2024 (4) TMI 162 - HC - Income Tax

Stay of demand - assessees may be accorded interim protection subject to deposit of 20% of the total outstanding demand failing which they would be treated as an assessee in default - HELD THAT - Ultimate application that was filed before the Principal Commissioner and which had in turn referred to the original stay application which had been moved before the Assistant Commissioner. However, and in our considered opinion, there clearly appears to have been a laxity on the part of the petitioner to have directly raised the contentions noticed briefly by us hereinabove before the Principal Commissioner. That authority has thus been deprived of the opportunity to examine the issues of prima facie case or undue hardship in the context of the challenges which have been raised to the computation of fair market value by the AO. We are of the opinion that the ends of justice would warrant the petitioner being accorded the liberty to move the Principal Commissioner afresh raising such contentions as may be chosen and advised. Any application in this respect that may be moved shall be decided by the Principal Commissioner without being influenced by the orders dated 26 May 2022 and 12 February 2024. Writ petition stands disposed of in terms of the above. The orders impugned before us shall abide by the fresh decision which the Principal Commissioner shall now take in terms of our directions contained in para 11 of this order.

Summary

Issues involved:
The judgment involves challenging orders passed by the Assistant and Principal Commissioners of Income Tax under Section 220(6) of the Income Tax Act, 1961, regarding an outstanding demand of Rs. 132.58 crores. The impugned orders were based on the Central Board of Direct Tax's Office Memorandum dated 31 July 2017, which required a deposit of 20% of the total outstanding demand for interim protection.

Details of the Judgment:

*Issue 1: Interpretation of Office Memorandum and Legal Precedents*
The Supreme Court clarified in a previous case that authorities have the discretion to grant deposit orders of a lesser amount than 20% pending appeal. The petitioner argued that the respondents incorrectly assumed the mandatory requirement of a 20% deposit based on the Office Memorandum. The Court noted the need for authorities to consider factors like prima facie case, balance of convenience, and irreparable loss in such cases.

*Issue 2: Fair Market Value Assessment*
The petitioner contended that the Assessing Officer's assessment of fair market value, considering a credit facility obtained upon mortgage, was arbitrary and violated Section 50C of the Act. The petitioner also argued that the respondents incorrectly applied Section 50D despite the fair market value already being determined.

*Issue 3: Compliance with Office Memorandums and Legal Principles*
The Court referred to a Division Bench decision emphasizing that the requirement of a 20% deposit for stay of demand pending appeal is not mandatory in all cases. The impugned orders were found to be non-reasoned, failing to consider the petitioner's submissions and the principles of prima facie case, balance of convenience, and irreparable injury.

*Separate Judgment by the Judges:*
The Court set aside the impugned orders and remanded the matters back to the Commissioner of Income Tax for fresh adjudication on the stay application. It was directed that no coercive action shall be taken until the stay applications are decided. The petitioner was granted the liberty to raise new contentions before the Principal Commissioner, who would decide the matter without influence from the previous orders. All rights and contentions of the parties were kept open for further proceedings.