2022 (2) TMI 1470 - HC - Income Tax

Order under Section 220(6) - Penalty u/s 271D - only reason given in the impugned order is the failure of the petitioner to file evidence to substantiate financial hardship for non-payment of tax demanded and penalty that in terms of the above circular and there fore the petitioner has been directed to deposit 20% of the disputed amount - HELD THAT - The thumb rule as per the circular dated 29.02.2016 bearing Reference F.No.404/72/93-ITCC is that mandatorily an assessee preferring any appeal before an Appellate Commissioner shall deposit 15% pending disposal of the first appeal. The aforesaid amount of 15% was later enhanced to 20% by a subsequent Office Memorandum dated 31.07.2017, bearing Reference F.No.404/72/93-ITCC. The circular also states that in a case where a stay of demand is granted by the AO on payment of 15% (now 20% amended) of the disputed demand and if the assessee is still aggrieved, he may approach the Jurisdictional Principal CIT for review of the decision of the Assessing Officer disposing an application. As decided in LG Electronics India Private Limited. 2018 (7) TMI 1905 - SC ORDER where orders passed under 220 (6) of the Act are without any reason, the case can be remitted back for determination of financial hardship, thus also held that it is open to the authorities to examine the facts of an order directing deposit of an amount less than 20%, pending main appeal. A reading of the impugned order indicates that it merely states that the petitioner has not brought any evidence of record to show financial hardship. However, what is required to be examined is whether the petitioner had made out a prima facie case on merits and whether the balance of convenience was overwhelmingly in favour of the petitioner for grant of an interim relief, apart from financial stringency as in held in Kannammal Vs Income Tax Officer 2019 (3) TMI 1 - MADRAS HIGH COURT Since the circular also gives the revisional remedy to the petitioner, we are inclined to dispose the writ petition by permitting the petitioner to file appropriate application for revising the impugned order with in a period of two weeks from the date of receipt of copy of this order, provided no order has been passed in the appeal filed by the petitioner against order dated 13.07.2019 before CIT (Appeals). Writ petition stands disposed of with the above observation

Summary

Issues:
Challenge to impugned order rejecting petition under Section 220(6) of IT Act, 1961
Interpretation of circular dated 31.07.2017 and its impact on petitioner's case
Review of order passed under Section 271D of Income Tax Act, 1961
Consideration of financial hardship and evidence provided by petitioner
Availability of alternate remedies for petitioner
Application of guidelines issued by Central Board of Direct Taxes
Prima facie case on merits and balance of convenience for grant of interim relief
Remedy of revision available to petitioner
Disposition of writ petition and further course of action for petitioner

Analysis:

The judgment delivered by the High Court of Madras pertains to a writ petition challenging an order passed by the Assistant Commissioner of Income Tax, rejecting the petitioner's application under Section 220(6) of the Income Tax Act, 1961. The impugned order was based on a circular dated 31.07.2017, requiring the petitioner to deposit 20% of the disputed amount due to the failure to provide evidence of financial hardship for non-payment of tax and penalty. The petitioner also faced a penalty of Rs.5.70 Crores under Section 271D of the Income Tax Act, 1961.

The court noted that the circular in question amended an earlier circular from 2016 and referred to a previous case involving similar issues. The petitioner's counsel was unable to confirm the status of an appeal filed against the penalty imposed, highlighting a procedural uncertainty.

During the hearing, the respondent argued that the writ petition lacked merit as the petitioner could have pursued alternate remedies, such as revision in line with circulars issued by the Central Board of Direct Taxes. The court considered the arguments presented by both parties, along with relevant court orders and guidelines issued by the tax authorities.

The court emphasized the importance of establishing financial hardship and a prima facie case on merits for the grant of interim relief, citing precedents from both the High Court and the Supreme Court. It was highlighted that the petitioner could seek revision of the impugned order within a specified timeframe, subject to the status of the appeal before the Commissioner of Income Tax (Appeals).

In conclusion, the court disposed of the writ petition by allowing the petitioner to file a revision application within two weeks if the appeal had not been decided by the CIT (Appeals). If necessary, the petitioner could approach the Tribunal with a stay application. The Principal Commissioner/Commissioner of Income Tax was directed to consider the petitioner's application in line with the court's decision and relevant legal principles.

Overall, the judgment addressed various legal aspects, including the application of circulars, the burden of proof on the petitioner, and the availability of remedies within the tax framework, providing a comprehensive analysis of the issues raised in the case.