2019 (5) TMI 189 - HC - Income Tax

Stay u/s 220 (6) - Stay demand in relation to the appeals pending before the CIT (A) - whether u/s 226 (3) order requiring the Petitioner to pay 10% of the demand as a condition for stay of the total demand during the pendency of the appeals before the CIT (A) apart from the admitted liability for AY 2016-17 can be said to be unjustified? - HELD THAT - The impugned order requiring the Petitioner to pay 10% of the demand cannot be termed to be unreasonable. Revenue, has shown the Court the copy of a demand dated 17th March 2017 raised by the Additional Commissioner of Income Tax on the Petitioner under Section 221 (1) which is 15% of all the disputed demands which form the subject matter of the appeals pending before the CIT (A). This has in fact been reduced to 10% by the impugned order of Respondent No.2. Petitioner then drew attention of the Court to the notices dated 5th March 2019 issued to the trade debtors of the Petitioner under Section 226 (3) of the Act and prayed that those should be stayed pending the disposal of the appeal before the CIT (A). The above notices issued are consequential upon the impugned order dated 28th February 2019. With the said order not calling for any interference, these notices also do not call for any interference - writ petition is accordingly dismissed and the application is also dismissed.

Issues:
1. Challenge to the order of the Principal Commissioner of Income-tax demanding immediate payment of outstanding dues.
2. Previous litigation and directions issued by the Court regarding stay of demand.
3. Petitioner's plea regarding the harshness of the demand in light of pending refunds.
4. Details of the demands raised by the Assessing Officer and the admitted tax liability for AY 2016-17.
5. Allegations by the AO regarding the Petitioner's business practices and formation of front companies.
6. Direction by Respondent No.2 to deposit the admitted tax liability for AY 2016-17 and 10% of the remaining demand.
7. Financial condition of the Petitioner and argument against the harshness of the demand.
8. Scope of the Court's concern regarding the stay of demand during the pendency of appeals before the CIT (A).
9. Reasonableness of the order requiring the Petitioner to pay 10% of the demand.
10. Comparison with a previous demand raised by the Additional Commissioner and reduction to 10% by Respondent No.2.
11. Petitioner's request to stay notices issued to trade debtors under Section 226(3).
12. Consequential nature of the notices issued based on the impugned order.
13. Dismissal of the writ petition and application.

Analysis:
The judgment involves a challenge by the Petitioner against the Principal Commissioner of Income-tax's order demanding immediate payment of outstanding dues. This is the second round of litigation, with previous directions issued by the Court regarding the stay of demand. The Petitioner argues that the demand is harsh due to pending refunds owed by the Department. The demands raised by the Assessing Officer and the admitted tax liability for AY 2016-17 are detailed, amounting to a significant sum. Allegations by the AO regarding the Petitioner's business practices and formation of front companies are also mentioned.

Respondent No.2 directed the Petitioner to deposit the admitted tax liability for AY 2016-17 and 10% of the remaining demand, leading to the Petitioner's plea about their financial condition and the harshness of the demand. The Court's concern is focused on the stay of demand during the appeals' pendency before the CIT (A), evaluating the reasonableness of the order requiring the Petitioner to pay 10% of the demand. A comparison is made with a previous demand raised by the Additional Commissioner, which was reduced to 10% by Respondent No.2.

The Petitioner requested to stay notices issued to trade debtors under Section 226(3), which were deemed consequential to the impugned order. Ultimately, the writ petition and application were dismissed, affirming the order for the Petitioner to pay the demanded amounts.

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