2022 (11) TMI 1027 - HC - Income Tax

Stay of demand - recovery proceedings - direction to deposit 20% of the demand - Relaxation to pre-condition of deposit - HELD THAT - This Court is of the view that the requirement of payment of twenty percent of disputed tax demand is not a pre-requisite for putting in abeyance recovery of demand pending first appeal in all cases. The said pre-condition of deposit of twenty percent of the demand can be relaxed in appropriate cases. Even the Office Memorandum dated 29th February, 2016 gives instances like where addition on the same issue has been deleted by the appellate authorities in earlier years or where the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee. In fact the Supreme Court in the case of PCIT vs. M/s LG Electronics India Pvt. Ltd. 2018 (7) TMI 1905 - SC ORDER has held that tax authorities are eligible to grant stay on deposit of amounts lesser than twenty percent of the disputed demand in the facts and circumstances of a case. Till the stay application filed by the petitioner is not decided, no coercive action shall be taken by the Respondents against the Petitioner

Summary

Issues:
Challenging order dismissing application for stay of demand and seeking stay of demands raised under Income Tax Act for Assessment Years 2013-14 to 2020-21 pending appeal.

Analysis:
The petitioner filed writ petitions challenging the order dismissing the application for stay of demand and seeking a stay on demands raised under the Income Tax Act for Assessment Years 2013-14 to 2020-21 till the disposal of appeals filed before the Commissioner of Income Tax (Appeals). The Respondent No. 2 had passed orders holding the petitioner as an "assessee in default" due to non-deduction of TDS under Section 194H of the Act regarding free samples given under a sales promotion scheme. A substantial demand was outstanding against the petitioner for the mentioned assessment years.

The petitioner contended that the provisions of Section 194H of the Act were not applicable to free samples given under the sales promotion scheme, citing a previous High Court ruling. The petitioner argued that the items allowed with purchases were not commission or brokerage as per Section 194H since no service was rendered by the purchaser to the petitioner. Despite filing appeals and a consolidated application seeking a stay on demand till appeal disposal, the application for stay was dismissed for not paying 20% of the disputed demand.

The High Court noted that the requirement of depositing 20% of the disputed tax demand pending appeal could be relaxed in appropriate cases, as per relevant Office Memorandums. Referring to a Supreme Court judgment, the Court emphasized that tax authorities could grant stay on deposit of amounts less than 20% of the disputed demand based on individual case facts. The Court found the impugned order non-reasoned, as it did not consider key principles like prima facie case, balance of convenience, and irreparable injury while deciding the stay application.

Consequently, the Court set aside the impugned order and remanded the matter back to the Commissioner of Income Tax for a fresh decision on the application for stay. The Commissioner was directed to grant a personal hearing to the petitioner's authorized representative before deciding the stay application. Until the stay application was decided, no coercive action was to be taken against the petitioner. The writ petition and pending applications were disposed of with these directions.