2023 (9) TMI 1542 - HC - Income Tax

Stay order in respect of collection of demand raised against the appellant, till the disposal of the appeal pending before the third respondent - HELD THAT - The order of the Ld' Judge passed in the writ petition is set aside. The order of the first respondent is modified by granting an order of stay, subject to the condition that the appellant shall pay Rs. 40 lakhs (i.e.) around 10% of the demand raised to the authority concerned, which shall be paid in two equated monthly instalments and the first installment be paid on or before 15.10.2023 and the second/final installment be paid on or before 15.11.2023. It is made clear that the said conditional amount is agreed to be paid by Elgi Rubber Company Limited on behalf of the appellant and in the event of the appellant succeeding before the competent authority, the refund be effected in favour of Elgi Rubber Company Limited, who makes the conditional payment. Any default on the part of the appellant in payment of instalments within the time stipulated, the respondent authorities shall proceed further in the manner known to law.

Summary

Issues:
Challenge to order under Income Tax Act - Assessment under section 147 - Rectification petition - Stay petition - Writ petition for setting aside stay order - Appeal against rejection of stay order - Modification of stay condition.

Analysis:
The appellant challenged an order under the Income Tax Act, claiming they were dissolved without winding up and not in existence during the relevant financial year. Despite this, the Assessing Officer made an addition under section 69A of the Act. The appellant filed a rectification petition, which was partially allowed, leading to an appeal before the third respondent. A stay petition was filed but rejected for not paying 20% of the demand. The appellant then filed a writ petition to set aside the rejection of the stay order. The High Court, in the writ appeal, modified the stay condition, requiring the appellant to pay Rs. 40 lakhs in two installments for grant of stay until the appeal is disposed of.

The appellant argued that the pre-condition of depositing 20% of the demand for grant of stay was excessive and requested it to be reduced to Rs. 40 lakhs, around 10% of the demand, payable in two equal installments. The Standing Counsel for the respondents had no serious objection to this request. The High Court, considering the challenge was only regarding the rejection of the stay order, set aside the order of the first respondent and modified it by granting a stay subject to the appellant paying Rs. 40 lakhs in two installments, with the first installment due by a specified date and the final installment due a month later.

The High Court's order stated that Elgi Rubber Company Limited would make the conditional payment on behalf of the appellant, and in case of the appellant's success, the refund would be made to Elgi Rubber Company Limited. It was emphasized that any default in payment by the appellant would result in further action by the respondent authorities as per the law. The writ appeal was disposed of with no costs, and connected miscellaneous petitions were closed.