2023 (5) TMI 476 - HC - Income Tax

Stay of demand - deposit of 20% of the outstanding demand - HELD THAT - It is the stand of the petitioner, that expenses have also been disallowed by the AO, on the ground that there was no explanation, although, the petitioner claims that these very expenses were added back by the petitioner on its own, and therefore, no explanation was required. These are the aspects, which in our view, are inter alia referred to in the application for stay, which the concerned authority should have dealt with, while dealing with the petitioner s application for grant of stay. AO has merely gone by the aforementioned CBDT instructions and granted stay, on deposit of 20% of the outstanding demand. In our opinion, if the demand is likely to get scaled down for the reasons adverted to in the petitioner s application, these aspects will have to be taken into account by the concerned authority, while dealing with the application for stay. The concerned authority also needs to bear in mind, the dicta of the Supreme Court in PCIT vs. M/s LG Electronics India Pvt. Ltd. 2018 (7) TMI 1905 - SC ORDER . Requirement to deposit 20% of the demand is not cast in stone. It can be scaled down in a given set of facts. We are inclined to set aside the order dated 08.04.2023. PCIT, as suggested by Mr Hossain, will carry out the de novo exercise, and take a decision on the application for stay preferred by the petitioner. PCIT will grant personal hearing to the authorised representative of the petitioner. In this behalf, the PCIT will issue notice to the petitioner, indicating the date and time of the hearing. PCIT will also pass a speaking order and deal with the assertions made by the petitioner in the stay application. Petitioner would like to make a concession, which is that the amount which is lying to the credit of the petitioner in the subject bank account could be remitted to the concerned authority, subject to the debit-freeze being lifted. Given this position, a direction is issued, to the effect that the entire amount which is available in the subject bank account shall stand remitted to the PCIT. In the event the amount presently available is remitted, for the moment, the debit-freeze ordered by the concerned authority shall stand lifted. We make it clear, that notwithstanding the fact, that the application for stay is required to be heard by the PCIT, the same would not come in the way of the NFAC hearing and disposing of the pending appeal preferred by the petitioner qua the assessment order.

Summary

Issues involved:
The judgment deals with the rejection of an application for stay of demand notice under the Income Tax Act, 1961, based on lack of cogent reasons. The petitioner raised concerns regarding the substantial unsustainability of the demand and inability to meet the terms of the order.

Details of the judgment:
The petitioner's grievance was that the impugned order lacked cogent reasons for rejecting the application for stay of demand notice. The order referred to CBDT instructions and required a deposit of 20% of the outstanding demand for stay. An ex parte assessment order was passed, leading to a significant demand raised against the petitioner for the Assessment Year 2021-22.

The petitioner argued that the demand was substantially unsustainable, given its financial situation. The petitioner's assets, turnover, and net worth were highlighted to support this claim. The petitioner contended that a substantial part of the addition to taxable income was unsustainable, particularly related to the sale of machinery, current liabilities, and disallowed expenses.

The court noted that the concerned authority should have considered these aspects while dealing with the application for stay. It emphasized that the requirement to deposit 20% of the demand is not absolute and can be scaled down based on the facts of the case. The court set aside the order dated 08.04.2023 and directed the Principal Commissioner of Income Tax (PCIT) to conduct a fresh review of the application for stay.

The PCIT was instructed to grant a personal hearing to the petitioner's representative, issue a notice for the hearing, and pass a speaking order addressing the assertions made in the stay application. Additionally, the court directed the remittance of the amount available in the petitioner's bank account to the PCIT, with the lifting of the debit freeze.

Despite the PCIT hearing the stay application, the court clarified that it would not hinder the National Faceless Assessment Centre (NFAC) from hearing and deciding on the pending appeal related to the assessment order. The writ petition was disposed of accordingly, and the pending application was closed.