2021 (1) TMI 1022 - AT - Income Tax

Stay of demand - exemption u/s.11 denied - assessee has violated provisions of section 13(3) r.w.s. 13(2)(a) for the reason that return required to be filed u/s.139(1) was not filed within the due date for filing return of income, accordingly, entire income has been brought to tax - HELD THAT - We find that assessee has not paid any amount towards outstanding demand created by Assessing Officer . As per the amended provisions of section 254 (2A) of the Act, before granting any stay, assessee is required to deposit at least 20% of disputed tax. When this provision is apprised to learned AR for the assessee , he pleaded that assessee s financial condition is very weak and it cannot service disputed demand. We, therefore, considering fact that assessee is not willing to pay any amount towards disputed demand, reject the stay application filed by assessee. However, in order to give early hearing to assessee, appeal filed by assessee is posted for out of turn hearing on 09.02.2021.

Summary

Issues:
Stay application for outstanding demand of ?14,41,78,220 for the assessment year 2017-18.

Analysis:
The assessee, a trust claiming exemption u/s.11 of the Income Tax Act, had its assessment completed under section 143(3) with a denied exemption due to not filing the return of income within the due date specified u/s.139(1). The Assessing Officer disallowed the entire exempted income of the trust, citing violations of section 13(3) r.w.s. 13(2)(a) and section 13(9). The trust filed an appeal before CIT Appeals challenging the order. The assessee argued that the high-pitched demand was created only on technical grounds and that the Assessing Officer failed to provide a valid reason for rejecting the exemption claimed u/s.11. The trust also cited precedents where demands were stayed during appeal proceedings due to high-pitched assessments causing genuine hardship.

The trust relied on the observations of the Madras High Court in a previous case, emphasizing the consideration of genuine difficulties faced by taxpayers during stay proceedings. The trust also cited various judgments supporting the stay of demands in cases of high-pitched assessments to prevent undue hardship. The trust invoked Instruction No. 1914 of 1993, arguing that the demand in dispute should be stayed as it relates to a legal issue decided in favor of the assessee by a High Court. The trust highlighted that the financial condition was weak, making it difficult to service the disputed demand.

The Tribunal noted the amended provisions requiring the assessee to deposit at least 20% of the disputed tax before granting a stay. The assessee, unable to pay any amount towards the demand, pleaded financial weakness. Consequently, the stay application was rejected, but the appeal was scheduled for an out-of-turn hearing. The Tribunal directed the assessee to cooperate for the appeal's disposal without seeking adjournment. The order was pronounced on 8th January 2021, dismissing the stay application filed by the assessee.