2021 (4) TMI 609 - HC - Income Tax

Stay of demand - whether assessing officer can grant deposit orders of a lesser amount than 20% pending appeal without making reference to the administrative Pr.CIT/CIT? - HELD THAT - As in M/S. LG ELECTRONICS INDIA PVT. LTD. 2018 (7) TMI 1905 - SC ORDER clarified that in all cases arising under 220(6) of the Act, it will be open to the authorities on the facts of individual cases, to grant deposit orders of a lesser amount than 20% pending appeal. This was laid down by the Hon'ble Supreme Court since it was submitted that the administrative circular will not operate as a fetter on the Commissioner since he is a quasi-judicial authority. Since the Assessing Officer is exercising quasi-judicial power by virtue of Section 220(6) of the Act, the implication of the clarification of the legal position by the Hon'ble Supreme Court is that the assessing officer can grant deposit orders of a lesser amount than 20% pending appeal without making reference to the administrative Pr.CIT/CIT. Reference of course has to be made if he is of the view that deposit order of a higher amount than 20% pending appeal is warranted. Thus the order impugned in this writ petition is liable to be set aside as it is absolutely non-speaking. It is true that as pointed out by the learned standing counsel, the stay petition filed by the petitioner is equally bald and bereft of details. But as observed in Kannammal's case 2019 (3) TMI 1 - MADRAS HIGH COURT , the assessing officer ought to be pro-active. The statutory provision will come into play only if an appeal has been filed before the appellate authority. The case of the assessee would definitely be projected in the appeal memorandum. Therefore, in the light of the stand taken in the appeal memorandum, the Assessing Officer can pass order by applying the trinity principles. The petition under Section 220(6) of the Act will have to be filed only before the assessing officer after filing the statutory appeal. The learned standing counsel claim that at present the assessees are indiscriminately filing the stay petitions. They move the appellate authority, the assessing officer and also the Principal Commissioner of Income Tax simultaneously. The Principal Commissioner of Income Tax is only the reviewing authority. It is only when the assessing officer makes a reference or if the assessee is aggrieved by the order passed by the assessing officer, by virtue of Circular dated 29.02.2016, the Principal Commissioner of Income Tax will get the jurisdiction to exercise his power under Section 220(6) of the Act and not otherwise. Thus the order impugned in the writ petition is set aside and the matter is remitted to the file of the assessing officer to pass orders afresh in accordance with law. The petitioner is at liberty to file a supplementary petition containing additional particulars and contentions. The assessing officer is obliged to consider all the contentions that may be raised by the petitioner while passing order under Section 220(6)

Issues Involved:
1. Reopening of assessment years 2015-16 and 2016-17.
2. Legality of the notice issued under Section 143(2) of the Income Tax Act.
3. Validity of the recovery proceedings initiated by the first respondent.
4. Compliance with Office Memorandum and CBDT instructions.
5. Nature and adequacy of the impugned order passed under Section 220(6) of the Income Tax Act.
6. Jurisdiction and authority of the Principal Commissioner of Income Tax in stay petitions.

Detailed Analysis:

Reopening of Assessment Years 2015-16 and 2016-17:
The petitioner, a major distributor of ITC products and a partnership firm, underwent a survey under Section 133A of the Income Tax Act on 05.12.2017. Based on this survey, the assessments for the years 2015-16 and 2016-17 were reopened. The petitioner contended that after the issue was initially settled, a second notice under Section 143(2) was issued on 20.09.2018, leading to adverse orders on 29.12.2018. An appeal was filed before the Commissioner of Income Tax (Appeals), Madurai.

Legality of Notice Issued Under Section 143(2):
The petitioner argued that the second notice under Section 143(2) was issued improperly after the issue had been settled. The petitioner sought to challenge the adverse orders resulting from this notice by filing an appeal.

Validity of the Recovery Proceedings:
The petitioner submitted an application under Section 220(6) to avoid being treated as an assessee in default during the pendency of the appeal. The first respondent directed the petitioner to pay 20% of the demand for stay, failing which follow-up action would be taken. The petitioner questioned this communication dated 06.02.2020 through the writ petition.

Compliance with Office Memorandum and CBDT Instructions:
The petitioner’s counsel argued that the first respondent failed to consider the Office Memorandum dated 21.08.1969 and other relevant CBDT instructions. The counsel cited several decisions, including Kannammal vs. Income Tax Officer, to support the contention that the parameters for stay application consideration were ignored.

Nature and Adequacy of the Impugned Order:
The court observed that the impugned order under Section 220(6) was non-speaking and did not comply with the requirement of a reasoned order as mandated by CBDT Instruction No. 1914. The court noted that the assessing officer must consider all relevant factors and communicate the decision in a speaking order. The court emphasized the need for the assessing officer to be proactive and consider the appeal memorandum while applying the trinity principles of prima facie case, financial stringency, and balance of convenience.

Jurisdiction and Authority of the Principal Commissioner of Income Tax:
The court clarified that the Principal Commissioner of Income Tax could only exercise jurisdiction under Section 220(6) upon a reference from the assessing officer or if the assessee is aggrieved by the assessing officer's order. The Principal Commissioner cannot assume jurisdiction in the first instance. The court also noted that the Hon’ble Supreme Court in Principal Commissioner of Income Tax vs. LG Electronics India Private Limited clarified that authorities could grant deposit orders of a lesser amount than 20% without reference to administrative instructions.

Conclusion:
The court set aside the impugned order for being non-speaking and remitted the matter to the assessing officer to pass a fresh order in accordance with the law. The petitioner was allowed to file a supplementary petition with additional particulars. The court directed the assessing officer to consider all contentions raised by the petitioner while passing the order under Section 220(6). The writ petition was allowed with no costs, and connected miscellaneous petitions were closed.

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