2018 (5) TMI 715 - HC - Income Tax

Stay petition - recovery of demand - unconditional stay - Held that - The object of grant of interim order is to preserve status-quo and not to make the appellate remedy infructuous or illusory. This principle cannot be straight away applied to Revenue matters, where a slight departure is required to be adopted. As pointed out earlier, the petitioner miserably failed to substantiate their contention that they are unable to mobilise funds to comply with the conditions nor they had brought out before the authorities as to how they have made out a prima facie case for grant of an unconditional stay or for that matter how the direction of the Assessing Officer to pay 20% of the disputed demand, is an onerous condition. Mere pendency of an appeal before the third respondent is no ground to state that there should be stay of the recovery of the tax demanded. Assessee company has established Eye Hospitals in various parts of the State and elsewhere in the country and it is stated that there are several persons employed with them and the hospitals are functioning and there are several senior citizens, who require care and attention, this Court is inclined to grant one more opportunity to the assessee company to show their bonafide and if they do so, this court is inclined to direct the assessee company to once again approach the third respondent for appropriate relief. Since the third respondent, CIT(A), is seized of with the appeal petition, the order passed by the second respondent, being earlier than the order dated 16.03.2018, passed by the third respondent, in my considered view, the order dated 16.03.2018, shall govern the proceedings and not the impugned order dated 06.03.2018. For such reason, it is unnecessary to interfere with the said order dated 06.03.2018 as already the third respondent, before whom the appeal is pending against the assessment, has already passed an order, dated 16.03.2018. W.P. disposed of by directing the petitioner/assessee company to pay 5% of the tax demanded for each of the assessment years

Summary

Issues Involved:
1. Challenge to the orders passed by the Principal Commissioner of Income Tax in stay petitions.
2. Assessment orders and provisional attachment of properties.
3. Rectification petitions under Section 154 of the Income Tax Act.
4. Stay of tax collection and payment conditions.
5. Financial constraints and high-pitched assessments.
6. Validity of CBDT instructions and guidelines.
7. Interim relief and balance of convenience.

Issue-wise Detailed Analysis:

1. Challenge to the Orders Passed by the Principal Commissioner of Income Tax in Stay Petitions:
The petitioners, a private limited company and its Managing Director, challenged the orders passed by the Principal Commissioner of Income Tax in stay petitions. The court noted that the petitioners had approached all available avenues, including the Assessing Officer and the second respondent, seeking a stay of the tax demand. The court observed that the petitioners' intention appeared to be to delay compliance with the orders rather than to present a serious case for stay.

2. Assessment Orders and Provisional Attachment of Properties:
The assessment for the company was completed under Section 143(3) read with Sections 153(C) and 153A of the Income Tax Act for the assessment years 2011-12 to 2016-17. Provisional attachment of immovable properties was also ordered. The Managing Director faced similar assessments and attachments. The court noted that the petitioners had filed appeals against the assessment orders and sought stays of tax collection.

3. Rectification Petitions under Section 154 of the Income Tax Act:
The petitioners filed rectification petitions under Section 154, alleging mistakes apparent from the record. These petitions were pending at the time of filing the writ petitions but were later rejected. The court acknowledged that the rejection of rectification petitions rendered the prayer in the writ petitions infructuous.

4. Stay of Tax Collection and Payment Conditions:
The company requested a stay of tax collection, citing financial constraints and high-pitched assessments. The Assessing Officer directed the company to pay 20% of the disputed demand, while the second respondent increased this to 30%. The court noted that the petitioners had not complied with these orders and had instead approached multiple authorities, leading to conflicting directions.

5. Financial Constraints and High-Pitched Assessments:
The petitioners argued that the assessments were extremely high-pitched and that they faced severe financial constraints. The court found the petitioners' claims to be vague and unsupported by evidence. The court emphasized that the petitioners failed to demonstrate a prima facie case, balance of convenience, or irreparable hardship, which are essential for granting a stay.

6. Validity of CBDT Instructions and Guidelines:
The court discussed the applicability of CBDT instructions, specifically Instruction No.1914 and the modified guidelines issued on 29.02.2016 and 31.07.2017. The court noted that the authorities were guided by these instructions, which prescribed payment of 20% of the disputed demand. The court found that the petitioners did not raise valid grounds to warrant a departure from these guidelines.

7. Interim Relief and Balance of Convenience:
The court highlighted the principles governing the grant of interim relief, including preserving the status quo and ensuring that the appellate remedy is not rendered illusory. The court concluded that the petitioners failed to substantiate their claims of financial constraints and did not make a prima facie case for an unconditional stay. The court granted limited relief to the company by directing it to pay 5% of the tax demanded and allowed it to file a fresh stay petition with the third respondent.

Conclusion:
The court disposed of the writ petitions filed by the company by directing it to pay 5% of the tax demanded and permitting it to file a fresh stay petition. The writ petitions filed by the Managing Director were dismissed, with a direction to pay 20% of the tax demanded. The court emphasized the need for compliance with the orders passed by the authorities and the importance of presenting a serious and substantiated case for stay.