2019 (12) TMI 990 - HC - Income Tax

Maintainability of the appeal - Stay of recovery proceedings - position to interdict the interim order under challenge - Main relief' sought for in the writ petition - HELD THAT - The 'interim relief' sought for in the I.A. is virtually the 'main relief' sought for in the writ petition. It has been held by the Apex Court in Bank of Maharashtra v. Race Shipping and Transport Co. Pvt. Ltd. and Another 1995 (2) TMI 471 - SUPREME COURT that no final relief can be granted in the form of interim relief. Proviso to Section 2(1) of the Act, 2006 clearly shows that no appeal is maintainable against an interim order passed by the learned Single Judge. Admittedly, the order dated 05.09.2019 is an interim order passed by the learned Single Judge in I.A. No. 1 of 2019. By virtue of the statutory bar, no appeal can be entertained against such an order. Unless the order finally adjudicates the lis, it cannot be treated as an order from which appeal lies. It is relevant to note that the Appellant / writ Petitioner is free to substantiate the contentions in the writ petition with regard to the 'main reliefs' and also as to the necessity to have the appeal / stay petition stated as filed before the 2nd Respondent to be finalized within a specific time. Similarly, the observation made by the learned Single Judge in the 'last sentence' of the order under challenge, that it is open for the writ Petitioner to move the Assessing Officer / 3rd Respondent to have relaxation in any manner and as to the alleged futility in this regard (having already moved the said authority and also the higher authority / 1st Respondent) could be highlighted in the course of final hearing. In the said circumstance, the appeal is dismissed as not maintainable, without prejudice to the rights and liberties of the Appellant to substantiate the merit involved with reference to the main prayers sought for in the writ petition.

Summary

Issues Involved:
1. Validity of the interim order dated 05.09.2019.
2. Maintainability of the appeal under the proviso to Section 2(1) of the Chhattisgarh High Court (Appeal to Division Bench) Act, 2006.
3. Applicability of CBDT Circulars regarding stay of recovery proceedings.
4. Assessment and recovery of high-pitched tax demands.
5. Jurisdiction and authority of the Assessing Officer and higher authorities in granting stay.

Detailed Analysis:

1. Validity of the Interim Order Dated 05.09.2019:
The appellant challenged the interim order dated 05.09.2019 passed by the learned Single Judge, which rejected the appellant’s request for an interim stay of the tax recovery assessed under the Income Tax Act, 1961. The appellant argued that the order was not in conformity with the CBDT Circulars, which provide guidelines for granting stay of recovery proceedings. The court noted that the appellant's assessment was high-pitched, with the assessed income being several times higher than the returned income. The appellant contended that the assessment was based on presumptions and conjectures and that the investment made by multiple retail liquor licensees was wrongly held as unexplained investment by the appellant.

2. Maintainability of the Appeal:
The court expressed doubts about the maintainability of the appeal under the proviso to Section 2(1) of the Chhattisgarh High Court (Appeal to Division Bench) Act, 2006, which bars appeals against interlocutory orders. The court referenced previous judgments, including a Full Bench decision, which clarified that appeals against interim orders are not maintainable unless the orders vitally affect the rights of the parties and have an element of finality. The court concluded that the interim order in question did not meet these criteria and therefore, the appeal was not maintainable.

3. Applicability of CBDT Circulars:
The appellant relied on various CBDT Circulars, which provide guidelines for granting stay of recovery in cases of high-pitched assessments. Circular No. 1914 and subsequent modifications stipulate that stay should be granted if the assessment is unreasonably high-pitched or if genuine hardship is likely to be caused to the assessee. The court noted that the power to grant stay is conferred upon the Assessing Officer and higher authorities within the Department, not the Appellate Authority. The appellant argued that the requirement to pay 20% of the disputed demand was unconscionable given the high-pitched nature of the assessment.

4. Assessment and Recovery of High-Pitched Tax Demands:
The court discussed the procedural history of the case, including the search and seizure operations, issuance of notices under Sections 153A and 142(1) of the IT Act, and the subsequent high-pitched assessment. The appellant’s grievance was that the assessment led to a huge tax liability, which could potentially lead to the closure of the appellant's business. The court noted that the assessment was based on the analysis of documents and circumstances collected during the search and seizure operations, which revealed organized tax evasion over several years.

5. Jurisdiction and Authority of the Assessing Officer and Higher Authorities:
The court emphasized that the power to grant stay of recovery lies with the Assessing Officer and higher authorities as per the CBDT Circulars. The appellant had already approached these authorities, who had turned down the request for stay. The court highlighted that the statutory power of the Appellate Authority to grant stay is not governed by the CBDT Circulars and that the appellant had not filed an application for stay before the Appellate Authority. The court concluded that the interim relief sought by the appellant in the I.A. was essentially the main relief sought in the writ petition, which could not be granted as an interim relief according to the Supreme Court's precedent.

Conclusion:
The court dismissed the appeal as not maintainable under the proviso to Section 2(1) of the Act, 2006, without prejudice to the appellant’s rights to substantiate the merits of the case in the writ petition. The court expressed hope that the learned Single Judge would finalize the writ petition expeditiously.