2020 (7) TMI 542 - HC - Income Tax

Stay petition - Submission seeking to defend the Revenue by contending that petitioner has been shown concession to pay 20% of the tax amount, that too in six equal installments is too fragile to be countenanced - HELD THAT - Admittedly, an application was filed before the PCIT seeking stay of assessment order. The same has also been disposed of without hearing the petitioner. Generally, in all cases, an application filed before any quasi judicial authority is required to be heard before any orders are passed and more so, in the case of this nature, where the assessee becomes liable to pay huge taxes. The third respondent- PCIT shall grant an opportunity to petitioner to put forth its case so far as the application for stay is concerned. - No coercive steps to recover the tax amount shall be initiated till PCIT passes his order.

Summary

Issues:
Challenge to assessment order, Stay application rejection, Disallowance of expenditure, Orders passed without notice or hearing, Maintainability of writ petition during pending appeal.

Analysis:

1. Challenge to Assessment Order:
- The petitioner challenged the assessment order dated 30th December 2019 passed by the Income Tax Officer, Bengaluru. The Assessing Authority instructed the bank to freeze the petitioner's account, leading to the filing of a stay application which was rejected. Subsequently, an application for stay was filed before the Principal Commissioner of Income Tax-5, Bengaluru, under Section 246A of the Income Tax Act, 1961. As no orders were passed, the petitioner approached the High Court seeking to quash the assessment order.

2. Disallowance of Expenditure:
- The petitioner's advocate argued that the Assessing Authority disallowed an expenditure of nearly &8377; 7.87 crores, incurred by making payments to contractors, without properly appreciating the replies received from the contractors. The advocate highlighted that replies from contractors were submitted before the assessment order date, indicating that the disallowance was unjustified. The petitioner contended that the order to deposit 20% of the tax amount in installments was passed without notice or hearing, rendering it unsustainable.

3. Orders Passed Without Notice or Hearing:
- The advocate for the petitioner emphasized that the order directing the petitioner to deposit 20% of the tax amount in installments was passed without notice or hearing, infringing upon the principles of natural justice. The petitioner argued that the Assessing Authority disallowed expenses without properly considering the contractors' replies, leading to an unjust tax assessment.

4. Maintainability of Writ Petition During Pending Appeal:
- The respondent's counsel contended that since an appeal was pending before the appellate authority and the Principal Commissioner of Income Tax had partly allowed the stay application, a writ petition challenging the assessment order was not maintainable. However, the High Court considered the arguments of both sides and found merit in the petitioner's contentions regarding the unjust disallowance of expenditure and lack of proper hearing before passing orders.

5. Judgment:
- The High Court directed the Principal Commissioner of Income Tax to grant an opportunity to the petitioner to present their case regarding the stay application. The petitioner was instructed to appear before the Principal Commissioner on a specified date for further instructions. The Principal Commissioner was directed to dispose of the application within four weeks of the petitioner's appearance, and no coercive steps for tax recovery were to be initiated until the Principal Commissioner passed the order. The writ petition was disposed of accordingly, with no costs imposed.