2014 (5) TMI 403 - HC - Income Tax

Stay application Waiver of Pre-deposits Held that - The issue is examined merely for the purpose of providing an interim formula, on the basis of which the assessee should enjoy stay against further recovery prima facie, it appears that addition approximately worth Rs. 140 crores represents the excess sale of gas in million cubic meter units, which the AO did not account for in the order of assessment the revenue imposed a condition which was too harsh at the first appellate stage the assessee is directed to deposit a sum of Rs. 50 Crores and rest of the amount to be waived till the disposal Partial Stay granted.

Issues:
Interim stay against recovery of tax demand based on an order insisting on a deposit of Rs. 124 Crores, disputed additions totaling approximately Rs. 498 Crores for A.Y 2011-12, excess stock of gas unexplained by the Assessing Officer, conversion ratio discrepancy in gas measurement units, and the fairness of the conditions imposed for the stay.

Interim Stay Against Recovery of Tax Demand:
The petitioner, a State owned Corporation dealing in petroleum products, challenged an order requiring a deposit of Rs. 124 Crores for an interim stay against the recovery of the tax demand. The Assessing Officer made additions totaling around Rs. 498 Crores for A.Y 2011-12, leading to the petitioner filing an appeal against the assessment order. The High Court found that the condition imposed for the stay was too stringent at the first appellate stage and directed the petitioner to deposit Rs. 50 Crores by a specified date for the stay to be effective, while all other conditions except one were modified. The Court clarified that no final opinion was given on the merits of the additions or arguments. The CIT [A] was tasked with deciding the issues independently.

Disputed Additions and Excess Stock of Gas:
Out of the disputed additions of approximately Rs. 498 Crores, the Department acknowledged that Rs. 78 Crores was in conflict with a decision by the Commissioner [Appeals] for a previous assessment year. The major portion of the disputed additions, around Rs. 370 Crores, related to an alleged excess stock of gas unexplained by the Assessing Officer. The petitioner argued that by converting gas purchase and sale figures into a single unit, the stock discrepancy would be resolved. The Assessing Officer had not considered the excess sale of gas in million cubic meter units, leading to the demand for Rs. 124 Crores. The Department contended that the conversion explanation was not provided earlier and the ratio was based on previous year figures. The Court, examining the issue for an interim solution, found that around Rs. 140 Crores represented the unaccounted excess sale of gas, with the Department not strongly contesting this point.

Conversion Ratio Discrepancy:
The discrepancy in the conversion ratio of gas measurement units was a key contention. The petitioner argued that by using a conversion ratio of 81/25200 from MMBTU to million cubic meters of gas, the stock issue would be resolved. The Department claimed that the conversion explanation was not presented to the Assessing Officer, who relied on previous year data for the ratio. The Court considered this aspect in a preliminary manner to determine the interim formula for the stay against recovery.

Fairness of Conditions Imposed:
The High Court found the condition of depositing Rs. 124 Crores for the stay to be overly severe at the initial appellate stage. Consequently, the Court directed the petitioner to deposit Rs. 50 Crores by a specified date for the stay to be effective, modifying all other conditions except one. It was emphasized that no final judgment was made on the merits of the additions or arguments presented. The CIT [A] was instructed to independently decide the issues without influence from the Court's observations.

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