2019 (3) TMI 650 - HC - Income Tax

Stay petition - condition of depositing 20% of the disputed tax demand is reasonable one - HELD THAT - Petitioners appeals are at advance stage of hearing before the Appellate Commissioner. However, in view of the clarification of the learned counsel for the petitioners that in case of the company, the Appellate Commissioner may have to call for remand report, the final outcome of such appeals, may not be available for at least a few months from now. We shall, therefore, have to provide for an interim formula subject to which the further recoveries of disputed tax would be stayed pending appeals. In this context, we take note of the contention of the learned counsel for the petitioners that the Assessing Officer has made major additions on the ground that the receipts in the hands of the individual assessee upon sale of shares was a business income. The question of correctness of Assessing Officer s additions on the head of sale of shares would have to be examined at length which obviously in these proceedings, we are not inclined to do. All the petitioners between them shall deposit a further sum of Rs. Two crores with the department latest by 25.3.2019.The attachment of the bank accounts of all the petitioners shall stand revoked forthwith.

Summary

Issues:
- Imposition of conditions for stay of tax recoveries pending appeals.

Analysis:
The judgment by the Bombay High Court involved petitions related to the imposition of conditions for the stay of tax recoveries pending appeals under the Income Tax Act, 1961. The petitions were filed by a Private Limited Company and its directors, who were husband and wife. The search and seizure actions at the company's premises led to assessments under different sections of the Act, resulting in a combined income tax demand of approximately ?50 crores for the assesses. The Assessing Officer insisted on a 20% deposit of the disputed tax for the stay of recoveries, which was challenged by the petitioners. The Principal Commissioner directed that the seized assets would only be released after the final demand was ascertained and 100% of it was paid by the assessee.

The petitioners approached the High Court as the department sought to recover the entire tax dues, attaching the bank accounts of all assesses as part of coercive recoveries. The petitioners argued that the appeals were at an advanced stage of hearing before the Appellate Commissioner, with the possibility of a remand report being called for by the Commissioner. The company had already deposited 20% of the disputed tax demand, totaling around ?1.20 crores. On the other hand, the department contended that the deposit condition was reasonable and the petitioners had not shown any financial hardship, thus should fulfill the condition.

After hearing both parties, the High Court acknowledged that the petitioners' appeals were at an advanced stage of hearing but recognized the potential delay in the final outcome due to possible remand reports. Therefore, an interim formula was provided for the stay of further recoveries pending appeals. The Court directed all petitioners to deposit an additional ?2 crores with the department by a specified date. Upon fulfilling this condition, the rest of the recoveries would be stayed until the appeals were disposed of by the Appellate Authority, who was urged to expedite the process. The attachment of bank accounts was revoked, but failure to deposit the specified amount would allow the department to proceed with further recoveries.

In conclusion, the High Court disposed of the petitions with the outlined directions, balancing the interests of the petitioners and the tax authorities in ensuring compliance with the tax demands while facilitating a fair appellate process.