2019 (3) TMI 1270 - HC - Income Tax

Stay of demand - deposit of 15% OR 20% of the disputed amount - recovery proceedings - HELD THAT - What prima facie emerges from the record is that, the Petitioner undisputedly has an arguable case on the three additions which the Assessing Officer has made. Prima facie case is one of the considerations which will weigh while imposing condition of deposit of disputed tax pending Appeal as held and observed by this Court in case of UTI Mutual Fund Vs. Income Tax Officer 2013 (3) TMI 350 - BOMBAY HIGH COURT . In the CBDT Circular dated 29/02/2016 while providing that the Assessing Officer shall stay pending Appeal on deposit of 15% of the disputed amount, (which was later on revised to 20% by virtue of the circular in 2017, other conditions remained constant.) The circular also envisaged cases where such requirement can either be increased or decreased depending on facts of the case. Thus requirement of 20% deposit of tax pending the Appeal is not a rigid one and cannot be implemented in all cases, irrespective of relevant facts. Since the Appeal of the Petitioner is pending before the Appellate Commissioner, we would be well advised not to consider the Petitioner s argument on merit of disallowances threadbare. Suffice to reiterate that the Petitioner has a prima facie case on such disputed issues. The Petitioner had already deposited advance tax of ₹ 11 Crores and TDS of ₹ 7,05,288/by the time of filing of the return. The Petitioner has deposited further sum of ₹ 1 Crore with the tax department. Impugned order passed by the Commissioner does not take into account the sum of ₹ 11,07,05,288/, perhaps due to oversight since it appears that the Petitioner may not have brought such facts to his notice. Be that as it may, whatsoever direction we may issue for depositing the tax pending appeal, this amount must be taken into consideration. ORDER - Petitioner shall deposit a further sum of ₹ 3 Crores with the Department latest by 30/03/2019. This shall, along with the amounts already deposited by the Petitioner represent roughly 15% of the basic tax demand. Subject to the Petitioner depositing the same, there shall be no further recovery of the tax and interest pursuant to the order of assessment till the Petitioner s Appeal is disposed of by the Commissioner (A).

Summary

Issues:
Challenge to orders requiring deposit of tax demand pending appeal.

Analysis:
The petitioner, a private limited company, challenged the orders passed by the Assessing Officer and the Commissioner of Income Tax requiring a deposit of 20% of the tax demand arising from the assessment order pending appeal. The petitioner sought a complete stay against recoveries until the appeal was disposed of. The Assessing Officer had computed the petitioner's total income at ?299.92 crores, resulting in a total demand of ?137.95 crores, including tax and interest. The petitioner filed an appeal against this order and requested a stay on recovery, which was partially granted by the Assessing Officer, requiring a 20% deposit of the outstanding demand. The Principal Commissioner rejected the petitioner's application for a complete stay, leading to the present petition.

The petitioner's arguments against the additions made by the Assessing Officer included the addition under section 56(2)(viib) of the Act, disallowance of claim of depreciation of goodwill, and disallowance of set off of brought forward loss and unabsorbed depreciation. The petitioner contended that the Assessing Officer erred in making these additions and that the petitioner had a strong case in the pending appeal. The petitioner had already paid advance tax and tax at source, which were ignored in the impugned order. On the other hand, the respondent argued that the Assessing Officer had valid reasons for the additions and relied on CBDT circulars laying down conditions for granting stay of recovery pending appeals.

The court observed that the petitioner had an arguable case on the disputed additions made by the Assessing Officer. It noted that the requirement of depositing 20% of the disputed tax pending appeal was not rigid and could vary depending on the facts of the case. Considering the petitioner's prima facie case and the amounts already deposited with the tax department, the court directed the petitioner to deposit a further sum with the department, representing roughly 15% of the basic tax demand. It ordered that there would be no further recovery of tax and interest until the appeal was disposed of, provided the petitioner complied with the deposit. The court also instructed the petitioner not to cause any delays in the appeal process and allowed the department to seek vacation of the stay if delays were perceived.

In conclusion, the court disposed of the petition with the specified directions for the petitioner to deposit a further sum, maintain no further recovery of tax and interest, ensure no delays in the appeal process, and warned against deliberate delays leading to potential vacation of the stay.