2024 (5) TMI 34 - HC - Income Tax

Stay of demand - disposal of the first appeal subject to the condition that the petitioner pays 20% of the disputed tax demand - whether grant of stay is in exercise of discretionary jurisdiction? - HELD THAT - Appellate authority did not examine whether the petitioner has made out a prima facie case. The petitioner asserted in the request letter that it has limited resources and would not be able to provide services to the public if directed to make the pre deposit. Although this does not qualify as evidence of financial stringency this aspect warranted consideration. It should also be noticed that office memorandum dated 31.07.2016 (Instruction No.1914) does not make it mandatory that the assessee should remit 20% of the disputed tax demand. Solely for the purpose of enabling a reconsideration of the stay application by applying the classical principles of prima facie case balance of convenience and irreparable hardship including financial stringency the impugned order calls for interference. The impugned order is set aside and the stay application is remanded for reconsideration by the appellate authority / first respondent in accordance with the observations set out herein. First respondent may exercise its discretion in accordance with law. In relation to the consideration of the stay application it is open to the petitioner to file an additional affidavit and supporting documents.

Summary

Issues involved:
The judgment deals with a stay application filed by the petitioner in a statutory appeal against an assessment order, challenging the requirement to pay 20% of the disputed tax demand pending the appeal.

Details of the judgment:
1. The petitioner argued that they were entitled to deduction under Section 80P of the Income Tax Act and that their limited resources would hinder their ability to provide services if forced to deposit 20% of the disputed tax demand. Reference was made to a judgment of the Delhi High Court to support the contention that the office memorandum did not mandate the 20% deposit.

2. The respondents highlighted that the petitioner had not filed the return of income or responded to notices before the assessment order was issued. They argued that the petitioner had not proved financial stringency, and the impugned order was issued in accordance with the office memorandum of 2016. The respondents contended that interference in the discretionary grant of stay was not warranted.

3. The court emphasized that the grant of stay is a discretionary jurisdiction, and the court's role is not to review the exercise of discretion but to ensure it aligns with established principles. The court noted that the impugned order did not consider whether the petitioner had made out a prima facie case, and the assertion of limited resources should have been taken into account. The court found that the impugned order required reconsideration based on classical principles of balance of convenience and financial stringency.

4. Consequently, the court set aside the impugned order and remanded the stay application for reconsideration by the appellate authority. The petitioner was allowed to submit additional documents within two weeks for the reconsideration. The writ petition was disposed of with no costs, and related motions were closed.