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2022 (12) TMI 804 - HC - Income TaxStay of demand - Addition u/s 68 - Petitioner vehemently urged that the CIT(A) could not have refused to extend the stay order which was earlier granted by the AO - HELD THAT - It transpires that the proviso contained in paragraph 2 of the Instruction No. 96 dated 21st August 1969 which envisages that there should be no lapses on the part of the assessee for purposes of claiming the tax in dispute to be held in abeyance was conspicuously missing from Instruction No. 1914 dated 02nd February 1993. CIT(A) it appears while rejecting the prayer of the Petitioner for grant of stay relied upon the instruction which appears had since been superseded. Also noticed that the Petitioner had all along been making desperate attempts for placing on record documents as additional evidence in terms of Rule 46A of the Rules which application ought to have been decided inasmuch as there was sufficient time with the Appellate Authority to pass orders in that regard. Only thereafter a view then could have been taken as regards their genuineness or veracity. In the present case it appears that the Appellate Authority did not even deem it appropriate to decide the said application even when the Petitioner claims that a prayer was made for such a decision in that regard. We accordingly find prima facie case in favour of the Petitioner as it appears that the assessment was high pitched as was claimed who stated that as against the returned income of Rs.68, 33, 07, 140/- the income has been assessed at Rs.461, 72, 35, 403/-. We stay the recovery based upon the impugned demand notices. Notwithstanding the fact that we have passed an interim order today we direct the Appellate Authority to decide the application under Rule 46A which is pending before it as also the appeal within three months from today Notwithstanding the pendency of the present petition before this Court. The directions passed today shall be liable to be vacated in case it is reported that any deliberate attempt has been made before the Appellate Authority to delay the final decision in the appeal. Objections be fled to the writ petition within six weeks.
Issues:
1. Interpretation of provisions of Section 10(34) of the Income Tax Act regarding exempt income. 2. Assessment of exempt income and expenses incurred for earning exempt income. 3. Stay on recovery notice under Section 220 of the Act. 4. Rejection of stay application by the CIT(A) and related legal arguments. 5. Application of CBDT instructions and circulars in granting stay on disputed tax demand. 6. Consideration of additional evidence under Rule 46A of the Income Tax Rules. 7. High pitched assessment and its impact on stay application. Analysis: 1. The petitioner filed a return of income for the assessment year 2017-18, declaring total income and exempt income. The Assessing Officer (A.O.) held that the petitioner could not substantiate the profit earned from the sale of listed shares as exempt under Section 10(34) of the Act, leading to the addition of the said amount back to the total income under Section 68 of the Act. 2. The petitioner sought a stay on the recovery notice under Section 220 of the Act, and an appeal was filed before the CIT(A) against the assessment order. The CIT(A) granted a temporary stay on the demand, considering additional documents submitted by the petitioner. 3. Despite efforts by the petitioner to extend the stay, the application was rejected, and a direction was given to pay 20% of the demand failing which coercive action would be considered for recovery. The petitioner filed a writ petition challenging the refusal to extend the stay beyond a certain date. 4. The CIT(A) rejected the petitioner's stay application, citing the failure to provide documents despite opportunities granted. The Appellate Authority directed the petitioner to pay 20% of the disputed amount in accordance with relevant instructions. 5. The CIT(A) considered the petitioner's plea for extension of stay and high pitched assessment but concluded that unconditional stay was not warranted as the petitioner did not show financial distress or inability to pay the demand. The CIT(A) emphasized the need for proper documentation and admissibility of evidence under Rule 46A. 6. The court acknowledged the petitioner's efforts to submit additional evidence and noted a prima facie case in favor of the petitioner due to the significant difference between the returned income and the assessed income. The court stayed the recovery based on the demand notices and directed the Appellate Authority to decide on the pending application and appeal within a specified timeframe. 7. The court highlighted the importance of timely decision-making by the Appellate Authority and warned against any deliberate attempts to delay the final decision. The interim order was subject to review based on the progress of the appeal proceedings. This detailed analysis covers the key legal issues and the progression of events leading to the judgment delivered by the Bombay High Court.
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