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2024 (5) TMI 1023 - HC - Income TaxStay of demand - order requires the petitioner to deposit 20% of the outstanding demand as a pre-condition for according protection - Undue hardship - prima facie case - HELD THAT - It is manifest that the AO has neither considered the prima facie merits of the challenge which stood raised by the writ petitioner and reiterated in its application for stay nor does it deal with the issue of undue hardship. The AO appears to have mechanically proceeded on the premise that since the petitioner had not made a pre-deposit of 20%, the application for stay of demand could not be considered. We note that while dealing with an identical view which was taken, we had in National Association of Software and Services Companies (NASSCOM) 2024 (3) TMI 773 - DELHI HIGH COURT pre-deposit prescriptions placed by a statute, the principles enunciated therein would clearly be of relevance while examining the extent of the power that stands placed in the hands of the AO in terms of Section 220 (6) of the Act. In our considered opinion, the respondents have clearly erred in proceeding on the assumption that the application for consideration of outstanding demands being placed in abeyance could not have even been entertained without a 20% pre-deposit. The aforesaid stand as taken is thoroughly misconceived and wholly untenable in law. In view of the above, and in our considered opinion, there would appear to be no justification to retain the instant petition on our board. The ends of justice would in fact warrant the matter being remitted to the AO for considering the stay application moved by the writ petitioner afresh.
Issues Involved:
1. Legality of the Assessing Officer's (AO) order requiring the petitioner to deposit 20% of the outstanding demand as a pre-condition for stay of demand. 2. Consideration of prima facie merits and undue hardship in the stay application. 3. Applicability and interpretation of CBDT's Office Memorandums (OMs) regarding pre-deposit requirements. Summary of Judgment: Issue 1: Legality of the Assessing Officer's Order The writ petition impugns the AO's order dated 03 May 2024, which required the petitioner to deposit 20% of the outstanding demand as a pre-condition for stay of demand during the pendency of its statutory appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO's order was based on CBDT's Instruction No 1914 dated 21.03.1996, OM dated 29.02.2016, and OM No. 404/72/93-ITCC dated 31.07.2017, which were interpreted to mandate a 20% deposit for granting stay. Issue 2: Consideration of Prima Facie Merits and Undue Hardship The court observed that the AO had neither considered the prima facie merits of the challenge raised by the petitioner nor addressed the issue of undue hardship. The AO mechanically proceeded on the premise that the petitioner had not made a pre-deposit of 20%, thus rejecting the stay application without proper consideration. Issue 3: Applicability and Interpretation of CBDT's OMs The court referred to its previous judgment in National Association of Software and Services Companies (NASSCOM) v. Deputy Commissioner of Income Tax (Exemption) Circle 2(1), New Delhi & Ors., which clarified that the OMs do not mandate a 15% or 20% deposit as a pre-condition for granting stay. The OMs provide discretion to the AO to grant stay subject to a deposit at a rate higher or lower than 20%, depending on the facts of each case. The Supreme Court in Principal Commissioner of Income Tax & Ors. vs LG Electronics India Pvt. Ltd. emphasized that the administrative circular would not operate as a fetter on the AO's quasi-judicial authority. Court's Decision The court found the AO's order unsustainable as it failed to consider relevant legal principles, including prima facie case, balance of convenience, and irreparable injury. The court noted that the AO's assumption that a 20% pre-deposit was mandatory was misconceived and untenable in law. Conclusion The court allowed the writ petition, set aside the impugned order dated 03 May 2024, and remitted the matter to the AO for fresh consideration of the stay application. The AO was directed to examine the application afresh, bearing in mind the legal principles enunciated in the NASSCOM judgment.
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