2023 (7) TMI 1458 - AT - Income Tax

Stay of demand - demand calculation - whether 20% of the demand for the purpose of staying the balance demand should be calculated with regard to total disputed demand or in respect to outstanding demand specified u/s.156? - HELD THAT - The outstanding demand may comprise of various components which assessee may not have even challenged or would be a result of various adjustments. Whereas, the disputed demand has to be seen qua the addition which has been disputed before this Tribunal on which the appeal has been filed u/s. 253(1). Here in this case, the assessee has deposited TDS on such capital gain but the entire addition was challenged before the AO as well as before this Tribunal. Such TDS amount undisputedly is more than 20% of the demand as worked out by the ld. AO in his computation of demand relating to this addition. Accordingly, there cannot be any doubt of misinterpretation that 20% has to be reckoned with the disputed demand and precisely for this reason Tribunal has clearly directed the AO twice as mentioned above. Despite such direction, AO has blatantly ignored the directions and instead asked the assessee to firstly pay the entire demand which is outstanding and then second time 20% of the demand of the whole outstanding demand as worked out by him post credit of TDS. Such an action of the ld. AO is not correct and accordingly, balance disputed demand is hereby stayed - firstly, for the reason that there is no fault on the part of the assessee to conduct the appeals and it is the department who is been seeking adjournment time and again as noted above and Secondly, already stay was granted by this Tribunal looking to the prima facie case on earlier occasions which has been misinterpreted by the AO. Accordingly, the stay is granted for the balance demand for a further period of six months or till passing of the order whichever is earlier.

Summary

Issues:
Stay of demand calculation based on disputed demand or outstanding demand specified under section 156 of the Act.

Analysis:
The applicant assessee was assessed for short term capital gain on the sale of shares in a company, resulting in a rectified demand on total income. The assessee filed a stay application before the ld. AO, claiming to have already paid more than 20% of the disputed tax liability through TDS. The Tribunal remitted the matter to the AO for verification of the 20% payment based on the disputed demand, not the outstanding demand under section 156. The AO, however, directed the assessee to pay the entire outstanding demand, violating the Tribunal's direction. The Tribunal reiterated its stance, directing compliance with Section 254(2A) and granting stay subject to the condition of depositing 20% of the disputed amount.

The AO, despite repeated directions, again asked the assessee to pay 20% of the outstanding demand without considering the TDS paid. The assessee approached the High Court through a writ petition, challenging the AO's order. The High Court observed discrepancies in the AO's calculation and the Tribunal's directions, emphasizing the need to calculate 20% of the disputed tax demand, not the outstanding demand. The AO's failure to comply prompted the Tribunal to grant a stay on the balance demand for six months or until the order is passed, citing the department's repeated adjournment requests and the misinterpretation of the earlier granted stay.

The entire controversy revolves around the correct calculation of 20% of the demand for staying the balance demand, whether based on the disputed demand or the outstanding demand specified under section 156 of the Act. The Tribunal clarified that the disputed demand, challenged in the appeal, should be the basis for calculating the 20% requirement, not the overall outstanding demand. The Tribunal granted the stay application, highlighting the department's adjournment requests and the AO's misinterpretation of the earlier granted stay. Consequently, the stay was extended for a further six months or until the order is passed, whichever is earlier, in favor of the assessee.