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2020 (3) TMI 798 - HC - Income TaxStay of demand - HELD THAT - We feel that the approach taken by both respondent Nos.1 and 2 in not accepting the stay prayer of the petitioner and instead directing the petitioner to pay 20% of the demand is not justified. The two authorities did not address the issues raised by the petitioner, namely, that in his own case for earlier assessment years against orders passed by the assessing officer on the same issue, the first appellate authority had held it to be a co-operative society and entitled to deduction under Section 80P(2) of the Act which was confirmed by the Tribunal. It was not the case of the petitioner that only because it has filed an appeal before the first appellate authority, the entire demand should be stayed. As perused the CBDT Circular No.530 dated 06.03.1989 and considered the decision of this Court in ICICI Prudential Life Insurance Co. Ltd. 2014 (2) TMI 518 - BOMBAY HIGH COURT On due consideration, we are of the view that the impugned demand notice dated 20.11.2019 issued by respondent No.1 for the assessment year 2017-18 is liable to be stayed till disposal of the appeal by the first appellate authority. We also direct that the first appellate authority may expedite hearing of the appeal filed by the petitioner on 14.12.2019.
Issues:
1. Legality and correctness of order rejecting application for stay of demand. 2. Interpretation of deduction claimed under Section 80P(2)(a)(i) of the Income Tax Act, 1961. 3. Rejection of prayer for stay of demand by respondent No.1. 4. Rejection of stay application by respondent No.2. 5. Consideration of CBDT Circular and judicial precedents. 6. Justification of insisting on payment of 20% of tax demand by respondent Nos.1 and 2. Analysis: The petitioner, an association of persons running a co-operative credit society, challenged the legality of orders dated 03.02.2020 and 18.02.2020 passed by respondent Nos.1 and 2 respectively, rejecting the application for stay of demand. The assessing officer had disallowed a deduction claimed under Section 80P(2)(a)(i) of the Income Tax Act, 1961, resulting in a demand notice being issued to the petitioner. The petitioner contended that in previous years, higher authorities had recognized it as a co-operative society entitled to the deduction, and therefore, the demand should be stayed till the appeal is decided by the first appellate authority. The High Court noted that respondent Nos.1 and 2 did not address the petitioner's argument regarding the previous favorable decisions by higher authorities. The Court considered the CBDT Circular No.530 dated 06.03.1989 and the decision in ICICI Prudential Life Insurance Co. Ltd., emphasizing the importance of judicial discipline and adherence to appellate decisions by revenue officers. The Court held that the demand notice issued by respondent No.1 was liable to be stayed till the appeal is decided by the first appellate authority, directing expedited hearing of the appeal. The Court found respondent Nos.1 and 2 unjustified in not accepting the petitioner's stay prayer and instead insisting on payment of 20% of the demand. It was emphasized that the mere filing of an appeal is not sufficient grounds for denying a stay of the entire demand, especially when previous appellate decisions favored the petitioner. The judgment allowed the writ petition, granting a stay on the demand without imposing costs.
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