2019 (9) TMI 1240 - HC - Income Tax

Stay of demand - conditional stay was granted subject to the petitioner paying 20% of the tax amount attributable to the additions to income made under Section 68 - Deduction u/s 80(P) (2) (a) (i) - additions to the income declared by the petitioner under Section 68 - HELD THAT - Taking note of the judgment of this Court in Mavilayi Service Co-operative Bank Limited v. Commissioner of Income Tax 2019 (3) TMI 1580 - KERALA HIGH COURT in the context of the deduction claimed under Section 80P of the Income Tax Act, as also the directions stated to have issued by a Division Bench in writ appeals, that only 1% of the tax amount confirmed against assessees under Section 68 of the Income Tax Act, need to be deposited, pending disposal of the appeals by the First Appellate Authority, I dispose the writ petition by directing the 2nd respondent to consider and pass final orders on Ext.P3 appeal pending before him, within an outer time limit of four months from the date of receipt of a copy of this judgment, after hearing the petitioner. It is made clear that till such time as orders are passed by the 2nd respondent in the appeal as directed, and the order communicated to the petitioner, further proceedings including those pursuant to Exts.P7 and P8 communications, for recovery of amounts confirmed against the petitioner by Ext.P5 order, shall be kept in abeyance on condition that the petitioner pays an amount equivalent to 1% of the tax demanded on the additions made in the assessment order under Section 68 of the Income Tax Act, within one month from today. It is made clear that the attachment over the accounts of the petitioner, as contemplated in Exts.P7 and P8, shall stand lifted forthwith on the petitioner depositing the aforementioned 1% amount with the respondents.

Summary

Issues:
1. Disallowance of deduction under Section 80P of the Income Tax Act.
2. Additions to income declared under Section 68 of the Income Tax Act.
3. Stay application and conditional stay granted by the First Appellate Authority.
4. Proceedings under Section 220(6) of the Income Tax Act.
5. Impugning of notices issued by the Deputy Commissioner of Income Tax.
6. Directions regarding deposit amounts pending appeal disposal.

Analysis:
The judgment involves a Co-operative Society registered under the Kerala Co-operative Societies Act, classified as a Primary Agricultural Credit Society, which filed a return of income for the Assessment year 2016-2017 claiming deduction under Section 80P of the Income Tax Act and declaring nil income. The Assessing Officer disallowed the deduction under Section 80(P) (2) (a) (i) and made additions to the income declared under Section 68 of the Income Tax Act, resulting in a demand notice for tax payment. Penalty proceedings were also initiated.

The petitioner appealed the assessment order before the First Appellate Authority and obtained a conditional stay subject to paying 20% of the tax amount attributable to the additions to income. Dissatisfied with the order, the petitioner invoked Section 220(6) of the Income Tax Act, resulting in a direction to pay 50% of the demand under Section 80P in addition to the demand on the additions made under Section 68, totaling a significant amount.

The petitioner challenged the notices issued by the Deputy Commissioner of Income Tax, Trivandrum, directing payment from the petitioner's account towards the tax liability confirmed in the assessment order. The judgment considered the submissions and referred to relevant case law, directing the First Appellate Authority to pass final orders on the pending appeal within four months. Pending the appeal's disposal, further recovery proceedings were to be kept in abeyance if the petitioner paid 1% of the tax demanded on the additions made under Section 68 within one month. The judgment also lifted the attachment over the petitioner's accounts upon depositing the specified amount.