2022 (11) TMI 1305 - HC - Income Tax

Stay of demand - Recovery of demand - requirement of payment of twenty per cent of disputed tax demand as a pre-requisite - Assessee-in-default for short deduction of tax at source - payment to the extent of 20% of total tax demand arising under Section 201(1) - HELD THAT - This Court is of the view that the requirement of payment of twenty per cent 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 per cent of the demand can be relaxed in appropriate cases. Even the Office Memorandum gives instances like where addition on the same issue has been deleted by the appellate authorities in the previous years or where the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee. As pointed out by the learned senior counsel for the petitioner, 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 per cent of the disputed demand in the facts and circumstances of a case. In the present cases, the impugned orders are non-reasoned orders. Neither the AO nor the Commissioner of Income Tax have either dealt with the contentions and submissions advanced by the petitioner nor has considered the three basic principles i.e. the prima facie case, balance of convenience and irreparable injury while deciding the stay application. The impugned orders and notices are set aside and the matters are remanded back to the respondent No.1-Commissioner of Income Tax for fresh adjudication in the application for stay.

Summary

Issues:
Challenging orders rejecting applications and directing payment under Section 201(1) of the Income Tax Act, 1961 for Assessment Years 2013-14 and 2014-15.

Analysis:

1. The writ petitions challenged orders rejecting applications and directing payment under Section 201(1) of the Income Tax Act, 1961 for Assessment Years 2013-14 and 2014-15. The petitioner filed appeals seeking stay on the recovery of demand after being held 'assessee-in-default' for short deduction of tax at source. The petitioner contended that the orders directing payment were non-speaking and failed to address their contentions adequately.

2. The petitioner argued that they had executed contracts for service, not contracts of service with consultant doctors, who had already paid their tax dues. They claimed that the condition under the Office Memorandum regarding payment of twenty per cent of the disputed demand was directory, not mandatory, citing a Supreme Court decision allowing tax authorities to grant stay on deposit of a lesser amount pending appeal.

3. The Court observed that the requirement of payment of twenty per cent of disputed tax demand could be relaxed in appropriate cases, as per the Office Memorandums. It noted instances where the deposit condition could be waived, such as when appellate authorities had ruled in favor of the assessee in previous years. The Court emphasized the need for reasoned orders and consideration of basic principles like prima facie case, balance of convenience, and irreparable injury in deciding stay applications.

4. The Court set aside the impugned orders and remanded the matters to the Commissioner of Income Tax for fresh adjudication on the stay application. It directed a personal hearing for the petitioner's representative before a specified date. Until the stay applications were decided, no coercive action could be taken against the petitioner regarding the demands arising from the orders. The writ petitions and pending applications were disposed of with these directions.