2018 (7) TMI 136 - HC - Income Tax

Stay of demand - directing the petitioner to pay 20% of the tax demanded as per the CBDT Office Memorandum, dated 31.07.2017 - Held that - CBDT Office Memorandum, dated 31.07.2017, though appears to fix a percentage of tax to be paid for being entitled to an order of stay, exception has been carved out in a very same instruction and this is clear from the Office Memorandum dated 29.02.2016, in paragraph 4 B(b) . CBDT did not completely oust the jurisdiction of the officer, while examining a prayer for stay of the demand of tax pending appeal. Respondent could not have passed the impugned order without taking note of the petitioner s case and without considering as to whether the petitioner has made out a prima facie case for grant of interim relief. The petitioner has specifically pointed out their financial position and the prejudice that is being caused to them on account of the high pitched assessment. They specifically pleaded that their income of the said year was 1/4th of tax assessed. This aspect was not dealt with by the respondent, while passing the impugned order. Larger question which will be decided by the CIT (A) is whether merely because a payment was reflected in form 26AS and shown to have been made to the assessee, can it be brought to tax, in the absence of proof to show that the assessee was the actual beneficiary of the said payment - information furnished to the learned Standing counsel for the Revenue would clearly demonstrate that at the time of passing the impugned order, no such reasons weighed in the minds of the respondent and therefore, the respondent cannot justify his order by substituting fresh reasons, after the order is put to challenge - Writ Petition is allowed, the impugned order is set aside and the matter is remanded to the respondent for fresh consideration and to pass an order on merits

Summary

Issues:
Challenge to order directing payment of 20% tax demand for stay of remaining tax till appeal disposal under Income Tax Act for assessment year 2015-16.

Analysis:
The petitioner challenged an order by the Assessing Officer directing payment of 20% of the tax demanded for the assessment year 2015-16 to be entitled for stay of the remaining tax till appeal disposal. The assessment revealed discrepancies in gross receipts reported by the assessee and as per form 26AS. The assessee explained the differences due to TDS wrongly deducted by a company supplying journals to Oil Marketing companies, where the assessee acted as a coordinator. Despite explanations and difficulties in rectification, the Assessing Officer added the difference amount to the returned income, leading to an appeal and a demand notice. The petitioner sought stay of the demand under Section 220(6) of the Act pending appeal before the Commissioner of Income Tax (Appeals).

The petitioner argued that the assessment was unduly high pitched, causing prejudice, and requested for stay. The respondent, citing a CBDT Office Memorandum, required payment of 20% of the demand for stay, emphasizing that mere pendency of an appeal does not guarantee stay. The court highlighted that the authority considering a stay application must assess if a prima facie case exists, balance of convenience favors the applicant, and refusal of stay would cause irreparable harm. The CBDT memorandum allowed exceptions, indicating that the officer should not be bound by fixed percentages.

The court noted that the respondent failed to consider the petitioner's financial position and the impact of the high assessment while passing the order. It raised a significant question for the CIT (A) to determine if a payment reflected in form 26AS can be taxed without proof of the assessee being the actual beneficiary. The respondent's additional arguments, not present in the impugned order, were deemed inappropriate as fresh reasons cannot be introduced post-challenge. Consequently, the court set aside the impugned order, remanding the matter for reconsideration, emphasizing the need for a fair hearing and lawful decision-making process.

In conclusion, the court allowed the Writ Petition, setting aside the order and instructing a fresh consideration by the respondent with proper adherence to legal principles and a fair opportunity for the assessee to present their case.