand is directed to be paid by the petitioners. 15% of the said amount works out to ₹ 45,49,244/- out of which 8 lakhs has already been recovered. Hence, there will be a direction to the petitioners to pay ₹ 37,49,244/- for being entitled to a grant of stay. The payment shall be effected in one lump sum or installments within a period of 12 weeks from the date of receipt of a copy of this order.

Summary

Issues: Challenge to orders for interim stay of tax demand, adequacy of opportunity for personal hearing, merits of assessment, safeguarding interest of revenue pending appeal.

Interim Stay of Tax Demand: The petitioners challenged four orders directing them to pay 20% of the total demand for an order of interim stay. Earlier, they filed writ petitions against a garnishee order for tax recovery, which were disposed of with a direction for the first respondent to consider their petition for stay of demand. The first respondent issued a notice for personal hearing, but the petitioners claimed inadequate opportunity to present their case. The High Court held that the assessment, based on a search and seizure operation, showed undervaluation of property. Citing a previous case, the court imposed a stringent condition for interim stay, directing the petitioners to pay ?37,49,244 for being entitled to the grant of stay, to safeguard the revenue's interest pending appeal.

Adequacy of Opportunity for Personal Hearing: The petitioners argued they did not have sufficient opportunity to present their case before the first respondent. They contended that the assessment was based on presumptions and assumptions, and the second respondent relied on third-party evidence. Despite the delay in receiving the notice for the personal hearing, the court found that the petitioners had a chance to appear and present their case, leading to the imposition of the condition for interim stay.

Merits of Assessment: The petitioners disputed the assessment's merits, claiming that the second respondent's conclusion of property undervaluation was based on a statement not implicating them. The court held that the assessment issues should be raised before the Appellate Authority during pending appeals, emphasizing the need to safeguard the revenue's interest until the appeal's resolution.

Safeguarding Interest of Revenue Pending Appeal: The High Court emphasized the importance of safeguarding the revenue's interest during the appeal process. Considering the search and seizure operation leading to the assessment and the substantial tax liability, the court imposed a stringent condition for interim stay to ensure the revenue's protection, directing the petitioners to pay a specified amount within a set timeframe for the stay to be granted.