2004 (8) TMI 335 - AT - Income Tax

Summary

Issues Involved:
1. Stay of recovery of outstanding tax demand.
2. Prima facie case on merits.
3. Balance of convenience and potential hardship.
4. Public interest considerations.
5. Alternative remedies available to the assessee.
6. Request for out of turn hearing.

Issue-wise Detailed Analysis:

1. Stay of Recovery of Outstanding Tax Demand:
The assessee-company sought a stay on the recovery of Rs. 8,73,29,309, which included tax and interest for the assessment year 2000-01. The Tribunal considered the request, noting that the outstanding demand was substantial and that the assessee had already paid a significant portion of it. The Tribunal decided to stay the recovery of the outstanding demand for six months or until the appeal's disposal, whichever was earlier, subject to the condition that the assessee pays Rs. 50 lakhs per month starting from September 2004.

2. Prima Facie Case on Merits:
The assessee's counsel argued that the company had a strong prima facie case to succeed on merits in its pending appeal. The counsel highlighted three major additions made by the Assessing Officer: Rs. 89,15,188 for advances from customers, Rs. 7,53,11,985 for alleged suppression of receipts, and Rs. 2,29,35,808 for non-genuine provision for expenses. The Tribunal acknowledged the presence of a good prima facie arguable case for the assessee, which justified the stay of the outstanding demand.

3. Balance of Convenience and Potential Hardship:
The Tribunal considered the balance of convenience and potential hardship to the assessee. Despite the company's sound financial position, the Tribunal found it unjust to make the company pay the entire outstanding demand given its substantial amount. The Tribunal noted that the assessee had already paid about 25% of the total outstanding demand, which was approximately 40% of the tax amount payable. The Tribunal balanced the interests of the Revenue by directing further part payments by the assessee.

4. Public Interest Considerations:
The Tribunal referred to the decision of the Hon'ble Supreme Court in the case of Dunlop India Ltd., emphasizing that a prima facie case on merits alone was insufficient for granting interim orders without considering public interest and other relevant factors. However, the Tribunal found that staying the recovery of the outstanding demand in this case would not harm public interest, especially since the assessee was directed to make further part payments.

5. Alternative Remedies Available to the Assessee:
The learned DR objected to the stay, arguing that the assessee had not exhausted alternative remedies before approaching the Tribunal. The Tribunal, however, cited the Hon'ble Supreme Court's decision in ITO v. M.K. Mohammed Kunhi, which held that the Tribunal has ample power to stay recovery of tax during the pendency of an appeal. The Tribunal also referred to the Hon'ble Calcutta High Court's decision in Susanta Kumar Nayak v. Union of India, which stated that the Tribunal must exercise its discretion and cannot refuse to do so based on the availability of alternative remedies.

6. Request for Out of Turn Hearing:
The assessee requested an out-of-turn hearing for its appeal to avoid further hardship. The learned DR opposed this request, citing the decision of the Madras Bench of ITAT in Olympia Paper & Stationery Stores. However, the Tribunal found that granting an out-of-turn hearing was appropriate in this case due to the substantial amount of the outstanding demand and the need to expedite the appeal's resolution. The Tribunal directed the Registry to fix the appeal for hearing out of turn on 12th October 2004.

Conclusion:
The Tribunal granted the stay application, allowing the stay of recovery of the outstanding demand for six months or until the appeal's disposal, subject to monthly payments by the assessee. The Tribunal also directed an out-of-turn hearing for the appeal, ensuring that the observations made were limited to the stay application and not a final opinion on the merits.