2019 (7) TMI 1222 - HC - Income Tax

Stay petition - prima facie case - substantial amount already paid - HELD THAT - In the instant case, we find that on objections being filed by the assessee, the Assessing Officer disposed of the objections and passed an order on 10.11.2017. Therefore, we are of the prima facie view that the CIT(A) ought to have considered the validity of the reopening and not rejected the appeal on the ground that the authorized representative of the assessee participated in response to the notice issued u/s 148. This, in our considered view, would be sufficient for the present to hold that the assessee has made out a prima facie case. Coming to the next aspect as regards the balance of convenience is concerned, the learned counsel for the assessee relied upon a decision of the Kolkata Bench of the Tribunal in respect of one Ravindra Sanghai (HUF) 2012 (5) TMI 811 - ITAT KOLKATA and submitted that it also pertains to dealing of shares in the company M/s.Multiplus Resources. In the said case, the Tribunal ruled in favour of the assessee by order dated 22.05.2012. Thus, we find that the balance of convenience, at this stage, would lean in favour of the assessee. Total tax paid by the assessee is ₹ 19,98,004/- out of the tax demand of ₹ 28,20,927/- which comes to nearly 71% of the demand. If interest on the tax is added, then the amount which has been paid by the assessee would be little more than 42%. Thus, going by the payment effected by the assessee towards the tax component, we find that the interest of the Revenue is sufficiently safeguarded. That apart, the assessee had requested for an early hearing of the appeal raising various contentions including the contention that the Chennai Tribunal has remanded similar matters for further verification. Payment effected by the assessee, thus for, that is prior to the passing of the interim order by the Tribunal and upon compliance of the payment of first instalment totalling a sum of ₹ 19,98,004/- would sufficiently safeguard the interest of the Revenue. Accordingly, the respondent need not insists upon any further payment till the disposal of the appeal and the balance tax and interest payable by the assessee shall remained stayed till the disposal of the appeal filed by the assessee before the Tribunal.

Summary

Issues involved:
1. Grant of stay of demand by the Tribunal
2. Prima facie case on merits of the addition
3. Balance of convenience in favor of the assessee
4. Undue financial hardship faced by the assessee

Detailed Analysis:
1. The appeal was filed against the order passed by the Tribunal in a stay petition regarding a demand of ?37,40,152 for the assessment year 2012-13. The Tribunal granted a stay subject to the condition of paying ?10,00,000 in monthly installments. The question arose whether the assessee is entitled to stay for the balance amount and if the Tribunal erred in directing payment in installments.

2. The assessee raised substantial questions of law regarding the dismissal of the request for full stay of demand without considering the complete facts and circumstances of the case, the presence of a strong prima facie case on merits, and the undue hardship that would be caused if further tax demand is to be paid. The Tribunal found no prima facie case on the merits of the addition, but the High Court noted that the Tribunal did not provide reasons for this conclusion.

3. The High Court refrained from delving into the merits of the case as the appeal was pending before the Tribunal. However, it found that the assessee had made out a prima facie case based on the objections filed against the reopening of the assessment. The Court emphasized the importance of considering the validity of reopening rather than rejecting the appeal based on the assessee's participation in proceedings.

4. Regarding the balance of convenience, the Court considered the circumstances of the case where the assessee, an individual, faced allegations related to stock brokers without any direct involvement or evidence against them. The Court found that the balance of convenience leaned in favor of the assessee, especially considering a similar ruling in another case.

5. The Court also assessed the financial hardship faced by the assessee, noting her limited income and lack of liquid funds to pay the disputed tax. The assessee had paid a significant portion of the demand, which was deemed sufficient to safeguard the interest of the Revenue. Consequently, the Court modified the Tribunal's order, allowing the balance tax and interest to remain stayed until the appeal's disposal.

In conclusion, the High Court partially allowed the appeal, emphasizing the importance of prima facie case, balance of convenience, and financial hardship considerations in granting a stay of demand.