2021 (1) TMI 602 - AT - Income Tax

Stay u/s 220(6) rejected - revenue s suggestion to direct the assessee to make payment of 20% of the disputed demands - HELD THAT - AO does not wish to recover the demands in the hope that as a law-abiding corporate citizen, the assessee will volunteer to cooperate with the income tax department and the Assessing Officer chooses to wait till suitable clarification is obtained from the Hon ble High Court to the effect that the stay granted in a writ petition challenging the validity of order declining stay under section 220(6), which is now admittedly infructuous in the light of the appeal having been disposed of by the learned CIT(A), ceases to hold good. This is indeed a welcome approach and reflects the utmost faith in and courtesy with which our taxpayers are being treated. In view of this factual position, we see no need to take a call on merits on this stay petition at this stage.The stay petition is, given the approach adopted by the field authorities, infructuous and must be dismissed as such. We must, however, take this paradigm shift in the approach of the field authorities, with a reasonable degree of circumspection. As for the revenue s suggestion to direct the assessee to make payment of 20% of the disputed demands, we find it difficult to understand, much less approve, such a request. It is not for the Income Tax Appellate Tribunal to supplement or support the recoveries by the field officers. Once the Assessing Officer himself has decided not to take coercive measures, for the time being, it cannot be open to us to direct the assessee to pay any part of the disputed demands. When the powers of recovering the disputed taxes are with the Assessing Officer, and when, according to him, there are no fetters imposed on the exercise of such powers, it cannot be open to him to ask anyone else to direct him to exercise these powers. As for the request for an early hearing made by the learned senior counsel, we have taken note of no objection thereto by the revenue authorities and the submission of the learned Departmental Representative that the Assessing Officer is in the process of filing cross-appeal, along with a petition seeking condonation of delay, against the partial relief granted by the CIT(A), as also the fact that both the cross-appeals are required to be heard together. Therefore, while we direct the Registry to list this appeal for the out of turn hearing on 18th January 2021, we also direct the Departmental Representative to move a petition seeking consolidation of appeals, if any such cross appeal is filed, so that the cross appeals can be taken up together.

Issues Involved:
1. Stay on collection/recovery of tax and interest demands.
2. Validity of demerger under Section 2(19AA) of the Income Tax Act, 1961.
3. Taxability of deemed dividend under Section 2(22)(e) of the Income Tax Act.
4. Liability to pay dividend distribution tax under Section 115Q.
5. Interest demand under Section 115P.
6. Interim stay granted by the High Court.
7. Tribunal's power to grant stay on recovery of demands.
8. Request for early hearing.

Issue-wise Detailed Analysis:

1. Stay on Collection/Recovery of Tax and Interest Demands:
The assessee sought a stay on the collection/recovery of tax and interest demands totaling ?3,786.34 crores for the assessment year 2018-19. The Tribunal noted that the interim stay granted by the High Court was still in operation due to the COVID-19 pandemic and subsequent extensions. The Tribunal found no legitimate apprehension for recovery of the disputed demands as the revenue authorities had taken a conscious decision not to take coercive actions pending clarification from the High Court.

2. Validity of Demerger under Section 2(19AA):
The Assessing Officer (AO) concluded that the demerger was not in accordance with Section 2(19AA) of the Income Tax Act, 1961. The AO viewed the demerger as a mere transfer of assets and liabilities with a net book value of ?1,721.61 crores, which did not constitute a business activity. The AO further computed the fair market value of the shares issued as consideration and concluded that the demerger was a guise for transferring assets.

3. Taxability of Deemed Dividend under Section 2(22)(e):
The AO determined that the excessive consideration paid to the shareholders of the assessee company under the guise of demerger consideration was taxable as deemed dividend under Section 2(22)(e) of the Income Tax Act. Consequently, the assessee was held liable to pay dividend distribution tax.

4. Liability to Pay Dividend Distribution Tax under Section 115Q:
The AO raised a demand for dividend distribution tax amounting to ?4,893.44 crores, which the assessee failed to discharge. The assessee was held to be in default under Section 115Q of the Income Tax Act.

5. Interest Demand under Section 115P:
The AO also raised a demand for interest under Section 115P, which amounted to ?978.68 crores at that point in time. The total demand raised on the assessee was ?5,872.13 crores.

6. Interim Stay Granted by the High Court:
The High Court had granted an interim stay on the recovery of the disputed demands, which was extended due to the COVID-19 pandemic. The Tribunal noted that the interim stay was still in operation and that the revenue authorities had decided not to take coercive actions until further clarification from the High Court.

7. Tribunal's Power to Grant Stay on Recovery of Demands:
The Tribunal discussed whether it had the power to grant a stay on the collection/recovery of demands unless the assessee made a partial payment of at least 20% of the disputed demands. The Tribunal concluded that it was not necessary to deal with this issue due to the interim stay granted by the High Court and the revenue authorities' decision not to take coercive actions.

8. Request for Early Hearing:
The Tribunal noted the assessee's request for an early hearing and the revenue authorities' no objection to it. The Tribunal directed the Registry to list the appeal for an out-of-turn hearing on 18th January 2021 and instructed the Departmental Representative to move a petition for consolidation of appeals if a cross-appeal was filed.

Conclusion:
The Tribunal dismissed the stay application as infructuous due to the interim stay granted by the High Court and the revenue authorities' decision not to take coercive actions. The Tribunal also directed that before resorting to any coercive measures, the Assessing Officer must give at least one week's notice to the assessee. The appeal was scheduled for an early hearing on 18th January 2021.

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