2017 (11) TMI 1226 - HC - Income Tax

Stay petition - revenue has rejected the said petition on the ground that the petitioner has not paid 20% of the disputed tax - Held that - Writ Petition is disposed of, with the slight modification to the impugned order (i) by permitting the 1st respondent to encash the fixed deposit of ₹ 95 lakhs together with interest accrued till the date of encashment and reckon the payment towards the disputed tax; (ii) the petitioner is directed to furnish immovable property security worth ₹ 2 Crores and such property/properties shall be free from encumbrance and the original documents should be deposited and appropriate documents should be executed in favour of the Department securing the interest of Revenue and the petitioner providing immovable property security for sum of ₹ 2 Crores, further demand of tax and penalty as claimed in the assessment orders shall remain stayed. It is represented by the learned counsel for the petitioner that the fixed deposits are in the names of the father-in-law and mother-in-law of the petitioner and the petitioner will make appropriate arrangements for them to give their No objection certificate for encashment of those fixed deposits. The above direction shall be complied with within a period of three weeks from the date of receipt of copy of this order.

Summary

Issues:
1. Rejection of stay petition under Section 220(6) of the Income Tax Act, 1961.
2. Interpretation of modified instructions by the Central Board of Direct Taxes regarding the quantum of lump sum payment required for stay of demand disputed before CIT (A).
3. Consideration of the nature of addition resulting in disputed demand in block assessment cases.
4. Decision on the writ petition concerning recovery of disputed tax amount and provision of immovable property security.

Analysis:
1. The petitioner challenged the rejection of his stay petition under Section 220(6) of the Income Tax Act, 1961. The respondent cited instructions by the Central Board of Direct Taxes, specifying a 20% payment of the disputed tax as a pre-condition for stay of demand disputed before CIT (A). The petitioner's case involved a block assessment due to real estate transactions from search and seizure operations, resulting in high-pitched assessments.

2. The court examined the modified instructions issued by the Board, distinguishing between two situations where the assessing officer may require a lump sum payment higher or lower than 20% based on the nature of the addition resulting in the disputed demand. The respondent contended that the petitioner's failure to remit 20% of the disputed tax rendered him ineligible for a stay. However, the court considered the recovery already made and funds available with the Department, modifying the order to protect the Revenue's interests while providing temporary relief to the petitioner pending appeal disposal.

3. The court noted that a substantial amount had been recovered, and fixed deposits were retained by the respondent. The modified order allowed encashment of the fixed deposit, provided immovable property security worth ?2 Crores, and stayed further demands and penalties. The petitioner was directed to arrange for No objection certificates for encashment of fixed deposits held by family members. Failure to provide the required immovable property security would automatically vacate the stay order. The court emphasized early appeal disposal due to the petitioner's individual status and the high-pitched assessments.

Overall, the judgment balanced the interests of the Revenue and the petitioner, ensuring compliance with the modified instructions while providing necessary relief and security measures.