2019 (7) TMI 937 - HC - Income Tax

Stay of demand - Single Judge order directing deposit of 40% of total enforceable demand and to furnish 35% of the enforceable total demand - Reopening of assessment u/s 147 - HELD THAT - The petitioner filed assessment relating to the assessment year 2010-11 showing NIL income. The case of the petitioner was taken up for reassessment under Section 143(1) and further u/s 147 the assessment was reopened and demand was raised. Against the reopening and re-assessment the petitioner filed appeal before the Appellate Authority. Along with the appeal, the petitioner also filed an application seeking for stay of the entire enforceable demand. The petitioner had also deposited 20% of the demand before the Appellate Authority. On the stay application of the appellant, order was passed under Section 220(6) of the Act. In the order it is noticed that based on the material, ACIT was of the view that it is a fit case for recovery of the entire demand raised, since the assessee had failed to prove genuineness of the credits in the Books of Accounts. The assessee could not prove the identity, creditworthiness of the Companies, who contributed to the share capital as well as the genuineness of the transaction. Taking note of the petitioner s argument and taking note the Circular No.1914, the learned Single Judge modified the order of the Assistant Commissioner passed under Section 220(6) demanding the entire enforceable demand to that of deposit of 40% of the total enforceable demand and furnishing of security to an extent of 35% of the enforceable total demand which in our view is an equitable order passed by the learned Single Judge. Petitioner has not made out any good ground to interfere with the equitable order passed by the learned Single Judge.

Summary

Issues:
1. Validity of the order under Section 220(6) of the Income Tax Act, 1961.
2. Requirement to furnish security for a percentage of the enforceable total demand.
3. Jurisdiction of the Assessing Authority in reopening the assessment.
4. Entitlement of the petitioner for a stay of the entire demand.

Analysis:

1. The petitioner challenged the order under Section 220(6) of the Income Tax Act, 1961, seeking to quash the demand for security. The petitioner, a company registered under the Companies Act, 1956, had filed a return of income showing NIL income for the assessment year 2010-11. The Assessing Officer reopened the assessment under Section 147 of the Act, resulting in a demand for a significant amount. The petitioner appealed this decision, along with an application for stay of the demand, which was partially granted by the Assistant Commissioner under Section 220(6) of the Act.

2. The main contention raised by the appellant was the requirement to furnish security for 35% of the enforceable total demand in addition to the deposit of 40%. The appellant argued that as the matter was pending in appeal before the Appellate Authority, they were only obligated to pay 20% of the demand. The appellant had already deposited 20% of the disputed demand and believed no further payment was necessary. However, the respondents justified the demand for security due to alleged fabrication of capital and share premium from other companies.

3. The Court examined the jurisdiction of the Assessing Authority in reopening the assessment and subsequently demanding the payment. It was noted that the Assistant Commissioner found it a fit case for recovery of the entire demand due to the failure of the assessee to prove the genuineness of credits in the Books of Accounts. The Court considered the petitioner's arguments and the Circular No.1914, leading to a modification of the demand to 40% of the total enforceable demand and furnishing security for 35% of the enforceable total demand.

4. The Court upheld the order passed by the learned Single Judge, considering it an equitable decision. It was concluded that the petitioner failed to establish sufficient grounds to interfere with the order. Therefore, the appeal was dismissed, affirming the directive for the petitioner to deposit 40% of the total enforceable demand and furnish security for 35% of the enforceable total demand.

This detailed analysis of the judgment addresses the issues raised in the case comprehensively, providing insights into the legal reasoning and decision-making process followed by the Court.