2012 (3) TMI 288 - HC - Income Tax

Application for stay - There is a demand of Rs.5.76 Crores, based on the orders of assessment of which the principal amount due on account of tax is Rs.4.53 Crores and interest in the amount of Rs.1.23 Crores - Revenue has submitted that the Petitioner should be required to pay the balance of the demand and no case for stay has been made out - Assessing Officers and the Appellate Authorities are duty bound to act in accordance with binding precedent and there is no reason or justification to act in the manner in which the applications for stay have been disposed of in this case - it is not in dispute that many of these issues would be governed by the proceedings which are pending before the CIT (Appeals) for Assessment Years 200607 and 200708 which have been heard, but where orders are awaited - Petitions are accordingly disposed of

Summary

Issues:
Challenge to orders rejecting applications for stay of demand for Assessment Years 2008-09 and 2009-10.

Analysis:
The judgment involved a challenge to orders passed by the Assistant Commissioner of Income Tax, Circle 7, Pune, and the Additional Commissioner of Income Tax, Range 7, Pune, rejecting applications for stay of a demand for Assessment Years 2008-09 and 2009-10. The assessment proceedings for both years were completed under Section 143(3) of the Income Tax Act, 1961, resulting in a demand of Rs. 5.76 Crores, with a principal tax amount of Rs. 4.53 Crores and interest of Rs. 1.23 Crores. The petitioner had also filed appeals before the Commissioner of Income Tax (Appeals) against the assessment orders. The petitioner requested a stay of demand pending appeal disposal, citing a refund due for another assessment year and pending appeal outcomes for earlier years. However, the authorities had initiated recovery proceedings, leading to a garnishee notice issued to the petitioner's bank under Section 226(3) of the Income Tax Act.

The petitioner contended that the rejection lacked reasons, and a significant amount had already been adjusted against a refund due, leaving a balance outstanding. They argued that pending appeal outcomes for earlier years would impact the current demand. On the other hand, the Revenue argued against granting a stay, insisting on payment of the balance demand. The court referred to past judgments emphasizing reasoned orders for stay applications and noted the authorities' failure to follow established legal principles. The court acknowledged that many issues in the assessment would be influenced by pending appeal outcomes for earlier years. Considering that a substantial portion of the demand had already been recovered, the court directed that the recovery of the balance demand for the relevant years remain stayed pending appeal disposal. The court also vacated the directions issued under Section 226(3) of the Income Tax Act and instructed the CIT (Appeals) to promptly decide on the appeals for the earlier years, followed by the appeals for the current years.

In conclusion, the court granted relief to the petitioner by staying the recovery of the balance demand, vacating the earlier directions, and instructing prompt action on pending appeals. The judgment highlighted the importance of reasoned orders for stay applications and the necessity for authorities to adhere to legal precedents in such matters.