2023 (10) TMI 1139 - HC - Income Tax

Stay of demand - revenue directed the petitioner to pay 20% of the demand as a pre-condition for stay of demand - HELD THAT - It is trite law that when an income tax authority exercises jurisdiction under Section 220(6) of the Act, he exercises quasi judicial power. While exercising quasi judicial powers, the authority is not bound or confined by departmental instructions. He has to apply his mind which must be reflected in the order. This position has been clarified by the Supreme Court in the case of Principal Commissioner of Income Tax Vs. M/s. L.G. Electronics India Private Limited 2018 (7) TMI 1905 - SC ORDER That being the position, we set aside the order dated 02.02.2023 and remand the matter back to the file of the first respondent for passing fresh order(s) in accordance with law after giving due opportunity of hearing to the petitioner to be done within a period of six (6) weeks from the date of receipt of copy of this order.

Summary

Issues:
Assailed legality and validity of the order dated 02.02.2023 passed by the first respondent regarding outstanding income tax dues and stay of demand under Section 220(6) of the Income Tax Act, 1961.

Analysis:

1. Assailing Legality and Validity of the Order:
The petitioner, Zoos and Parks Authority of Telangana, challenged the order dated 02.02.2023 passed by the first respondent regarding the outstanding income tax dues totaling Rs. 41,38,07,520.00 for the assessment years 2016-17 to 2021-22. The petitioner filed a petition under Article 226 of the Constitution of India, contending that the order was not in accordance with the law.

2. Granting Stay of Demand and Conditions Imposed:
The first respondent had granted a stay of demand subject to the payment of 20% of the total demand by 10.02.2023, as per the Circulars of the Central Board of Direct Taxes (CBDT) dated 29.02.2016 and 31.07.2017. Failure to make this payment within the specified period would automatically vacate the stay order, leading to the initiation of recovery proceedings by the department.

3. Judicial Review of the Order:
The High Court observed that the first respondent had merely followed the CBDT circulars in directing the petitioner to pay 20% of the demand for obtaining a stay of demand. However, the Court emphasized that the income tax authority, when exercising jurisdiction under Section 220(6) of the Act, must apply quasi-judicial powers independently, not solely relying on departmental instructions. The Court cited the Supreme Court's decision in the case of Principal Commissioner of Income Tax Vs. M/s. L.G. Electronics India Private Limited to support this principle.

4. Setting Aside the Order and Remand:
In light of the above, the High Court set aside the order dated 02.02.2023 and remanded the matter back to the first respondent for passing fresh orders in accordance with the law. The Court directed the first respondent to provide a fair opportunity of hearing to the petitioner and to complete the process within six weeks from the date of receiving the order. During this period, the respondents were prohibited from taking any coercive measures to recover the outstanding demand for the mentioned assessment years.

5. Final Decision and Closure:
The writ petition was allowed accordingly, with any pending miscellaneous applications being closed without any order as to costs. The judgment highlighted the importance of independent application of mind by income tax authorities while exercising quasi-judicial powers under the Income Tax Act, ensuring due process and fairness in dealing with tax matters.