1997 (2) TMI 155 - AT - Income Tax

Summary

Issues:
1. Assessment of income and demand raised by the AO.
2. Stay of recovery of demand pending reference to the High Court.

Analysis:
1. The petitioner, a public limited company involved in producing edible oils, had its income assessed at Rs. 1,28,22,500 by the AO, which was later reduced to Rs. 55,66,660 by the Tribunal. The demand raised on this income, totaling Rs. 47,07,236, included interest under s. 234B of the Act. The petitioner sought a stay on the recovery of this demand until the disposal of a reference pending before the Gujarat High Court. The company faced financial difficulties due to losses and coercive actions by the Department, making it impossible to pay the demand without selling assets. The AO had made additions to the income, including alleged low yield in crushing rapeseeds and disallowance of purchases from alleged bogus suppliers, contested by the petitioner citing various justifications. The Tribunal granted a partial stay of the demand, considering the company's financial situation and the pending reference.

2. The petitioner's counsel argued that the Tribunal had the power to grant a stay of collection when a reference to the High Court had been granted, citing legal precedents. The Departmental Representative opposed the stay petition, emphasizing the substantial additions confirmed by the Tribunal. The Tribunal, after reviewing the submissions and legal provisions, acknowledged its power to grant a stay of recovery during the pendency of a reference. It referenced Supreme Court and High Court judgments supporting the grant of stay to prevent the appeal from being rendered nugatory. Considering the financial constraints faced by the petitioner and the risk of liquidation if assets were disposed of for recovery, the Tribunal granted a stay on the outstanding demand until the High Court's decision on the reference or a specified date, subject to the petitioner furnishing adequate security.

In conclusion, the Tribunal allowed the stay petition pro tanto, recognizing the need to protect the petitioner's interests and ensure a fair resolution of the pending reference before the High Court.