2019 (7) TMI 131 - HC - Income Tax

Stay of the demand being tax penalty - whether the assessee is required to pay the entire amount of demand when the appeal is pending ? - HELD THAT - It is true that the assessee should establish a prima facie case and should show a balance of conveyance in his favour and also establish that he will be put to irreperable hardship if the demand of entire tax and penalty would not be stayed before the Tribunal. The three cardinal principles which are granted by Civil Courts while granting reliefs are equally applicable before the Quasi Judicial and Tribunal. During the pendency of this writ petition before this Court on account of certain technical errors, the assessee has paid a further sum of ₹ 5,00,000/- and as on date, the assessee has paid ₹ 60,31,279/- as against ₹ 85,53,832/-. This amount paid by the assessee would be sufficient to safeguard the interest of the Revenue. Writ petition is partly allowed and the order and direction issued by the Tribunal is modified and the Tribunal is directed to reckon the payments effected upto date i.e., ₹ 60,31,279/- to be sufficient to protect the interest of Revenue and the Tribunal may proceed to hear the appeal and decide on merits and in accordance with law.

Summary

Issues:
Stay of demand of tax penalty during pendency of appeal.

Analysis:
The writ petition was filed challenging the Order passed by the Income Tax Appellate Tribunal regarding the stay of demand of tax penalty for the assessment year 2015-16. The petitioner/assessee had requested a stay on the demand of &8377; 85,53,832/-, which was the tax penalty computed by the Assessing Officer. The Tribunal had directed the assessee to pay the balance amount in monthly installments of &8377; 3,00,000/- after the assessee had already paid &8377; 51,31,278/- out of the total demand.

The main issue revolved around whether the assessee was obligated to pay the entire demand amount while the appeal was pending. The Court emphasized that the assessee needed to establish a prima facie case, demonstrate a balance of convenience in their favor, and prove that irreparable harm would be suffered if the entire tax and penalty demand was not stayed. The Court highlighted that the principles applied by Civil Courts in granting reliefs were equally relevant in quasi-judicial and Tribunal settings.

During the proceedings, the assessee made an additional payment of &8377; 5,00,000/-, bringing the total amount paid to &8377; 60,31,279/- out of the original demand. The Court concluded that this payment was sufficient to protect the interests of the Revenue. Consequently, the writ petition was partly allowed, and the Tribunal was directed to consider the payments made by the assessee as adequate to safeguard the Revenue's interests. The Tribunal was instructed to proceed with hearing the appeal on its merits and in accordance with the law. The Court ruled in favor of the petitioner/assessee, modifying the Tribunal's order and directions.

In conclusion, the writ petition was partly allowed without any costs, and the connected miscellaneous petition was closed. The judgment provided clarity on the obligations of an assessee during the pendency of an appeal regarding the payment of tax penalties and the considerations involved in granting stays on such demands.