2018 (6) TMI 101 - HC - Income Tax

Grant of absolute stay - Pre- deposits - demand of disputed tax entirely - genuine hardships - Held that - Considering the facts and circumstances of the case, the matter being seized of by Appellate Authority, the respondent-Authorities are expected to consider the genuine hardship that would be caused to the assessee due to the high-pitched assessment. Hence, in the circumstances, this court is of the opinion that interest of justice would be sub-served in directing the petitioner to deposit 20% of the total enforceable demand in addition to 20% deposited and furnishing suitable security for another 35% of the total demand. Order - The impugned order at Annexure-A is modified. The petitioner shall deposit 40% of the total enforceable demand. Deductions shall be given to the amount already deposited. Sufficient security shall be furnished for 35% of the enforceable total demand within a period of four weeks from today.

Summary

Issues:
Challenge to order under Section 220(6) of the Income Tax Act, 1961 for assessment year 2010-11 - Rejection of petition for absolute stay and collection of disputed demand.

Analysis:
The petitioner, a company in the business of HDPE/PP woven sacks/Fabrics, filed a return declaring Nil income. The reassessment under Section 147 of the Act determined an income of &8377; 98,08,840/- with an addition of &8377; 4,65,00,000/-, leading to a disputed demand. The petitioner appealed before the Commissioner of Income-tax (Appeals) seeking stay of the demand, but the request was rejected, directing immediate payment of the entire demand. The petitioner contended that as per Circular dated 29.2.2016, 20% of the disputed demand was paid, and the balance should have been stayed. However, the respondent argued that clause 4(B) of the Circular applied due to credible evidence supporting the addition, and the petitioner's failure to cross-examine witnesses. The High Court considered the arguments and material on record.

By a letter, the respondent directed the petitioner to pay 20% of the demand if challenging the order before the Appellate Authority, which was done. The request for further stay of the entire demand was rejected based on the alleged fabrication of capital and share premium from other companies. The High Court noted that the assessment appeared high-pitched, pending before the Appellate Authority. Referring to a previous case, the Court emphasized the need to consider genuine hardship caused by high-pitched assessments and unreasonable demands. The Court found that the respondent should have judiciously considered the application, directing the petitioner to deposit 40% of the total enforceable demand, modifying the earlier order.

In conclusion, the High Court allowed the writ petition, modifying the impugned order to require the petitioner to deposit 40% of the total enforceable demand, with deductions for the amount already paid, and furnish suitable security for another 35% within four weeks. Revocation of notices under Section 226(3) was subject to this payment, with a disclaimer that observations in the petition should not be treated as precedent.