2018 (8) TMI 1152 - HC - Income Tax

Stay of demand - Additions u/s 68 - laundering of black money - CIT(A) granted a stay on condition of payment of 50% of the amounts. The learned Single Judge reduced it to 20%. - Held that - Considering the entire circumstances as also the failure of the assessee to produce the details at the first stage, we are of the opinion that the assessee will have to make a deposit of 1% of the tax addition made under Section 68 of the Act within a period of one month from the date of receipt of a certified copy of this judgment.

Issues:
1. Appeal against the modified interim order in a first appeal under the Income Tax Act, 1961.
2. Challenge of conditional order directing payment of 20% of the demand made under Section 68 of the Act.
3. Assessment made after issuance of notice under Section 143 of the Act.
4. Treatment of deposits as unexplained cash credits under Section 68 of the Act.
5. Request for a blanket stay and production of details before the First Appellate Authority.
6. Opposition to the prayer based on concerns of black money laundering and compliance with the demand raised.
7. Consideration of the appeal without requiring immediate deposit of amounts.
8. Affidavit of undertaking to produce details of deposits before the First Appellate Authority.
9. Requirement for the assessee to make a deposit of 1% of the tax addition made under Section 68 of the Act within a specified period.

The judgment of the Kerala High Court involved an appeal against the modified interim order in a first appeal under the Income Tax Act, 1961. The appellant, a cooperative bank, challenged the conditional order directing payment of 20% of the demand made under Section 68 of the Act. The assessments were conducted after a notice under Section 143 of the Act, where the bank provided Audit Certificates but failed to produce details of depositors, leading to the treatment of deposits as unexplained cash credits under Section 68. The appellant sought a blanket stay and undertook to produce the necessary details before the First Appellate Authority, emphasizing earlier ignorance as the reason for non-furnishing of details before the Assessing Officer.

The opposing party, the Income Tax Department, raised concerns about the potential laundering of black money through cooperative banks and argued for compliance with the demand raised, highlighting the necessity for verification of the genuineness of depositors. The Court, considering the institution's cooperative nature and its members from various sections of society, decided to afford the appellant an opportunity to produce the deposit details. To ensure compliance, the Court directed the appellant to file an affidavit of undertaking to provide the necessary information to the First Appellate Authority within the stipulated time.

In light of the circumstances and the appellant's failure to produce details initially, the Court ruled that the appellant must make a deposit of 1% of the tax addition made under Section 68 of the Act within a month from the receipt of the judgment. The judgment disposed of the Writ appeal without any observation on merits, allowing the First Appellate Authority to consider the case independently. The Writ Petition was allowed, leaving the parties to bear their respective costs.

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