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2020 (2) TMI 735 - HC - Income TaxStay petition - Recovery of outstanding tax demands - petition for stay of collection is hereby rejected on the ground that mere filing of appeal before the CIT(A) is not a valid reason for stay of collection - HELD THAT - As relying on MRS. KANNAMMAL VERSUS INCOME TAX OFFICER WARD 1 (1) TIRUPUR 2019 (3) TMI 1 - MADRAS HIGH COURT the impugned order is set aside. The petitioner is granted liberty to approach the appellate authorities with an application for stay of recovery within a period of two (2) weeks from today and the Appellate/Administrative Commissioner will, after hearing the petitioner, dispose the stay application in accordance with law and after taking into consideration the three fold aspects of prima facie, financial stringency and balance of convenience within a period of three (3) weeks thereafter by way of a speaking order. There shall be an order interim stay of recovery of the disputed demand till disposal of the stay application to be filed by the petitioner before the Appellate/Administrative Commissioner. It is made clear that if the petitioner does not file an application for stay within a period of two (2) weeks from today, then, order dated 05.02.2020 will automatically stand revived.
Issues Involved:
1. Consideration of stay of tax demand pending appeal. 2. Compliance with Central Board of Direct Taxes (CBDT) guidelines. 3. Assessment of prima facie case, financial stringency, and balance of convenience. 4. Adequacy of the Assessing Officer's order. Issue-wise Detailed Analysis: 1. Consideration of stay of tax demand pending appeal: The primary issue in this case revolves around the petitioner’s request for a stay of the tax demand pending the appeal before the CIT(A). The impugned order dated 05.02.2020 rejected the stay request on the ground that mere filing of an appeal does not justify a stay of collection. The order stated that the request for stay would only be considered upon payment of 20% of the tax demand, as per CBDT's Instruction No.1914, as modified by subsequent Office Memorandums (OMs). 2. Compliance with Central Board of Direct Taxes (CBDT) guidelines: The judgment scrutinizes compliance with CBDT guidelines, particularly Instruction No.1914 and its modifications by OMs dated 29.02.2016 and 31.07.2017. These guidelines outline the procedure for granting stay of tax demands and emphasize the need for assessing officers to consider the existence of a prima facie case, financial stringency, and balance of convenience. The guidelines also stipulate that stay petitions should be disposed of within two weeks and that decisions should be communicated promptly. 3. Assessment of prima facie case, financial stringency, and balance of convenience: The judgment emphasizes that the assessing officer must consider the "trinity" of factors—prima facie case, financial stringency, and balance of convenience—when adjudicating stay petitions. The court referenced a previous case (Mrs. Kannammal V. Income Tax Officer) to highlight that these parameters are well-settled and must be applied to ensure fair adjudication. The guidelines also allow the assessing officer discretion to adjust the quantum of demand based on these factors. 4. Adequacy of the Assessing Officer's order: The court found the assessing officer’s order to be a non-speaking one, lacking in detailed reasoning and failing to consider the necessary parameters for granting a stay. The order merely stated that filing an appeal is not a sufficient ground for stay and directed immediate payment of the demand. The court criticized this approach, stating that the assessing officer should have issued a speaking order, considering the conditions precedent for the grant of stay and the relevant CBDT Circulars. Conclusion: The court set aside the impugned order, granting the petitioner liberty to approach the appellate authorities with a stay application within two weeks. The appellate/administrative commissioner is directed to dispose of the stay application within three weeks, considering the prima facie case, financial stringency, and balance of convenience. An interim stay of recovery of the disputed demand is ordered until the disposal of the stay application. If the petitioner fails to file the application within the stipulated time, the order dated 05.02.2020 will automatically revive. The writ petition is allowed, and connected miscellaneous petitions are dismissed.
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