2018 (11) TMI 650 - HC - Income Tax

Grant of stay - Department from recovering 80% tax arising out of such additions - Held that - Prima-facie the question that would arise is the High Court has admitted the Tax Appeal against the quantum additions and also after by-parte hearing and on recording the reasons prevented the Department from recovering 80% tax arising out of such additions, can the revenue proceed to recover the penalty, which is admittedly relatable to such additions. AO undoubtedly has a discretion to grant stay against the recovery of the penalty amount and in the process impose suitable conditions. In any case, the Court in exercise of writ jurisdiction failed as possible, either to stay the demand fully or without conditions. In the facts of the present case what should be the correct approach. We would like to hear the respondents in further detail. To enable the respondent to file reply, let there be notice returnable on 11.12.2018. By way of ad-interim relief, respondents are prevented from carrying further recovery of the penalty.

Summary

Issues:
1. Stay against implementation of penalty order sought by petitioner.
2. Tax appeal admitted against judgment of Income Tax Appellate Tribunal.
3. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
4. Stay of penalty order pending appeal.
5. Discretion of Assessing Officer in granting stay against penalty recovery.
6. Writ jurisdiction and conditions for stay of demand.

Analysis:

1. The petitioner expressed intent to withdraw the department appeal seeking a stay against the penalty order's implementation. The Tribunal confirmed conditions leading to a substantial tax demand of approximately ?400 Crores, prompting the petitioner to file a Tax Appeal before the High Court. A detailed order was passed, addressing the taxability questions and the need for a deposit to stay coercive recovery.

2. Following the Tribunal's judgment, penalty proceedings were initiated under Section 271(1)(c) of the Income Tax Act, resulting in a penalty imposition of ?326.38 Crores. The petitioner appealed the penalty order and requested a stay, leading to a requirement by the Assessing Officer for a 20% deposit of the penalty amount for the remaining penalty to be stayed.

3. The Court questioned the revenue's pursuit of penalty recovery while the Tax Appeal against the quantum additions was pending. The Assessing Officer's discretion in granting stay against penalty recovery with suitable conditions was highlighted. The Court sought a detailed response from the respondents to determine the correct approach in the given circumstances, preventing further penalty recovery temporarily.

4. The respondents were temporarily restrained from carrying out additional penalty recovery pending further proceedings. The respondents were given notice returnable on a specified date to provide a detailed response. The advocate for the respondents waived the service of notice on their behalf, indicating cooperation in the legal process.