2023 (7) TMI 33 - HC - Income Tax

Stay of demand - direction to pay 20% of outstanding demand as per CBDT office memorandum - stay application preferred before the PCIT beyond the period of limitation - revenue prays for adjournment to obtain instruction on the fact of stay application filed - HELD THAT - We are not inclined to grant adjournment. This is because it will appear from impugned letter that the ITO was uncertain on whether stay application had been filed elsewhere, that is before appellate authority. That means, the stay application made before the AO was not considered for order being made under sub-section (6) of section 220. We quote below relevant sentence from impugned letter. If you have applied for stay of above-mentioned demands, please furnish the copy of the order of the stay of demand granted, if any. On our above appreciation of the fact situation, it is not necessary for us to express any opinion on the orders of the Delhi High Court and the Supreme Court, relied upon by petitioner. Impugned letter is set aside and quashed. AO is directed to consider the stay application and pass order under provision in sub-section (6) in section 220.

Summary

Issues involved:
The reassessment of income under section 68 of the Income Tax Act, 1961 and the direction to pay 20% of outstanding demand without proper consideration of stay application.

Reassessment of Income:
The petitioner-assessee's income was reassessed with an addition of Rs. 5,57,50,296 under section 68 of the Income Tax Act, 1961. The petitioner preferred an appeal and applied for a stay before the Assessing Officer. The impugned letter directed to pay 20% of the outstanding demand without proper application of mind, which was challenged by the petitioner.

Mechanical Direction for Payment:
The petitioner relied on a Delhi High Court order which held that a mechanical direction to pay 20% of the tax demand without reasons, especially when the appeal and stay application were filed beyond the limitation period, was unsustainable in law. The impugned order lacked reference to the central issue in the pending appeal or the petitioner's grievance regarding the order passed by the AO, making it unsustainable.

Judicial Precedents and Administrative Circulars:
The Supreme Court's decision in PCIT v. LG Electronics India Private Limited clarified that administrative circulars should not restrict the authority of the Commissioner or the AO, who are quasi-judicial authorities. The AO, in this case, was criticized for acting mechanically and not exercising discretion under section 220(6) despite the appeal and stay application being filed. The AO was required to adjudicate on the question of stay instead of relying solely on the administrative order.

Court's Decision:
The High Court set aside and quashed the impugned letter directing payment without proper consideration of the stay application. The AO was directed to consider the stay application filed by the petitioner and pass an order under section 220(6). The actions taken based on the impugned letter were also quashed. The writ petition was disposed of accordingly.